the reflexions insider

The “prisoner’s dilemma” is an analogy in game theory that’s used to describe everything from crowd behavior to stock markets and employee group evaluations. One variation is this: you and an associate are each arrested and interrogated separately. The first to implicate the other will get a light sentence; the other is imprisoned indefinitely. If you implicate each other you both get a moderate sentence. But if you both stay quiet, you’re both let go. It’s about mutual trust and cooperation for a mutually beneficial outcome. If you look hard enough, economists and behavioral anthropologists will tell you, you’ll find it everywhere.

David Carr wrote an article in yesterday’s New York Times about why newspapers find themselves in this very predicament, but with a twist — there’s no way out unless they cooperate. Cooperating in this scenario would probably mean something like a subscription-based paid content model for a network of websites from large daily newspapers. If you pay the fee, you get unfettered access to all participating websites. If you don’t, you get very little (except what others might be willing to repost, a possible copyright issue lurking in the shadows of what has historically been a free and open [...]

Google is full of really smart people working on really hard problems. This is nothing new. Indeed the image of brilliant young engineers working on game-changing new products has come to define the company’s identity. What’s surprising to me is Google’s relative lack of significant innovation in recent years on its bread-and-butter product: search. Recent rumblings indicate that this may start to change.

The company is understandably hesitant to tinker with its core product, which some analysts estimate generates over 90% of its total revenue, especially given its most recent quarter which exceeded even the most optimistic expectations (in a recession, no less). But the sands are shifitng, and the sheer size of Google means it will be hard-pressed to compete with smaller, more nimble competitors who are starting to get attention, like Powerset and Twitter.

A recent article at Google Watch suggests that Google sees its future in the semantic web, a collection of standards and technologies that seek to deliver more meaning and structure to the web’s content but have largely languished due to a lack of widespread adoption. From the article, Google CEO Eric Schmidt is recently quoted as saying:

“Wouldn’t it be nice if Google understood the meaning of your phrase rather than just the words that are in [...]

(Image by nswlearnscope via Flickr)

Recently the ever-snarky tech/finance blog Silicon Alley Insider held a contest to propose how to fix what they called Digg.com’s “broken business model” (”broken” because Digg lost $2M on $6.4M in revenue, a staggering loss by any standard). The winner would have his or her proposal (and resume) delivered personally to Digg founder Kevin Rose and CEO Jay Adelson. The winner was Keith Cowing, an MBA student at Cornell, who suggested among other things that Digg generate revenue by selling sponsored posts on the home page and data to marketers about its users. Probably something Digg should consider but it’s hardly a revolutionary thought and not exactly the kind of model that will transform underperforming web 2.0 properties into revenue generators.

By and large the “web 2.0″ crop of business models has been disappointing. There are no shortage of examples. YouTube, purchased by Google for $1.65 billion, has a revenue model that’s “so secret, even Google doesn’t know what it is.” While Google doesn’t publish financial information about YouTube, its impact on revenue has been [...]

Consider this: Twitter didn’t exist three years ago. YouTube didn’t exist four years ago. And Facebook, the second most-visited website in the world on Christmas Day, 2008 (after Google), was started as a half-serious side project by Mark Zuckerberg in his dorm room less than five years ago. All of these websites were effectively created after the (now oft reviled) term “Web 2.0″ was coined by Tim O’Reilly and John Battelle in 2004.

By any standard, profitable or not, these are enormous web properties. And the timeline above demonstrates how rapidly the web landscape shifts and how fickle are its users.

Below I’ve identified several trends that I think will make an impact over the coming months and into 2010. This isn’t meant to be a “prediction” list per se, but an attempt at identifying how the current dynamics of social media will play out. Enjoy.

Twitter will launch a commercial subscription service that will generate revenue by letting companies use the platform to connect with customers. It will receive additional buyout offers but will remain independent for at least another year. I believe its investors are convinced that it’s worth more than their potential suitors think. And I believe they’re right. But having zero revenue is not sustainable.
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For anyone who caught the Powerpoint slide deck from what has come to be known as Sequoia Capital’s “Holy Sh*t” Meeting, this is shaping up to be a challenging environment for even the most innovative startups to raise capital or indeed, survive at all.

But if you heard the who’s-who of Silicon Valley venture fund partners that were gathered for a panel at the recent Web 3.0 Conference, or even a recent NYSIA panel discussion featuring Fred Wilson from Union Square Ventures, you’d come away with more of a sense of cautious optimism rather than the “OMG it’s the freaking apocalypse” ethos that many seem to have adopted as the the startup worldview du jour.

So for the benefit of those who might have an interest in what some of Silicon Valley’s VC wonks were saying, I’ve compiled the highlights from the discussion in this third installment from the Web 3.0 Conference. The panel was moderated by Rebekah Wu, CEO of Right Hand Partners. I’ve done my best to attribute comments where possible.

On what should make it into a presentation or pitch to [...]

As just about everyone has already heard, Google has released its own open source web browser called Google Chrome. The open source community project is called Chromium. With a powerhouse like Google behind it, will this be a significant challenge to Internet Explorer and will it change how we use the internet? We won’t know for quite a while, but we can gain some insight by looking at Google’s motivation and the technologies they choose to incorporate.

With Mozilla’s Firefox being open source and having a few years of maturity behind it, why didn’t Google simply contribute code to the project?  One reason is Firefox’s focus on streamlining basic web browsing while Chrome’s focus is on richer web applications.  Google’s view of the web is one of increasingly complicated client-server applications.  They see a gradual paradigm shift in the internet, which they are happy to help grow, but which would require a web browser more dedicated to the task.

Another reason for starting from scratch might be one of control.  While it is open source, Chrome’s direction is effectively controlled by Google.  They are the primary developers and any project forks would get only a fraction of Google’s visibility with the public.  The [...]

In the ever-shifting landscape of internet titans, the Microsoft/Yahoo! power struggle is looking more like a teenage soap opera, albeit one with billions of dollars and control of the #2 internet search position in play. But what’s more, the side effects of the struggle are starting to point to a power play for dominance of the burgeoning world of the semantic web.

Besides the posturing and very public nature of both companies’ actions, what’s most interesting — and sometimes most telling — are the investments, partnerships, and acquisitions that have been unfolding since the saga began.

One of the more recent moves was Microsoft’s acquisition of the semantic search firm Powerset, itself coming on the heels of Yahoo!’s recent announcement of its open search platform, providing some support for semantic data to third party developers.

The Powerset acquisition is more than bet-hedging against losing out on its bid for Yahoo!. What Microsoft has started to understand is that the next killer app of the web will be found in the nascent semantic technologies and standards that are only starting to take shape.

Companies large and small are starting to invest big money in semantic web research and development. But if Microsoft can spend big money buying their way [...]

About a month ago, those of us who follow changes in Google’s search result rankings with a level of enthusiasm usually reserved for sports franchises woke up to something frightening: The Dewey Update.

Google normally makes daily changes to their search result rankings, so finding yourself in position 3 when you were in position 4 yesterday is not abnormal. But it was quite shocking for many webmasters to wake up one morning and discover their site completely removed from Google’s search results.

Google’s primary goal should be to deliver the best (i.e., most relevant) search results to its users. This is what ensures that users will keep coming back and what maintains Google’s marketshare. However, the reasons behind this update (although impossible to pinpoint) appear to be focused on ranking Google’s internal pages higher than others.

After the update, Google Books search results were suddenly ranking close to the ever-dominant Wikipedia pages. In addition, Youtube and Google News content was being displayed prominently over other commercial listings. This looks like a blatant abuse of Google’s position. Their mantra “Do No Evil” implies a commitment to being fair and balanced—manipulating search results to put their own pages first is clearly an unfair tactic that hurts both users and webmasters.

Fortunately, this update was short lived. After Google’s spin master continue >>

Image by wwphotos via Flickr

Tuesday’s keynote was given by Eric Schmidt, CEO and Chairman of Google, Chairman of Novell, etc, etc. There were two items of note: 1) the announcement by Schmidt that Google has just released a presentation application to their office suite, and 2) the fact that Schmidt’s appearance came on the heels of the announcement by Microsoft and AT&T that they will ask federal regulators to challenge Google’s acquisition of DoubleClick for 3-odd billion dollars.

Incidentally, while booth size shouldn’t always be the measure of the relative importance of a company at a trade show, it was telling that Microsoft’s booth was in the “low rent” section and looked like the marketing department had paid for the trip by ransacking their couch for spare change (See the photo I snapped to the right. If you squint your eyes you can kind of make out the Microsoft booth among all of the people who are looking elsewhere). [...]