permanently transient

James Patterson: Henry Ford would be proud!

2010-08-31T09:53:00.000-07:00

I have been travelling a lot recently for work. Since I am not a big fan of $300 cuff links, perfumes or expensive chocolate boxes, normally I wait for my flights in the airport bookstores.

That's how I suddenly realized how popular James Patterson is. At any given bookstore, I would find at least five or six of his books. I did some research and what I found was amazing: he holds the New York Times record for most Hardcover Fiction bestselling titles by a single author (56 total), which is also a Guinness World Record. Recently his books have sold more than those of Stephen King, John Grisham and Dan Brown taken together [thanks, Wikipedia!]

How does he manage to do that?

First of all - and this might be the most relevant factor, because it influences all the rest - he is not a proper author. He doesn't have sad stories about his manuscripts being rejected, he didn't publish short stories in the local newspaper and he doesn't get all poetical when he speaks about writing. In reality, he was a very successful professional in the advertising industry before he ventured into writing.

By being an outsider, he wasn't bound by the tradition or the ethics of the writing "clique" and thus could shape his books however he wanted. It turns out that his day job gave him a very interesting style. There are few characters and they are all very simple and easy to read. Chapters are two or three pages long, always ending on a cliff hanger. His prose is simple and sentences short.

In other words, his books bring to books the 30-second ad spot mentality - no waste of time, just the essentials. (Whether or not this is good literature is another question).

The second factor is that he understands the value of brands. Of course, he is not alone here: Conan Doyle's Sherlock Holmes is also a brand, as well as many other characters. However, he does not have one or two "brands" - he has about seven of them. And he develops them to cater to specific niches. He has a series of books appealing to teenagers, another one to house wifes, a third one to fantasy fans and so on. Not surprisingly, the marketing term "versioning" comes to mind.

So, with that we have understood why his novels are popular - he is really good at writing stuff that sells well to different niches. But how does he manage to be so prolific?

That's factor three - and here it gets interesting.

It turns out he doesn't write the books himself.

Yep - he has "writing associates" who do most of the heavy lifting for him.

Currently he has no less than eight of this "associates" - I believe one for each "brand". Because of strict contractual terms, they don't disclose exactly how they working relationship functions, so we have to relay on what Patterson himself says. According to a 2006 Times magazine profile:

"He'll whip up a detailed outline, then ship it off to his collaborator for a first draft. "I may talk to them on a couple-week basis," he says. "And then at a certain point I'll just take it over and write as many as seven drafts. There were a couple of them that really were a mess," he adds ruefully. "At least twice it's been, 'I wish that I just started this thing myself.'"

While this type of collaboration is not exactly new - authors such as Robert Ludlum (of Jason Bourne fame) and Tom Clancy have been doing a lot of it lately - Patterson has taken it to the next level and created a well oiled machine that cranks out about eight books a year.

So, back in the airport, I ended up buying one of his Alex Cross books and reading it on the plane.

Did I like it? No. Is it good literature? No. Will I buy another one? No.

But is it a beautiful display of business model innovation? Certainly. He focuses on what he does best - creating stories and managing brands - and outsources all the rest.

No wonder Harvard Business School has a case study about him.

Internet as utility

2010-08-31T09:52:00.001-07:00

I haven't had a phone land line since 2004. And for many months since then I have gone without a TV. On the other hand, I have always had an internet connection - in fact, the few days between moving into a new place and having the ISP turn on the service were so miserable that I ended up buying one of those USB mobile modems. It doesn't work too well, but it's better than nothing.

Which brings me to the point: I can't agree when people say that Facebook is a utility and therefore needs to be regulated. This is just non-sense. As Paul Carr put it:

"The test, by the way, for if X is a utility: if the sentence ‘Millions of children in Africa have no access to x’ doesn’t sound like a headline from the Onion". [the Onion is an online newspaper famed for surreal, fictitious headlines. N.A.]

On the other hand, the Internet is most certainly an utility. Maybe not for everyone, but for a lot of people that depend on it to work, to communicate and to do business. Plus, the Internet is the main tool through which citizens interact with their governments - which cannot be said of TV, for instance.

Quotes about the future

2010-06-01T03:55:00.000-07:00

People love to make bold statements about the future. Normally they follow the following formula:

"In ___ years, most people will be _________."

Predicting the future is one of those interesting exercises where you get points for the impact of the idea - not the accuracy of the prediction. That's why I liked this post by Kevin Kelly about quotes on technology and the future.

Feel free to check them yourself, but here are my favorites. Can you tell which ones turned out to be right?

Yesterday, we changed the channel; today we hit the remote; tomorrow, we'll reprogram our agents/filters. Advertising will not go away; it will be rejuvenated.
Michael Schrage, Wired 2.02, Feb 1994, p. 73

I expect that within the next five years more than one in ten people will wear head-mounted computer displays while traveling in buses, trains, and planes.
Nicholas Negroponte, Wired 1.06, Dec 1993, p. 136

The very distinction between original and copy becomes meaningless in a digital world -- there the work exists only as a copy.
Daniel Pierehbech, Wired 2.12, Dec 1994, p. 158

The scarce resource will not be stuff, but point of view.
Paul Saffo, Wired 2.03, Mar 1994, p. 73

Games - the gist

2010-05-20T13:37:00.000-07:00

I was involved in a very interesting project about games for a few months. Here's a few learning points:

There is no single games industry. The skills needed to succeed as a company, the profile of target users and the typical budget to develop and launch a game vary wildly, with AAA console games (think Grand theft Auto and Gears of War) in one end, and casual, free to play in the other.

Product vs service. Launching a game, today, is no longer the end of a long developing process, now let's all go for a long weekend at the beach. It's rather the end of a short developing process and the start of a permanent state of alertness and reaction to user feedback. When they say games now are about the service, it's completely true. Because games now are online, they are being permanently updated and improved.

Online beats Piracy. Game companies learned with the music industry (maybe). You can pirate a CD, but you cannot pirate a live concert. Similarly, you can pirate a PS3 DVD, but you cannot pirate an online expansion pack or an online game server. Have you ever heard of a pirate FarmVille?

Brands are your friends. Remember when two guys in a garage could make millions selling iPhone Apps? Those times lasted for about one year. Now all best selling paid apps are from big brands. Why? Because when customers have thousands of competing offers, they need a way to help them make a decision, and a familiar brand normally does the trick. We are seeing the same effect happen now in Facebook games. Check out the largest gainers of every week and increasingly you will see known brands there.

Social games are nothing new. In other words, the image of the socially awkward teenager playing Nintendo alone in the basement is an exception. Games are inherently a social experience, the problem was that it took 30 years for technology to develop to the point as to allow video games to be multiplayer. Thinking back, even in the times of Donkey Kong and Asteroids, playing in the arcade in the mall was a social experience, wasn't it?

Don't take out your wallets yet. Social games are great. Zynga and its friends are making a killing. It's just like printing money. If they go IPO they will become gazillionaires. What's is wrong with this picture? One single thing: ALL of Zynga's businesses happen within another platform, namely Facebook. How was the saying about putting all your eggs in one basket? They are all trying to create separate platforms (such as farmville.com), but so far to no avail. If Facebook is the one social networking to rule them all, maybe all the crazy multiples that Disney and EA have paid for Playfish and Playdom might prove to have been a mistake - maybe there are no such things as "social" games, but just Facebook games... Just to reinforce the point, I did a quick mapping exercise. As of March 2010, 9 out of 10 top Facebook game developers were located within a 20 miles radius of Facebook HQ.

Meanwhile, beyond Sillicon Valley... In the other hand, there is life elsewhere. Companies are doing very well by simply staying out of Facebook and going for other social networks and other demographics. Mentez and Vostu dominate Google's Orkut and the Brazilian Market. There is another company doing the same in Russia. Facebook? No thanks.

In short, there is a lot going on in the games industry. As a parting thought: Games is the only media industry that has not been disrupted by the internet. Instead, games companies - to different extents, of course - are riding the wave and learning very fast. The figures are there to prove the point: While TV has remained stable and newspapers, books and magazines have been shrinking, games have been growing at a CAGR of 5%.

It's the network, stupid

2010-04-13T09:17:00.000-07:00

Zynga is on a roll. It's like magic: every new social game they launch on Facebook gets millions of users almost overnight.

At first, it's hard to understand how they do it. Their games are good, but not so much better than the competition. There is nothing exceptionally ingenious about their monetization strategy - they sell virtual goods like everyone else. Even the names are the same - PetThis, AcquariumThat, DinnerThis, IslandThat.

So what's the trick?

It's the network. Zynga's secret was to build a large user base, as fast as fast gets. From then on, it just gets easier. The so called network effect is well know in business and management (I mentioned it before in this post). What is interesting is that, due to the nature of social games, it's influence here can be absurdly strong, and probably explains why, comparing the number of users, Zynga is two times as big as the next competitor (which is Facebook itself).

And this advantage will only get stronger. The only thing that could change this would be some disruptive development, such as a complete new game format that gets everyone by surprise, or regulatory changes.

But I think this train has left the station. Zynga will remain the number one, and competitors will have to learn how to live with it.

[update] Just as expected, the threat to Zynga's dominance came from a regulatory change - not from regulators, by from Facebook itself. By severely limiting the use of viral channels, Facebook diluted the power of the network effects a bit. Evidence: Farmville lost about 20 million users in the last 3 months or so. [June 7th, 2010]

Free+simple beats Paid+complicated - an online video odissey

2010-04-12T06:15:00.000-07:00

Last weekend I wanted to catch up on my movies list.

You realize that you live on modern times when you discover that DVD rental stores as as good as gone today. You have to look really hard to find one, and when you do, it will probably be either (a) expensive, niche focused and "artsy" (b) far from where you live or (c) creepy, with a large porn section in the back.

I live very central, so whereas I could find many souvenir shops open and selling I-heart-London T-Shirts, there was no DVD store in sight.

"But this is the 21st century", I thought, "I can certainly solve this problem online". Oh, how wrong I was.

I first tried to sign up for the European equivalent of Netflix, called Lovefilms. I loved Netflix when I lived in California and the prospect of all-you-can-eat movies in the mail was very exciting.

So I filled up the sign up form, selected a plan and was ready to put together my movies list. But then my credit card got rejected. Not one credit card - all of them, three or four, from different banks, shapes, sizes and colors. The reason: the website use one of those security systems that check you billing address, and they only accept UK addresses.

It is possible that Lovefilm have a good reason to do so, but I suspect that the true reason is as simple as saving having a poorly planned payment interface that does not accept non-UK postal codes. Whatever the reason, no Lovefilm for me.

The next obvious option was iTunes. They do actually accept PayPal, but I had another problem: iTunes is like getting married to your computer. Once you open an iTunes account using one specific computer, it is for the rest of your life. It turns out that the computer with my iTunes account had crashed and was in the process of being restored - or else I would lose all my libraries, playlists, purchases, the whole season of Lost. If I opened another iTunes account, my life would be a mess - duplicated sign-ups, redundant libraries, chaos and destruction. So, no iTunes movies for me.

Amazon could be a nice option. Back in the day, they had a nice online rental system called Unbox (since then renamed to something else). I love Amazon and buy even my toilet paper from them if I can, so, eagerly, I went to Amazon.com. But - no! The automated geoblocking system caught me - who do you think you are, trying to fool us that you are in the US? - and redirected me to Amazon.co.uk - which doesn't have any movies rental service.

You see, I was trying hard. I had been to three well-known websites, and still could not get my movie fix. Each in their unique way, they made my life complicated - limited payment options, DRM, walled garden systems, geoblocking.

Were I not a law-abiding citizen, I would have simply downloaded whatever movie I wanted to watch from BitTorrent. Or I could have watched it in a streaming website hosted in Croatia. Or I could have found a link and downloaded the file directly from some online storage website. All free. Would that be illegal? Yes. Do most people care? No.

And this is the sad conclusion: people keep on downloading illegal files not only because it's cheaper, but also because it's easier. Users don't want to jump through hoops just to watch a movie.

I know I don't.

Every eyeball has a price - literally

2010-04-09T08:49:00.000-07:00

The biggest innovation brought by Google (and largely responsible for it's ground breaking success) was that under a cost per click systems companies now could measure ROI much more precisely. Instead of relying on indirect audience measurements - number of newspapers sold, TV audience ratings - advertisers now could know exactly how many people clicked on an ad.

The evolution of CPC was the so called cost-per-action, in which the advertiser pays when the user actually do something - spend time on a website, accept an offer, buy a good.

However attractive these types of advertising deals are, they all had the same problem - there is no real incentive for the audience to engage with the ad or respond to it. And the click through rates and conversions rates showed it. For every thousand ad impressions, if you get 20 to click on your ad, you should consider yourself lucky.

This is why I was pleasantly surprised when I read that some companies are now offering money for users to watch an ad. The basic idea is similar to the "internet offers" made famous in the social games industry (sign up for Netflix and get 50 gold FarmVille coins), but less scammy and much more straight forward. Users sign up for an ad network and get cold, hard cash for watching video ads.

This is very interesting. And much more so because in the early nineties, Bill Gates predicted that something similar would happen with spam and email - advertisers would pay users if they opened and read commercial messages.

As with most futuristic predictions, even if the details of the idea were incorrect, the general idea was in the right direction.

It's still a dream

2010-03-17T09:59:00.000-07:00

A few months ago I wrote a post about why Twitter didn't want to have revenues - any revenues.

The big update on that topic is that nothing changed. They are still living off a fantasy in the hopes someone will acquire them for a bajillion dollars.

After all, it happened to YouTube, didn't it?

UPDATE: Oh, well. It's sponsored tweets after all. Check the latest news here.

We are all three year olds...

2010-03-15T04:15:00.000-07:00

Isn't it cool to say that you "love to discover new bands"? That makes you sound progressive, open for new experiences and full of musical references.

However, the reality is that almost everyone listens to the same artists and songs all the time. If you take anyone's iPod and check the "Most played" list, it will contain less than 5% of the whole library. Go on, try it, I can wait.

It turns out that we like things that we know, things we are familiar with.

Radio stations have known that for a long time. You know when people call the station to ask for a song? Did you notice that they never ask for an obscure one, a song they haven't heard since high school? It's always the same song that played 4 times in the last 2 hours.

Once I read a very good article about a TV show for small children, 3 year olds or so. They spent a lot of time doing studies and discovered that the kids loved to see the same show again and again (actually, any parent knows that - there is no limit to how many times a kid can watch Wall-E...). So what did they do? Showed the same episode of the show every day of the week. Kids loved it, the producer became a millionaire and parents wanted to shoot themselves in the heads.

And this is why, if one year ago I told you that it would be a good idea to make a movie about a farmer managing his little farm and buying crops and building barns, you would say I'm crazy. Now, if someone starts discussing a possible FarmVille movie, it turns out it might make a lot of sense. It's not a movie about a farm - It's FarmVille.

And so this is why, ladies and gentleman, brands are so powerful: because we are all 3 year olds who love to see the same thing over and over again - Final Fantasy XIII, Rambo VI, Star Wars VI, Guitar Hero Special Edition Masters of Glam, you name it.

History and fiction

2009-12-07T04:54:00.001-08:00

You know when sometimes you read something that makes you think "Wow, I would have never formulated it this clearly!"?

Well, today I had one of these moments reading this blog. I love both history and science fiction, but I had never compared the two passions side by side like the author here did. The post is below, but please visit the original source, there's other good stuff there.

"Which do you think provides greater value? Is there anything that one provides that the other can’t? Many would argue that studying history has the advantage of allowing you to learn from past events, envision where the future might lead us, and avoid repeating old mistakes. I would argue that the right fiction can provide the same benefits.

When we think about history, most of it comes from the record humans have made of events. In many cases, the only evidence available is the recount done by only one side of what happened. Additionally, it is still the positions of individuals, which doesn’t guarantee that the narration of how things unfolded is accurate enough. If we rely on the devices, artifacts, and other cultural manifestations, we aren’t better off, as it still relies a lot in interpretation. To worsen this short-comings, we have the fact that nothing from history can be truly verifiable. All witnesses might be long gone. All existing documents can be forgeries. History at its best can just be considered a fiction based on reality.

The case of fiction with fiction is similar. It comes from the experiences and point of view of its author. It is shaped by the events surrounding its writing. It might have inaccuracies, and if anything is based on facts, those may remain unverifiable. However, good fiction have consistent characters, plots that follow a logical and causal path, and themes that are universal. Those same elements have the power seen in the most important events in history. Fiction at its best can be considered history based on imagination.

With my arguments so far, I am not trying to understate the importance of any of the above. On the contrary, I believe both of them have insurmountable merit to the progress of mankind. However, they require of reasoning learners. People with the ability to discern if the events and characters portrayed in either source of stories are coherent with the logic, emotions and social context provided. Either form will require a critical appraisal from whomever studies it. Therefore, never disregard them both as viable sources of ideas, inspiration, and vision."

The world is changing fast

2009-12-07T02:27:00.001-08:00

You probably heard all this before:

- social media is important
- the US and Europe are lagging behind in technology and internet trends
- there are many big businesses making fortunes in China and we have never heard of them
- etc etc etc.

But anyway, here's a presentation with some interesting, concrete numbers for you. Feel free to be impressed. I was.

[hat tip to Jeff Paiva www.jeffpaiva.com]

Surfing the wave

2009-12-04T02:46:00.000-08:00

One of the good things about having friends in Silicon Valley is all the beta preview invites that I get.

So a few months ago, I got a Google Wave invitation from a friend from Berkeley. I accepted but - truth be told - didn't really start using it. The main reason was the old network effect: what's the point of having a communication tool if no one else is in the network? As my professor once said, the first person who bought a fax machine was stupid (if you want to put it a positive light, this is called "network effect").

Some weeks later, there were some people on Wave already, and since you can send invites to your friends, I thought that the tendency was for a valuable network to build up fast. By that time I already had many of the people I email often on my Wave contact list - my wife, my brother and friends.

Now, four months into it, Wave is anything but a success. No one uses it.

Why?

I believe people are simply not ready to be so collaborative. A "Wave" is extremely open-ended. Anyone can change the document, add stuff, paste a picture, delete a paragraph. That's scary. It might sound cools if you are a software engineer working in Palo Alto, who uses scrum based project management techniques, but for the rest of the world, the mere mortals who can barely use "compare documents" in Word, Wave is simply too open.

That is a little typical of Google and Silicon Valley. They are all early adopters, get really excited about new technologies and assume the rest of the world is just like them. Sometimes, it turns out to happen. Sometimes, it doesn't.

Let's wait and see where the Wave goes.

When selling for zero is a good business

2009-11-28T11:16:00.000-08:00

One of the most amazing things I learned during my MBA was the power of auctions. There is a whole science behind it, with elements from game theory, microeconomics and much more. When well understood and incorporated to a business model, auctions can work wonders - just take look at Google and how they manage to get the highest price for every single advertising keyword.

But not only that: the psychology behind auctions is also fascinating. Auctions are much more than finding the customer with the highest willingness to pay. They have hidden, unique characteristics which allow businesses to offer more value to the customers, and also extract more value accordingly. Let's see:

You see a leather jacket on sale for US$ 400. Will you buy it? Is that a good price or not? To answer that, you need references: you think about the last jacket you bought, or some other jacket in a similar store, or even what percentage of your salary this US$400 represents. Complicated. So the store helps you decide: they add a sign that reads: From US$540 reduced to US$400. Wow! That's really cheap now, isn't it?

So auctions offer an even better point of reference: other people. If everyone is bidding for the jacket - four hundred, four hundred and ten, four hundred and thirty... - it must really be worth it.

But how can a business make money with auctions?

Answer number one is have people bid against each other, so that you get the highest price. That's old school - but worked for Google.

answer number two is have people pay to bid.

Some companies have discovered this and turned it into a huge business. The German version I know starts with the product being offered at full price. Each "bid" reduces the price by 20 cents, but for each bid you have to pay 50 cents to the website. The twist comes from the fact that prices are secret and only shown to people when they place a bid.

Why would someone bid? Well, it is true that each individual bid does not make economic sense in itself, but in reality you're paying to discover the current price and have a chance to buy it cheap. The value proposition is very unique. Plus, the value of each bid is so low that if benefits from the "low prince insensitivity barrier".

This is a beautiful, innovative business model. It turns the traditional auction upside down: the company makes money not from selling the good, but from selling the experience, or the thrill of the bargain hunting. In a way, it's just like if all retailers would charge each person coming for a Black Friday 2 dollars entry fee. How much money could they make this way?

Google sees your deepest secrets

2009-11-28T09:23:00.000-08:00

That the internet brings out a weird side of people is no breaking news. It suffices to say that porn material is responsible for about 50% of all internet traffic, and the adult content industry was a major sponsor behind the development of technologies for compression of media files for easier distribution. Yep: that MP3 of yours? Thank it to San Fernando Valley and those girls with names like Axxxley.

But what has Google to do with this? Well, it is by far the most popular search engine in the world and, as such, its aggregated data on searches offer a pretty accurate picture of people's interest for specific subjects.

First, try Google Trends. Search for "American Idol". From the results, you learn that the show starts in January with a small peak in interest. You also see that the show seems to be particularly loved in the Philippines.

But the most interesting insights come from the suggested searches. When you're typing search keywords, Google normally makes suggestions based on the most popular searches (although their help page does not explain exactly how they decide what to suggest). What comes up in the suggestions is really funny, and really scary.

Try typing the following:

- are aliens
- can a girl
- Obama is
- is it a sin

Scary stuff, isn't it?

But, hey, why don't try it yourself? Feel free to post your results in the comments.

Payment services and user experiences

2009-11-09T03:22:00.001-08:00

Recently I have been doing some research around businesses around online payment services.

The internet is attractive essentially because it offers experiences in real time without any consideration of physical borders. With a few clicks, you can buy a piece of software or stream a movie right now, no matter where you are. You can send an email to anyone in the world, and they will receive it immediately.

But there is a glitch there: whenever you have to pay for anything, some serious obstacles get in the way. Many websites believe it's enough to accept two or three major credit cards. They forget that credit cards are not widespread in developing countries, and that even in developed countries children and teenagers (mostly) don't have their own credit cards. Credit cards transaction costs are also very expensive for websites and almost automatically corrode any margin from small ticket businesses such as virtual gifts and in-game items.

So the ideal payment service would be one that:

(a) is perfectly scalable, working fine for payments from 5 cents to 500 dollars;

(b) does not require the user to have a bank account or a credit card;

(c) works in every jurisdiction - there is few things more annoying than having your credit card turned down because it comes from the wrong country; and

(d) is safe, that is, has a reliable technology to prevent frauds and eventual hacking of the system does not spill over to your bank account.

It's clear that meeting all those criteria is virtually impossible. So it's no surprise that despite PayPal being a very successful business, there are many many micropayment start-ups popping up everywhere, each one trying to focus in a niche or offering some different value proposition.

As with many things online, the network effect will be a deciding factor: having the best payment platform means nothing if your business development team failed at making partnerships and your solution is not accepted anywhere. PayPal might look ugly and offer a less than optimal user experience, but the are very widely accepted, and that is their real competitive advantage.

Interestingly, Amazon might become a large player overnight. Amazon already owns payment data for about 200M users, gathered since their early days. Amazon also has the trust of their users. If now Amazon manages to convince website owners to sign in for Amazon Payments, Amazon might turn overnight into a major headache to PayPal.

Cellphone carriers are also in a good position. They already have a billing relationship in place with their subscribers and, since communication happens over the cellphone network, the data infrastructure piece of the equation is already in place. Finally, with about three times more cell phones than landlines on the planet, it's fair to say that the potential is huge, especially in countries with low broadband penetration where the primary mean of internet access is (or will be) the mobile phone itself.

Unfortunately, one of the most complicated parts of this business is regulation, and I don't expect this to change so soon. In the contrary, since 9/11 countries have enacted increasingly restrictive rules about anything resembling international money transfers.

Let's wait and see what the future brings us.

Selling dreams or Buying Twitter

2009-11-05T10:09:00.000-08:00

Do you tweet?

I do, but not much. I must confess that I'm more the voyeur-type, just following a few people and mostly finding interesting things through searches. Different than Facebook or my five email accounts, I can forget to check my Twitter for a week and well, my world definitely does not fall apart.

But this is not the subject of this post.

While everyone is super excited about Twitter and the potential of "real time journalism", "life streaming" or "microblogging", I'm interested in finding out how Twitter will make money. Apologies if that's boring.

In Silicon Valley, for some weird reason, having a clear business model or even something basic as a source of cash flow might be completely irrelevant. YouTube, Blogger, MySpace and many other internet start-ups were sold for a lot of money to larger players despite not showing any profits.

But with Twitter this trend seems to be taken to the extreme: they seem to be avoiding having revenues.

Why would they do that?

Well, in the current situation, potential buyers can dream about how much money they can make acquiring Twitter and mixing it with their own services, or by turning on whatever revenue model they created. In other words, the sky is the limit. How much is Twitter worth? As much as your dreams want it to be.

On the other hand, as soon as Twitter turns on whatever model they have (or don't have) to make money, they are back to the real, cold world of valuation. If you have revenue, then you have margins, and EBITDAs, multiples and all those uncool financial terms that bankers use to put a dollar value to a business.

Twitter prefer to sell dreams than to sell a cash flow. And, crazy as it seems, that might just work for them.

PS: this post is a relflection on an article I read online a few months ago about Twitter sticking to the free model. I can't seem to find the original. If you find it, please post a comment and I'll be happy to add the link.

Who was the first fax sent to?

2009-11-05T09:53:00.000-08:00

I just got a Google Wave invitation. I was excited as a child on Christmas Eve: "OMG! Now I get to test it before everyone else!!"

How wrong I was. As soon as I logged in, I realized I didn't have anyone to "wave" to. My contact list was empty. Probably as of now just a bunch of Google engineers and their developer friends are using/testing Google Wave, so I guess I'll have to wait.

Which brings me to the law of the network effect: for each user, the value of a network is proportional to the square of the number of people in the network. In other words, a network of two persons is eight times less valuable than a network of four persons. There is a cute formula for this, but you can Google it.

This explains why products such as Facebook and Twitter focus much more in attracting users than in making money. The belief is that, after they have attracted enough users, the value of their network will be so astronomically high (as with everything with an exponential in the formula) that the path to monetization will necessarily somehow reveal itself.

The interesting (and somewhat puzzling) fact is however that many of those products have not managed to create sustainable business models yet. I have a theory for why this is so, but that's a subject for another post.

Real life Sci-Fi and the pleasures of researching

2009-11-05T07:48:00.000-08:00

I just stumbled upon this video by Kevin Kelly. For those who don't know him, he was one of the early co-founders of the Wired Magazine. For me, Wired is one of the few magazines which I always read from cover to cover, every month. Anyway, Kevin Kelly is also a technology visionary, not in the sense of a tech geek who will tell you how cool the new iPhone app is, but a much more philosophical type of visionary, discussing technology from a historical, behavioral and anthropological perspective.

Anyway, watching this video brought me different feelings. First, it made me want to go back to my sci-fi books. Second, it made me feel comforted because his assertions go largely in the same direction as my own conclusions about the Internet of Things - although truth be said, he gave this talk more than two years ago. I have to do my homework...

The link is here.

Next vampires wanted

2009-11-04T08:53:00.000-08:00

Traders dream of picking the winning stock. Book authors, on the other hand, dream of finding the new mega niche and becoming the next JK Rowlings.

But not all of the authors. Many of them have a less risky approach and go for the 'me too' strategy. Take the Dan Brown example: once he hit the vein of historical conspiracy plots, the next few years saw hundreds of authors piggybacking on the success of the new genre: secret brotherhoods, religious plots, lost apostles and forbidden gospels.

The most recent trend is obviously vampires. I was aware that it was a big thing, but I was blown away when I started doing some research on the subject. You can certainly look it up at Amazon, but it's much more fun to actually browse the shelves in a real world library. There are literally dozens of new vampire franchises out there. Each one with anything between 3 and 10 books. All with similar concepts - basically, good vampires fighting bad vampires, all seasoned with a good dose of sexual metaphors and less metaphorical sex. All written by women.

It's a legitimate approach - if something works, copy it. People have been doing for a long time. However, the real question is how to identify the next big hit. If a few years ago I had came up with a book concept about young celibate vampires from Seattle, no serious publishers would have listened to me. In fact, apparently fifteen publishing houses turned down Stephanie Meyer's Twilight.

Which brings us to the one million dollar question: is there a way to predict trends in the entertainment industry? Could someone have foreseen the vampire wave because, say, sales of Gothic music were up or because black was back into fashion? Or is it truly impossible, and the only way to predict a hit is by creating it with some luck and a massive marketing budget?

I don't know. Do you? I'm looking forward to your comment.

Hands-off

2009-11-03T07:15:00.000-08:00

One of my current projects involves innovations in user interfaces. I must say it's a fascinating topic: everyone remembers how futuristic the glove-cum-transparent touch screen in "Minority Report" was - and yet it's happening as we speak!

That and much more. Since the Wii and the iPhone came out, it has been a true arms race towards increasingly intuitive and easy to use user interfaces. The trend is so strong that today consumers simply expect every gadget to have a touch screen. Just look at someone holding a Kindle for the first time and you will see him touching the e-ink page in the hopes of getting any reaction from the poor piece of Amazon hardware.

As with everything American, this war has a legal component. In January 2009 Apple was awarded a patent on touch interfaces and a touch language. I didn't check out the exact terms of the patent, but as a principle I can only say that patenting a language (as in "two taps: open") can hardly be a good thing.

But mostly interesting of all is how fast the trend is evolving. We are barely getting used to touch surfaces and Microsoft announced they created a "controllerless" controller, that is, a piece of hardware that recognizes your face, voice and body movements, so that you can play games simply by moving your body.

So, if that's sound impressive, about the brainwave-activated controllers? I tested one at the Berkeley Haas School of Business last year and was impressed. thay are still very basic (only two or three 'commands' are possible) but the potential is there. Proof thereof is this Toyota wheelchair prototype, controlled exclusively with brainwaves.

So there you have it, a nice evolution of controlling technologies: keyboard to touchscreen, then a touchless body movement recognition engine, then finally the ultimate connection with your brain, no movements necessary.

The waves of news

2009-10-29T10:12:00.000-07:00

I am currently addicted to a new website called YourVersion. Basically, they are a news aggregator. You pick your areas of interest and they select for you the most recent pieces of news about the topic (notice I haven't said 'keyword', so I'm not sure how the search process works). The interface is pretty smooth and simple and, for my purposes, it serves me well.

Before that, I was regularly using Google News Alert, which works very well, but only comes in my mailbox once a day (slowly I began to need my fix more frequent than that).

Anyway, after a few months browsing the news in this 'aggregated' format, I started to notice an interesting trend: news spread in a circular way. Normally one newspaper or blog breaks the new and from then on everything is basically cut and paste, with little value added. So, for instance, when someone at Hulu says that they are going to start charging for content, one blog breaks the news, and all the subsequent articles just quote the first.

In reality, this is just a new manifestation of a trend that has already been in place for many years. In the late nineties, early 2000s, all articles were (authorized) copies of the original Associated Press or Reuters article. Now they are just a copy of something different - and probably non-authorized.