Hey, Firefox: Don't Mess With My Preferences

I know that Mozilla/Firefox ended its contract with Google and entered into a new search contract with Yahoo!, but that doesn't mean I want them to mess with my settings and make Yahoo! my default search engine.

There's No Such Thing as a Secure Back Door

The Washington Post editorial board, rather predictably, follows its tendency to defer to the state on issues of law enforcement and national security,

Law enforcement officials deserve to be heard in their recent warnings about the impact of next-generation encryption technology on smartphones, such as Apple’s new iPhone. This is an important moment in which technology, privacy and the rule of law are colliding.

The issue arises from the fact that Apple's latest version of iOS, and the next version of Google's Android OS, will automatically encrypt many routine communication functions, and will also remove any mechanism through which Apple or Google can decrypt phone content for law enforcement.

The technology firms, while pledging to honor search warrants in other situations, say they simply won’t possess the ability to unlock the smartphones. Only the owner of the phone, who set up the encryption, will be able to do that. Attorney General Eric H. Holder Jr. said this could imperil investigations in kidnapping and other cases; FBI Director James B. Comey said he could not understand why the tech companies would “market something expressly to allow people to place themselves beyond the law.”

While certainly, over enough time and enough cases, situations will arise in which content saved on a smart phone could be useful to law enforcement, and some of the criminals in those cases won't already be using readily available third party encryption apps, I am reminded of the saying, "Bad facts make bad law" -- a comment on the propensity of courts to carve out exceptions to constitutional protections because, in the most common example, a really bad person did something particularly awful and existing law would render key evidence inadmissible. We should not compromise everybody's rights based upon the inevitability that a very small number of people will do bad things.

The Post argues that "This is not about mass surveillance", but really it's not about surveillance at all. It's about accessing the content of a smart phone that has been physically seized by the police. If the police have a warrant that allows them to intercept voice and data transmissions from a smart phone, or to remotely activate the phone and use it as a listening device, the change doesn't affect their ability to do so. The change means that law enforcement cannot take a seized iPhone to Apple and ask them to bypass its pass code to decrypt its content.

The Post argues,

But smartphone users must accept that they cannot be above the law if there is a valid search warrant.

Similarly, owners of safes and vaults must accept that they aren't above the law if there is a valid search warrant -- but that being the case, sometimes the only way into a safe or a vault is through the application of brute force. The idea that law enforcement would be handed a master key that could open any safe, vault or lock box in the nation would be ludicrous to the editorial board, which writes,

A police “back door” for all smartphones is undesirable — a back door can and will be exploited by bad guys, too.

An encrypted smart phone is similar to a safe, with the pass code serving as the key or combination you need to access the contents. It happens to be a particularly good safe, such that if the owner uses a complex pass code or you don't have the patience to work through the 10,000 basic four digit pass codes without locking yourself out of the device, it's really tough to get the content.

When the Post writes,

However, with all their wizardry, perhaps Apple and Google could invent a kind of secure golden key they would retain and use only when a court has approved a search warrant.

They're engaging in wishful thinking: "We can't have a back door, as that would create an unacceptable security hole, so what we should have instead is... a back door!" A back door that would be the immediate target of criminals and intelligence agencies worldwide. A "golden key" that would have to be stored somewhere, and attempts to gain access to it not only through reverse engineering or brute force, but by bribery, blackmail, theft and extortion, would begin immediately. The editorial board appears to be aware that making everybody's phone vulnerable to bad actors is a bad idea. Unfortunately, once you ungild the "golden key", it's their only idea.

Google and Apple vs. the Patent Trolls

With Apple and Google settling their patent disputes, some have noted that the two companies are now teaming up to urge legal reforms directed at patent trolls. In simple terms, a patent troll is a company that does not produce anything, but instead builds a library of patents that it uses to make demands for compensation or to launch lawsuits, often strategically timed to coerce a quick settlement, against companies that they allege are violating their patents. Many start-ups end up having to choose between settlement or burning through hundreds of thousands of dollars in legal fees, often significantly more than the patent troll demands to settle the claim, instead of investing that money in their business. The patent troll may wait to file a lawsuit until a company is in merger or acquisition talks or announces an IPO, knowing that in those contexts companies will often want to quickly settle any litigation.

At the same time, large companies are notorious for being unwilling to license outside technology and, upon learning of an innovation, of trying to find a way to replicate its best features without running afoul of the existing patent. Also, absent a huge bankroll, it is a rare private inventor who can afford to litigate even an egregious patent violation. Although I am not claiming it to be at all typical, or at all common, it's not difficult to see why an inventor who lacks the resources to directly capitalize on a patent, who can't find a manufacturer willing to license or buy the patent, and who sees what appear to be violations of his patent by existing companies, might choose to license or sell a patent to a company that could reasonably be described as a "patent troll".

One reform that is sometimes proposed as a way to greatly reduce patent trolling is to eliminate software patents. However, we're now in an era in which traditionally patentable devices covered with switches, buttons and knobs can be replicated on a touch screen, purely through software. We're in an era in which the patentable elements of a breakthrough computer innovation may be entirely software-based, and where product development could involve the investment of millions, even tens or hundreds of millions of dollars, but where replication of the idea is comparatively cheap and easy. That's the context of the Samsung-Apple litigation, with Apple having spent $150 billion or more developing the iPhone and Samsung, displeased with its own efforts, choosing the much easier path of imitation.

If you deprive the innovator of any patent protection, it's highly unlikely that they're going to make the necessary investment to produce that type of innovative product as they would be concerned that immediate imitators would prevent them from obtaining a return on their investment -- or might turn that investment into a gargantuan loss. Also, given the $billions that major companies have spent building their patent portfolios, even if it would make sense in the long-term to narrow the protection available through software patents, it's difficult to imagine that those companies will support reforms that would significantly reduce the value of their patents. At the same time, it should be possible to get broad support to narrow eligibility for software patents, and perhaps even to significantly shorten their duration, reforms that would help keep dubious patents from being used coercively against manufacturers and service providers, and allow companies to recover their investments while limiting the amount of time in which competitors are reluctant to build upon a patent holder's breakthrough or essential technology.

Another reform that is often suggested, and which seems quite reasonable, is to provide that a patent holder can only obtain injunctive relief is if it actually manufactures a product covered by its patent. A reform along that line seems reasonable, although I think it would be appropriate to provide for injunctions if the patent holder can demonstrate that it is in the process of developing products or that the alleged violation is intentional. Otherwise, the coercive impact of an injunction could cause a company to settle a frivolous claim in order to keep a key product on the market or to reassure investors or its distribution network.

I've also seen it suggested that, if sued, a company should be permitted to ask a court to declare that the patent holder is a patent troll and, if the court agrees, that the company should be required to post a bond to cover the alleged violator's legal fees if its patent litigation is not successful. While the most noteworthy example I've seen, the proposed Shield Act, attempts to define "patent troll", its definitions remain problematic. For example, the requirement that a company seeking to protect an acquired patent "provide documentation to the court of substantial investment made by such party in the exploitation of the patent through production or sale of an item covered by the patent" would put a significant hurdle in front of a patent holder trying to sell a patent that is already being infringed, or in front of a company that acquires a patent that is infringed prior to its commencement of production and sale of a covered product.

The bond requirement imposed on a company determined to fall under the act would be oppressive to a company bringing a legitimate patent claim, but there's no reciprocal requirement -- either for a bond requirement or for an award of legal fees against a defendant company that loses its defense of a patent case -- that would discourage a company from defending a patent that it believes is, or probably is, valid. While there's something to be said for reducing a patent troll's ability to coerce a settlement from a company that might prevail if the case were litigated, the Shield Act seems to substitute one problem for another -- now a willful infringer can create a litigation environment in which a company that has acquired a valid patent could come under intense financial pressure to settle for far less than the claim is worth.

A more modest reform bill is pending in Congress, and it does include a reciprocal attorney fee provision, but it is not widely viewed as having a large chance of passing. The bill includes some interesting elements that attempt to limit the ability of a patent holder to coerce another company based upon nebulous claims of patent infringement, and potentially create a cause of action against a patent holder who violates those provisions.

Google and Apple are in a powerful position to push for meaningful patent reform. Let's hope that they push for balanced reforms, even at risk of devaluing their patent portfolios, and that more tech companies join their effort.

Microsoft... Still Doesn't Get It

A Microsoft executive, Frank Shaw's, attempt to poke Apple has gained some attention,

Note: If you are the TL;DR type, let me cut to the chase. Surface and Surface 2 both include Office, the world’s most popular, most powerful productivity software for free and are priced below both the iPad 2 and iPad Air respectively. Making Apple’s decision to build the price of their less popular and less powerful iWork into their tablets not a very big (or very good) deal.

Since we launched the Surface line of tablets last year, one of the themes we’ve consistently used to talk about them is that they are a terrific blend of productivity and entertainment in one lightweight, affordable package. In fact, we’re confident that they offer the best combination of those capabilities available on the market today.

Wait a second... then why did Shaw just say this?

I have to say, I’m really excited for a 1080p Lumia with a third column on my start screen so I can keep a close eye on more people, more news, more stuff.

That is, if Microsoft's tablets are the best combination of productivity and entertainment on the market, why is Shaw excited about buying a Nokia, even if Microsoft is in the process of acquiring that company? Shaw leaves me with the impression that his blog post is less about touting his company's great product than it is an attempt to promote Windows tablets, generally, by taking digs at Apple. Microsoft was very late to recognize the market for the tablet computer, and continues to withhold Office from competing platforms as it has scrambled to develop its own tablets. On top of that, part of the reason that Microsoft's tablets are "affordable" is that they aren't selling, and as a result prices have been slashed... now twice. I don't want to diminish the Surface as a product, and I suspect that it would have been more successful had it been released two years earlier, but as with the Zune there's a significant price for coming late to market with a product that doesn't capture the imagination of your market.

What strike me most about the piece is how the Surface is, in essence, touted as a laptop. Microsoft, we're told, is the expert in how real people work. Real people want keyboards, trackpads, multiple windows open on their displays, a full version of Office. (Real people also apparently want an obnoxious, in-your-face tile interface shoved in their faces when they boot up a Windows 8 computer, and want touch screens on their portable computers.) And yet real people demonstrate Microsoft's skill in assessing their needs by buying Apple and Android tablets in huge numbers, while largely ignoring the Surface.

If you're typing or editing large documents, are creating spreadsheets, or working with other complex documents, you probably do want a keyboard and mouse or trackpad, but... you probably already have a desktop computer, a portable computer, or both upon which to perform those tasks. If you have a notebook computer that runs Windows, what's the advantage of toting around a Surface tablet with a keyboard cover when you can simply use your computer? The power of Surface has given Windows tablets about 5% of the market, which is enough to keep your toes in the water. Apple has about 5% of the global PC market, so in a sense Microsoft is in good company.

Shaw declares that by offering so much productivity Microsoft is leading the market (from behind)....

And so it’s not surprising that we see other folks now talking about how much “work” you can get done on their devices. Adding watered down productivity apps. Bolting on aftermarket input devices. All in an effort to convince people that their entertainment devices are really work machines.

In that spirit, Apple announced yesterday that they were dropping their fees on their “iWork” suite of apps. Now, since iWork has never gotten much traction, and was already priced like an afterthought, it’s hardly that surprising or significant a move. And it doesn’t change the fact that it’s much harder to get work done on a device that lacks precision input and a desktop for true side-by-side multitasking.

I think Shaw is onto something when he describes how Microsoft is in touch with what people want, if we define "people" as the population that is already predisposed to buy a Surface. The problem is, he is touting solutions that have absolutely nothing to do with how most people use tablet computers. The tablet is largely a product for consumption of media and entertainment, not for productivity. To the extent that you can add on productivity, about 90% of tablet users are going to find all of the power they need (and perhaps more) in the free apps that Apple is offering, and those apps will get better over time.

Perhaps what Shaw is displaying is discomfort at seeing his company's business model increasingly threatened by free software. Sure, the competing software may be less powerful than Office suite, but... free, and good enough for a significant majority of users. It's part of an expectation Microsoft helped create when it launched its browser war against Netscape, and even before that with its controversial bundling practices: the idea that you pay for your computer hardware, and that the software you need for basic functions (an ever-expanding category) should be free. Your Surface tablet runs Windows 8 and Office, but will upgrades to either be free? I doubt that's what Microsoft has in mind.

Apple seems to be taking the position that software is a commodity product that is best used to sell hardware, and by expanding the sphere of what its customers get for free - and how well its products play together - they want to keep customers in the Apple ecosystem. I can see merit in Microsoft's vision of the future, with people having full capacity to do whatever it is that they want to do on whatever device they have with them, but I'm not sure that the vision is compatible with Microsoft's business model - at least not in the mass market. If expensive software upgrades are required for any product running Windows, that cost will quickly undermine Microsoft's claim that its products are more affordable than those that offer free upgrades. Apple's vision of the future seems to be to allow users of its products to transition from one device to another, phone, tablet, computer, Apple TV, while having each device know exactly where you left off on the other. Continue your movie from where you paused, continue editing your document from where you stopped.... That vision seems to be more viable, and is unquestionably consistent with Apple's business model and - despite Mr. Shaw's claims - seems to be more consistent with how people in the mass market are using their devices.

So, when I see Apple drop the price of their struggling, lightweight productivity apps, I don’t see a shot across our bow, I see an attempt to play catch up.

Whereas I see Apple as obviating the need for 90+% of its customers to ever purchase "Office for IOS", should Microsoft ever muster enough courage to release such a product.

I think they, like others, are waking up to the fact that we’ve built a better solution for people everywhere, who are getting things done from anywhere, and who don’t have hard lines between their personal and professional lives. People who want a single, simple, affordable device with the power and flexibility to enhance and support their whole day. :)

I admit it. If I had to choose between doing my professional work, or even blogging, on a tablet or a notebook computer, I would pick the notebook computer as the "single, simple, affordable device with the power and flexibility to enhance and support their whole day". But I don't have to choose, and thus can use my smartphone or tablet for the functions they provides extremely well - basic communication, media consumption, web browsing, simple games, demonstrations, and online reference materials - and switch to my notebook computer (or go to my desk) for more complex tasks. To look at it another way, the fact that I have a Swiss Army knife and thus can sometimes avoid using a more specialized tool doesn't mean I'm going to throw away my saws, knives, screwdrivers and scissors. If your vision of a typical tablet user is somebody typing away on a keyboard using a fully featured windows OS, you're not looking at how people interact with their tablets.

Where We Could Really Use the "Next Steve Jobs"

A lot of people focus on the smartphone market, and complain with each new Apple product that... Steve Jobs would have done something different, or better, or both. Steve Jobs brought something unusual to Apple, specifically a willingness to make huge gambles on theoretical technology, and to release products that could turn out to be failures. Apple seems to have become exceedingly cautious, but I'm not sure that is so much the result of a change in the company's philosophy as it is a change in consumer expectations. The iPhone 4 antenna issue, and the Apple Maps brouhaha, suggest that consumers want nothing less than perfect and, rather than launching risky products that might inspire a mixed reaction or turn out to be the next Newton (or Zune), caution has spread across the industry.

The real story behind the focus on portable electronics is not so much that a life-changing innovation is just around the corner. It's much more that there is profit in the upper end of the market, the mass market having already been commoditized. Smartphone advances reflect the importance of competition as, even though Apple sees the rise and fall of Nokia as a cautionary tale, history suggests that product development in a commoditized market tends to be slow. Most companies see little to no point in spending hundreds of millions of dollars to marginally improve a product that will likely sell at the same price point as before. That's the sort of context in which a short-sighted CEO of a company like Hewlett-Packard might decide that it no longer makes sense to fund research that is not directly aimed at turning a profit, or why a similarly short-sighted company's products might go from excellent to "good enough" in order to increase margins by decreasing production costs. (Am I talking about the same company?)

One might argue that televisions have seen marked advances in technology despite being a largely commoditized market, but that has been driven in no small part by the introduction of HDTV and the money poured into the development of new displays for computer users and commercial settings. Even in that context, major players like Panasonic have a very difficult time turning a profit, and the pool of companies that produce television displays and sets is not expanding.

One area that has seen a surprising lack of innovation is the desktop computer market. That's in part because it's a tough nut to crack - computers do pretty much what we want them to do, there are no obvious ways to dramatically improve the user interface, and the technologies for interacting with computers other than through a mouse and keyboard tend to focus on niche users or turn out to be largely impractical. It may be that one day we'll have displays and "no touch" gesture controls as shown in the film, "Minority Report", but that's not on the horizon. Basically, the desktop computer market seems a lot like the television market. To the extent that incremental improvements are seen, they're in no small part the result of R&D in the mobile marketplace. The biggest "innovation" we've seen in a desktop operating system was Microsoft's annoying, clumsy interference with the user experience by putting a "smart tile" display between the computer user and the desktop - that is, they tried to make the desktop experience more like mobile, never mind whether that makes sense. Apple has made similar, albeit less in-your-face changes to its desktop operating system, with its Launchpad and App store, but they're really not part of the ordinary desktop experience.

Somebody commented to me recently that Apple seemed to be "giving up" on the competition for desktop computers. I responded that they're chasing money and market share, and that right now they can find both in the mobile space while there is little incentive to try to claw out a greater market share in the desktop market. The cost of significantly expanding their desktop presence would be significant, and there's really not much money to be made in that market. Were Apple to start producing $300 - $600 portable computers it might find a market, but it would have to make the quality cuts that are readily apparent in computers in that price range, potentially costing it brand loyalty over the long run in the same manner that the low quality Apple products of the Sculley era damaged Apple's reputation and competitiveness. Why mass produce low-cost computers that have to be sold at tiny margins and that would likely have an impaired user experience, when you can continue to sell $1000+ computers that people enjoy using, and sell millions of highly profitable iPads to the sub-$1,000 market?

Really, though, the desktop industry needs to be woken from its complacency, much in the manner that Google and Apple rebooted then-stagnant browser development with Chrome and Safari. The problem being, you either need a company that sees a long-term gain in developing new technology at a significant short-term cost, the way Xerox PARC laid the foundation for the computer mouse and windows-driven displays, or because they don't want to be indentured to a competitor's product. And if you take the HP Labs / Xerox PARC approach, you also need a visionary who can see how a new idea can be improved and put into widespread use - after all it was Apple, not Xerox, that turned the mouse and menu/windows-driven interface from an impractical lab-based demo to the desktop standard.

The manner in which the world, and Apple, has changed is perhaps best illustrated by today's quiet announcement that the iMac has been updated. You can go to the Apple Store and buy one today - but the new version isn't even flagged as "new". A secondary illustration comes from the Mac Pro, the high-end computer Apple develops for the professional market, which is soon to be released in an innovative new case. But that's innovation in the same sense as the Mac Mini was an innovation - great design and packaging, but nothing you couldn't have accomplished in a traditional mini tower case. Apple did promote the redesigned Mac Pro, some months back, but when will it actually come to market? Later this year. There's no sense of urgency, as there is in the highly competitive mobile marketplace.

An argument can be made that when a technology reaches a certain point of maturity, all new developments will be incremental. Perhaps the keyboard and mouse-driven desktop computer are pretty much it - and unless the entire concept is reinvented (much as the iPhone reinvented the smartphone market) this is it. People seem disappointed when the new "state of the art" smartphone looks like the old one - as if there's a great deal you can do to differentiate the hardware of a typical smartphone in ways that are obvious or exciting. Even in that market, unless a new, disruptive technology comes along the biggest future changes will come through software. In fifteen years, today's typical smartphone and tablet apps are likely to look about as sophisticated as Pong. But still, it would be nice to have a sense that somebody out there - somebody positioned to disrupt the market - was looking at "impractical, unworkable" new ideas from a different angle, and asking, "What if...."

Apple and the Decline of Microsoft

If the take-away is that big companies can sometimes lose track of how to compete effectively with smaller, nimbler, more innovative successors, there's nothing new to that story - it bears repeating, it's something companies should try to remember as they get big, and it's something most companies seem to forget given enough time, success, and/or an unfortunate choice of leadership. Paul Krugman argues that Apple could follow Microsoft into decline, and that it's situation could potentially be worse as it sells consumer products and thus isn't as insulated from market forces as Microsoft, which benefits from having lazy IT departments refuse to support Apple products. But that makes Apple more like Hewlett-Packard, a once great and innovative company that produced quality products, then lost its way under incompetent, bean-counting management that slashed its research budget and didn't care about quality. For that matter, you could compare the future theoretical decline of Apple to the past, actual decline of Apple, where bad decisions by Steve Jobs and his successor all-but-destroyed the company before Steve Jobs returned from NeXT with a much improved vision for the company. But for Apple's reinvention of itself, odds are that we wouldn't be fretting over whether the next iPhone will be only incrementally improved over the prior model and that Android would still be a Blackberry clone. Let's recall, Apple's big profits come not from software, but from hardware.

Krugman writes,

The story of how that state of affairs arose is tangled, but I don’t think it’s too unfair to say that Apple mistakenly believed that ordinary buyers would value its superior quality as much as its own people did. So it charged premium prices, and by the time it realized how many people were choosing cheaper machines that weren’t insanely great but did the job, Microsoft’s dominance was locked in.

On the contrary, I think Apple is painfully aware of the fact that many consumers, particularly those at the low end of the market, are choosing Android devices. Although Apple still suffers more than a bit from the Steve Jobs attitude of, "We know what you want better than you do" (an attitude Krugman notes in a blog entry on the subject) - and in fairness to Steve Jobs, at least during his second tenure at Apple he was often correct - they don't market their most profitable products in the manner that Krugman suggests. They're not trying to convince you to buy a $599 iPhone versus a bottom-of-the-market $100 Android phone. They're trying to get you to sign up for a two year contract with your phone carrier, with much of the purchase price being built into your service contract and your nominal purchase price being not much different from a low-end phone.

In terms of quality and pricing, for quite some time Apple's computers have stacked up quite well, feature-for-feature, with the diminishing pool of well-constructed PC's. But it has been my impression from the lack of development of their desktop market that they aren't interested in trying to make a huge - or even a modest - push for market share within that diminishing market. Not surprisingly, they like to manufacture products that are profitable, something that very few cell phone manufacturers do. They and Samsung presently sell cellular phones at a profit. Thanks to the increased quality of competing products, I suspect that Samsung will soon find itself facing a commoditized market for higher-end cell phones and Apple will be the last cell phone company that makes a significant profit from its hardware. Then, barring the unlikely event that we get something as disruptive to the industry as another iPhone, Apple will no longer be able to sell its cell phones for an appreciable premium over the commodity price - and the entire industry will have to glean its profits elsewhere. Apple is trying to establish a reliable ecosystem - hardware and software that work well together, allow most products that remain in service to be upgradable to the current operating system, and are easy and reliable platforms upon which third party software and hardware developers can manufacture apps and iOS-compatible products. Despite Android's quality, the fragmentation of its operating system and the fact that many phone manufacturers don't care if a two-year-old handset can be upgraded will impair its ability to offer the same opportunities. Apple intends to make money, even in a commoditized market, from app sales and licensing fees.

Krugman appears to be focusing on major disruption rather than modest innovation, even as he brings Yahoo! and Marisa Mayer into the discussion. If the resurgence of Yahoo! is a story to be believed... and I'm a skeptic... its resurgence will be the result of improvements at the margins. And that story would not be atypical. The biggest fortunes tend to be made not by the person who comes up with a concept or invents the early version, but with the person who comes up with an upgraded version of the product - something that ships better, something that's easier to manufacture, something that's easier to use. When Steve Jobs saw early versions of a window-based operating system and mouse at HP's then-famous labs, he saw the potential to transform them and turn them into products for a mass market. Jobs wasn't the inventor of the cell phone, display panel or touch screen - but he and his company came up with an innovative way to combine them.

Microsoft committed some odd, oversized errors over the past couple of decades that have contributed to its downward slide. As Krugman notes, they didn't see the potential of the iPhone, but more than that they didn't see the potential of the Internet. As Krugman noted, a lot of Microsoft's past success was built on its monopoly power, but its best and most profitable products were not major innovations. Windows built upon work that Microsoft performed for Apple, in developing the operating system for the Macintosh. It's office suite built upon software products that offered similar functionality, perhaps with modest improvement (but often without, or with 'innovative' features that you couldn't wait to turn off), and became dominant through bundling. Its browser became dominant through bundling, leading to the decline of Netscape, but it lost interest in developing a cutting edge browser pretty much the moment it no longer perceived Netscape as a threat.

Contrary to Krugman's inferences, having never been a user of Apple products, Apple did not always have a quality advantage over Microsoft or its associated hardware developers. Windows 95 incorporated some features that it took Apple years to emulate, and after Jobs left Apple's hardware quality plummeted. For that matter, for all of its innovative features, the early Macintosh suffered from having too few programs and too little RAM, as well as the odd design compromises that came from Steve Jobs' disdain for internal fans. Microsoft's present plight emerges from its failure to effectively enter new markets as the old ones faded - as operating systems became "good enough" that companies felt no need to upgrade every year or two, and as its Office suite became "good enough" that any changes it made from year-to-year were not likely to bring new sales, and as its customers tired of its game of modifying Word files such that you had to jump through hoops to save a document that would open on an older version of its software. In that sense we're back to the legitimate fear for Apple as a hardware company - that unless it comes up with a remarkable hardware innovation it's looking at a future where its products are commoditized and while, despite some people sticking with the company due to their library of iOS apps, many customers come to see little reason not to change platforms. Apple is trying to look beyond that day, and Google is struggling to convince Android developers to follow standards that will allow it to keep up.

Apple's biggest problems seem to come from copyright law, and entrenched monopolies and oligopolies. It is having difficulty coming up with a television product because of the difficulty of licensing content from media companies. Its products rely on Internet bandwidth, with many customers obtaining that bandwidth from cable monopolies. The iPhone demonstrated how you can create a breakthrough, profitable product in a tired, commoditized market, but without content there's no apparent room for a similar move in television. Also, most televisions these days would qualify as reasonably powerful computers, so it's not clear that Apple could offer a disruptive product that would not quickly be emulated, perhaps less artfully, by its competitors. People talk about an iWatch, and I think it is inevitable that Apple will produce a wearable device of some sort... although I don't think it is likely to be a watch in the sense that we have traditionally used that word, either in how it's worn or what it does, but all we can do at this point is speculate.

Google is, in a sense, playing Microsoft to Apple's iOS, offering a version of highly similar software for free, Microsoft Internet Exploder vs. Netscape's browser. I sometimes wonder if Google will continue to provide free operating system development for the world, or at least if it will be as quick to make its greatest innovations part of the core as opposed to part of a proprietary add-on, particularly as it attempts to spin Motorola up into a dominant manufacturer of Android phones. As with all of this stuff, time will tell.

The Logic Behind Control Freaky iPhones

I have sympathy for the argument that Apple has a history of being something of a control freak with its hardware, and that its tendency to want to control what users do is manifest in its iOS devices, the iPhone and iPad. If you're the sort who likes to customize your experience within the OS, you have very few options. If you're the sort who likes to dig deeper into the device to change appearance or function, Apple works hard to prevent that. If your intentions are good, than can be frustrating.

That's not to say that it's not frustrating, also, when your intentions are bad. Although some people jailbreak their iOS devices in order to use them on a network that does not yet support the iPhone, or because they enjoy hacking the device, let's be honest: Most people looking to jailbreak an iPhone or iPod, or complaining bitterly about how Apple restricts their freedom as compared to Android, are primarily interested in installing bootleg apps or making "free" in-app purchases.

As it stands, iOS looks its age. There are pro's and con's to that, the most obvious pro's being that it's easy to use and remains compatible with most older iOS devices. On the other hand... it's somewhat inefficient, the constraints on file organization make it somewhat clumsy, it screams out for new features, some of its functionality is clumsy (adding an event to the calendar, for example), and its quaint adherence to skeuomorphs (e.g., making a calendar look like an old, on-paper desktop calendar) needs to go. (Rumor is that skeuomorphs are on their way out in the next iOS update.)

When you look at the latest version of Android, or when you look at Android's present market share, the question I heard a while back, "Why do developers still tend to develop an iOS app first, instead of starting with Androd," seems fair. I think the answer is this: Because Apple is enough of a control freak to ensure that a majority of iOS device holders will buy their apps, instead of installing "free" bootleg versions. That's an issue I expect to only become more pronounced as Android starts to saturate the market for lower-cost smartphones.

Although I'm not sure that they expected it to happen so quickly, Apple has known for many years (really, all along) that it's only a matter of time before any computer technology becomes commoditized. You can create a premium product and sell it at a premium price, but if the run-of-the-mill product is almost as good as yours that is likely to result in your rapid loss of market share. People seem to forget that while Apple is competing with Samsung (and, indirectly, Google) for the lion's share of the smartphone market, it's competing with Amazon (and Google) to be a dominant vendor of electronic books and media. Google doesn't give away Android in order to give its competitors an advantage in the marketplace - it does so to give its own software product an advantage, and to better position itself to compete in the mobile space for ads, apps and media.

To the extent that Apple can make itself the device maker that is most likely to provide royalties to developers and content owners, and Android doesn't find a way to rein in bootlegging, that aspect of Apple's control freaky nature is likely going to provide it with a significant advantage when negotiating with content providers.

The End of Google Reader and the Future of Blogging

For those who use it, Google's announcement that it's killing off Google Reader is probably a bit of a surprise. After all, with the simplification of the Reader shortly after the introduction of Google Plus, it seemed like it was in a pretty easily supported maintenance mode. But... there's no profit, and no future, in maintenance mode products.

The actual announcement has resulted in some reactions that are, oh, perhaps a bit over-the-top. The idea that you won't use a new Google product because an older one you like is being phased out is superficially understandable, but the fact is that even products that are immensely profitable for a company can eventually become obsolete. There's nowhere you can go in the online world with certainty that the product you know and love won't be discontinued, in some form of maintenance mode, or suddenly and dramatically reinvented into something you barely recognize.

What Google's action says to me is that people are continuing to shift from using RSS feeds to follow blogs and news sources and toward other means of aggregating content or finding interesting links. Yes, the skeptics are likely correct that Google wants Reader users to shift over to Google Plus, even if it doesn't offer the same functionality. But I suspect that the biggest issue for Google is that people truly are shifting away from Reader, and although those of us who use Reader may find it extremely useful, we're a shrinking minority of Internet users.

My personal reaction to the news was two-fold. First, it's difficult to monetize RSS feeds, so people have been pretty passive about pushing them on the public. Second, people are shifting away from blogging, as such, and are switching over to more casual or less time-intensive means of sharing their thoughts or keeping in touch with friends. The push toward Google Plus is not just about use our new product, not our old one, it's consistent with a general shift away from blogging.

Although the numbers are approximate, blogger is shown by compete.com as being down by more than 2 million unique visitors per month over the course of a year, more than 40% of its traffic. Although the drop-off on blogspot (the URL that serves blogs hosted by Google) is less significant,

If the content is being created elsewhere, eventually the traffic will go there as well.

I am left wondering about the future of blogging. I've never seen blogs as much more than a simple CMS (content management system) that allows people to easily publish content, albeit in a somewhat constrained format. It's treated a bit differently than other content by search engines - on the whole, it appears to be treated as being of shorter-term interest so, although a page can generate authority by drawing in links or hitting a sweet spot for search terms, for the most part blog posts are lost to time. I haven't spent enough time browsing blogs in general to see whether blogs are becoming "more serious" - whether on the whole it's the lighter, more casual conduct is what's drifting off to other mediums. If it is, then perhaps blogging will ultimately evolve into something more serious. But if the trend is across-the-board, it's quite possible that conventional blogging platforms will go the way of livejournal - once an Internet phenomenon that remains significant, but... appears to have lost about half of its traffic over the past year.

One way or another, if public interest is plummeting and the future lies in another direction, major companies are going to shift their resources in the new direction - and eventually will discontinue their support for the dying platforms. If it worries you that because Google discontinues one product it might later discontinue another, you're right - it could happen. But unless you're content to limit yourself to what you save on your own hard drive, that's true of any company and product. If you are going to grouse, "I won't use Google Keep because Google is killing Reader", great... and are you switching your phone to Apple, a company that has at times killed products and services, Microsoft, a company that has also at times killed products and services, or RIM/Blackberry, a company that is in danger of being unable to support its proprietary mobile OS?

If you're posting your complaint on a blog, as I intimate above, you may be missing the forest for the trees.

Would You Even Want a An Apple Watch

In what I expect to be another entry in my unbroken record of making incorrect predictions about future Apple products, why not comment on the rumored "Apple Watch" and the rumored 100 engineer team working hard to get one to market?

Interestingly, we're also told that Apple's chosen to rework the full iOS to run on the watch instead of building up the iPod nano's proprietary touch operating system — although the previous nano was already watch-sized and seemed like a great starting point for a wrist-sized device, Apple's betting on iOS across product lines.

If Apple actually figures out a way to get a useful interface to iOS onto the face of a watch, all the more power to them. I expect Siri would play a huge role... if you have an Internet connection.... But I find myself thinking back to my youth. Sure, the few remaining people who read the comic strip thought Dick Tracy's watch phone was cool, but the craze of the day was the digital watch. I recall the efforts to put more and more features into watches, including an effort to make a TV watch and any number of successfully marketed calculator watches. Tiny screens, tiny buttons. These days, the cool watches are once again analog.

I have to admit a personal prejudice: The only piece of jewelry I wear is my wedding ring. I have a watch, but I don't like to wear it. The idea of wearing a "smartwatch" of some type is not appealing. The more battery life you give it, the more you try to make it a primary device instead of a secondary device, the more you are going to load up the watch band with batteries, antennas and the like. For the advantage, I suppose, of being able to easily look at a tiny screen and perhaps make Dick Tracy-type FaceTime calls. I'm again taken back to the expensive, overly featured digital watches of my youth - wearing one could be cool, could indicate that you had money to burn, could prove that you're on the bleeding edge of technology, but was otherwise not very practical.

What about exercise? You are on the stepper at the gym or out jogging. You're seriously going to run your headphones to your wrist? An oversized wrist band isn't going to feel sweaty and gross? Granted, not everybody exercises, but.... Google glasses, by way of comparison, seem much more practical (although they face the same sort of issues if you try to make them a primary device as opposed to drawing their data from your cell phone.)

And what about heat dissipation?

Obviously Apple has time to resolve these issues, just as it had to when it reworked OS X to work on the iPhone instead of building up the iPod's operating system in the late 2000s. And it should be motivated to resolve these problems quickly: financial analysts are already starting to latch onto watch rumors as a growth opportunity for Apple's battered stock price since the fabled TV project looks increasingly unlikely in the current media climate. (That Bloomberg report is headlined "Apple's Planned 'iWatch' Could Be More Profitable Than TV," in case any investors missed the underlying subtlety.)

I used to wonder more about the Apple TV before I saw how my daughter interacts with her iPad. We already have Apple TV - a personal screen that supports streamed video - the parts that are missing are the licensing agreements that would make it a viable alternative to premium cable, and the software interface that would let you quickly and easily filter your options. I would not be surprised if Apple has a strong concept for the software, but without a licensing agreement there's not really a good reason to push beyond what we see in iTunes or the actual Apple TV product.

If analysts are anticipating that Apple's next big breakthrough is going to be a fancy wristwatch, even with due consideration to how popular wrist devices reportedly are in Japan, I think their focus is misplaced. Let's see... that gives Apple about six or seven months to prove me wrong.

Mitt Romney - Everything You (Apparently) Were Afraid to Ask....

I was running a Google search today and discovered that auto-complete was suggesting that people have serious concerns about Mitt Romney. I thought I would take the time to address some of the concerns implied by common search terms:

"Mitt Romney fetus" - Yes, he once was a fetus.

"What is Mitt Romney hiding" - Everything but his physical appearance.

"Mitt Romney police uniform" - Fetish? Let's not go there....

"Mitt Romney's jeans" - Didn't I just say... Please.

"Mitt Romney trillion" - No, still only a few hundred million.

"Mitt Romney's email" - OPM@example.com

"Mitt Romney's kitchen cabinet" - Poggenpohl. Nice stuff that you've probably never heard of, and probably can't afford. No, seriously, it's the group of guys who used to take care of Howard Hughes.

"Mitt Romney's laugh" - Don't make fun. His laugh box atrophied.

"Mitt Romney's military service" - I will now present the entire record of Mitt Romney's military service: "".

"Mitt Romney's political views" - He believes exactly what you believe, but with more conviction. Even if you change your mind, he's already ahead of you.

"Mitt Romney's real name" - Stephen. No, actually it's Willard. But don't tell Mitt.

"XCR Mitt Romney" - The manufacturer has endorsed Romney, but don't expect a "Romney in a tank" type picture of him shooting off firearms.

"Mitt Romney zombie" - No, truly he's not, but it's an easy mistake to make.

Control Freaks vs. Commoditization

In relation to Microsoft's plan to become a manufacturer of tablet computers, Paul Krumgan observes,

[I]f you contract with other people to build equipment, they may be unwilling to invest in quality in the belief that you will use your sole-buyer status to extract the benefits.

And that, apparently, is exactly what has been going on with Microsoft; its reliance on other people to build computers using its software worked very well for a long time, but lately Apple’s control-freak approach has been winning out.

I agree with Krugman and his reference to Hart, but from my experiences in the hardware market I think Microsoft's primary difficulty emerges from the commoditization of personal computers, both desktop and notebook, and the reluctance of third party manufacturers to take a long-term, quality driven perspective through which they can profit from selling premium products.

I bumped into a friend recently and noted that he was using a MacBook Pro. I commented that he had traditionally used PC's. He responded that he is OS agnostic, and suggested that his principal motivation for switching was quality. I started to comment about the decline in the quality of the Dell notebooks I've owned and he cut me off, "Dell computers are crap!" So there he was, a guy with enough money to buy a premium computer of any brand, as long as it worked, and he was turning to Apple because, all else being roughly equal, its products are reliable.

The difficulty for Microsoft is that if it builds high-end products, sold alongside third party Windows tablets built to be sold as commodities, even if quality is accepted as a matter of faith it may have difficulty maintaining a premium price point. But perhaps Microsoft accepts that its move may alienate third party manufacturers, and that those third parties will compete more directly with Amazon and... it would appear Google as well, for the lower-end tablet market, while it focuses on a premium product that can compete with the iPad, or at least give Microsoft an opportunity to establish itself as a tablet manufacturer for enterprise customers while it fashions additional products that may have greater appeal to consumers.

Quality? If it wants to offer tablets that can truly be classified as premium, I don't think Microsoft has much choice but to make its own hardware. For any other company, such an approach would involve a significant risk with much of any eventual benefit flowing to Microsoft.

The End of Google Shopping as a Price Comparison Service

Back in the earlier days of the Internet, a clever guy came up with an idea for a directory made up of nothing but ads, based up a pay-per-click model with advertisers bidding against each other for prime placement. The website and associated patents were acquired by Yahoo!, and were licensed by Google shortly before its IPO for... a ton of money. Google's subsequent history suggests that, as much as it paid, it got the better half of the bargain.

Now it seems that history is coming full circle, with Google transforming its frequently renamed and reinvented price comparison service into what amounts to a directory or search service for ads (and nothing but ads). I have to say... I'm a bit disappointed. Not because I don't see Google as having a right to charge merchants to promote themselves through a shopping service, or that I think such a service is free or easy to run - in fact, I can see how paid inclusion could help ensure that merchants keep their listings current and accurate, diminish the number of fraudulent and misleading entries, and make the service much easier to manage. My disappointment is that I use the product to comparison shop, and if merchants choose not to participate or those offering better deals don't have the budget to compete with better capitalized but more expensive competitors, the service won't fill my needs. Not even close. Not even in the same ballpark.

I don't mind paying a premium for a better product or service, but I don't want to have the good deals hidden behind mediocre vendors with large advertising budgets. I hope that Google's reinvented service turns out to be a lot more sophisticated, and useful, than the announcement and present commentary suggest.

What if the Facebook Phone... Isn't a Phone

What if it's a takeover?

You'll find lots of explanations about why it would be a bad idea for Facebook to develop and market its own cellular phones. And it's hard to argue with that. But what if Facebook has a different plan in mind? An Amazon-style plan, forking Android, pushing its own app store to the forefront, then cutting deals with cellular phone manufacturers to use Facebook's flavor of Android instead of Google's version on their already-compatible hardware? The change could be made pretty much invisible to the average consumer, but with Facebook driving traffic through its own browser, pushing out more of its own display ads, baking in new features like its camera and perhaps instant discounts, "buy with Facebook" allowing you to use your phone as a charge card, and the like?

If Google ever gets tired of carrying the weight of its competitors and changes the way it licenses Android, Amazon and Facebook will still have its latest edition of Android as a foundation for their own cellular operating systems.

How Facebook Might (or Might Not) Life Up to the Hype

Once upon a time there was a company called AOL that had a proprietary platform, something of a walled garden, and had many thousands of paid subscribers. It took down the walls, introduced its subscribers to the larger Internet, went public, got an insanely high stock valuation, merged with Time Warner and... the rest is history.

Once upon a time there was a company called Facebook that created a walled garden, invited many thousands of free subscribers to join, played games with the height of its walls - low enough to get search engine traffic, high enough to keep members from exporting their data to use on competitors' sites - but was primarily interested in pulling its members away from the larger Internet in favor of devoting most or all of their attention to its proprietary platform, went public, got an insanely high stock valuation (and yes, despite it's being a "flop" that valuation remains insanely high) and....

Will history repeat itself?

Today, with his portrait on the opposite side of the electronic page from a box that encourages his readers to log into the site using Facebook, and which touts content that is popular on Facebook, Ross Douthat complains that Facebook is an "illusion". He makes some good points about Facebook and the illusion of online community, although he often does so in a way that's reminiscent of my personal feelings somebody who doesn't "get" the appeal of constantly reviewing a Facebook wall for updates. Douthat seems to have forgotten his own personal history as a blogger. The best inference is that Douthat understands the Internet as a vehicle for the exchange and discussion of ideas, and even for self-promotion (as long as there's a quid pro quo), but doesn't "get" the frivolous side.

Douthat focuses on companies that bring the old world into the electronic age,

It’s telling, in this regard, that the companies most often cited as digital-era successes, Apple and Amazon, both have business models that are firmly rooted in the production and delivery of nonvirtual goods. Apple’s core competency is building better and more beautiful appliances; Amazon’s is delivering everything from appliances to DVDs to diapers more swiftly and cheaply to your door.

He's derisive of companies, no matter how successful, that are largely or purely electronic:

Twitter is not the Ford Motor Company; Google is not General Electric. And except when he sells our eyeballs to advertisers for a pittance, we won’t all be working for Mark Zuckerberg someday.

Never mind that one of the companies that is most often cited as digital-era success is Google. Were Douthat to spend a bit of time wondering what it is that Amazon, Apple and Google have in common, and what Facebook hopes to achieve, a concept mentioned above, the platform, might come to mind. Google, Apple and Amazon are engaged in a pretty intense battle to capture the mobile and tablet market, to push their own interfaces for the rental and purchase of electronic entertainment, and to grab as much market share as they can. The goal is not to sell "our eyeballs to advertisers for a pittance" - it's to dominate the future market for the rental and sale of electronic information, entertainment and software, and to get a healthy cut from each sale.

Why does Amazon offer Prime content on its Kindle and not on its competitors' devices? Because it wants you to buy the Kindle. It wants to own the platform, not be an app on somebody else's platform. And that makes sense: why would you buy an app that you can only use through the interface of another app, when you can get the same app, optimized for the hardware you're using, for the same price through the OS-manufacturer's platform? When Facebook admits that it cannot get traction in the mobile market it's, in essence, admitting its failure (to date) as a platform. People will play Farmville, and the like, in their browsers and Facebook gets a cut of the virtual sales, but on a competitor's mobile device Facebook is "just an app" the use to check up on their friends.

A company that Douthat forgot to mention, once the giant of the computer world, is Microsoft. Another company that is struggling to capture a significant foothold in the mobile platform market, and pouring an incredible amount of money into entering that space. The "failed" IPO generated many billions of dollars for Facebook that can be used to help it try to better establish itself as a platform and to compete with the established platforms. But it's facing an incredibly tough environment in which its competitors have established products and track records, and in which despite many billions of dollars invested in software, search platforms, operating systems and the like, Microsoft continues to flounder.

If You Think Google Takes Advantage Of You....

You can always block Googlebot from your site.

In a move aimed at helping newspapers generate new revenue from struggling online operations, the German government intends to require search engines and other Internet companies to pay publishers whose content they highlight....

The proposal was cheered by German publishers, who complain that Internet companies like Google have profited hugely from their content, while generating only scraps of digital revenue.

“In the digital age, such a right is essential to protect the joint efforts of journalists and publishers,” the Federation of German Newspaper Publishers said, adding that it was “an essential measure for the maintenance of an independent, privately financed news media.”

The proposed policy is directed at all search engines and aggregator sites, not just Google, but it's really the bottom line of the big players that has some publisher openly salivating.

It's a fair response that a copyright holder shouldn't have to insert code into its content saying, "Please don't index this," but only to a point. If the companies at issue weren't already profiting from the traffic generated by Google, whether in money or prestige, they are all sophisticated enough to exclude their content from Google's sites and simply do without the web traffic.

The Biggest Threat to Facebook: Data Liberation

Facebook's strengths and weaknesses are summarized reasonably well on CNET, with the leading strengths being reach (the huge number of Facebook users), dwell (the huge number of hours a typical U.S. user spends on Facebook) and lock-in (you can't get the same social experience elsewhere). When I speak to people who use Facebook they emphasize that last point: they use Facebook not because they particularly like it, but because that's where their friends, kids, grandchildren, grandparents, and distant relatives... pretty much everybody in their lives, can be located. And when they comment on why they don't have Google Plus accounts, or why they don't use their Google Plus accounts, it boils down to "I don't want to check multiple sites and a lot of my friends and relatives are only on Facebook."

Google understood that and, in launching Google Plus, made obvious the benefit of porting their Facebook information over to your Google Plus account. Facebook panicked and slammed the door shut, twice. Work-arounds appear to remain, but they involve more work than the typical user is going to do. History suggests that if Facebook sees a significant uptick in the number of users exploiting a work-around, it will shut off that avenue as well.

Meanwhile, Google has taken to talking about how its users own their own data, and has coined the term "data liberation". They have a dedicated engineering team focused on mak[ing] it easier for users to move their data in and out of Google products.

Users should be able to control the data they store in any of Google's products. Our team's goal is to make it easier to move data in and out.

At present, at least from a U.S. standpoint, pretty words, right? What are the odds that Congress is going to get in the way of Facebook's claiming to own your data. But then there's the E.U.

Key changes in the reform include:...

• People will have easier access to their own data and be able to transfer personal data from one service provider to another more easily (right to data portability). This will improve competition among services.

• A ‘right to be forgotten’ will help people better manage data protection risks online: people will be able to delete their data if there are no legitimate grounds for retaining it.

Google is, in a very real sense, using its present position of strength to its advantage. People are tied into Google for a range of functions that Facebook does not offer, and are unlikely to switch over even to one of Google's more direct rivals. But if they create an environment in which the users of other services (who, for the most part, already have Google accounts) can more easily break Facebook's lock and replicate their experience on Google Plus, over time Facebook's advantage will erode.

Facebook's cautious IPO suggests that they know their present weakness, and that investors understand it as well. There is no indication that Facebook needs the money it's going to raise through the IPO, unless "need" includes the desire of certain early investors to cash in. Facebook has managed to grow, support itself, acquire other companies, and sign up pretty much every easily attainable Internet user in the world without going public. Their $5 billion offer is "real money", but the odds seem pretty good that those shares will be snapped up by investors hoping that Facebook will become the next Apple or Google, investors who can afford to take the risk that they'll be more like MySpace or even pets.com. A larger offering would run the risk of quickly saturating that market, then establishing a void of demand for Facebook at its exceptionally high claimed valuation. There's a point at which investors start to weigh performance against potential, and the more weight you put on performance the less shiny Facebook looks.

I think it was pretty brilliant of Facebook to try to shift from being a social network to a platform, as evidenced by the fact that Zynga accounts for a huge percentage of its revenues - and an even larger portion, when you consider Facebook's profits from ads on Zynga pages. But for the platform aspect of Facebook, its present revenues would look pretty weak. But as people increasingly use portable devices, a platform in their own right, are they going to want to go through Facebook to access Zynga, or are they going to want to access Zynga games the way they access Angry Birds - through a standalone app? Zynga can as easily pay Apple a 30% commission on sales of virtual tractors (I'm sure Apple appreciates Facebook's setting that commission point), and can do even better through the Android platform - and Zynga's shareholders, no doubt, want to see it grow well beyond the walls of Facebook. Facebook's apps have been criticized as under-featured, but how do you create an app for use on a rival platform? If the app is good enough that people don't use your web interface, you're "just an app". And if you try to become a platform on a platform - "Load the Facebook app, then load additional apps through Facebook" - you're going to have difficulty replicating the experience of using a native app on the device in your user's hands.

Facebook has also done surprisingly well with advertising revenue, selling billions of dollars worth of ads to be viewed by people who aren't in consumer mode. But unless they can translate that into something along the lines of AdSense, such that their ads are placed on third party sites where people are in consumer mode, they seem to have a growth problem. Outside of China, pretty much everybody who is likely to be an active Facebook user is on Facebook, and Facebook is reluctant to try to enter China. Adding more nominal users doesn't generate revenue (or sell virtual tractors). How do you increase revenue per user without making your ads a huge money loser for advertisers?

What's the future of Facebook? Beyond noting that it's going to be around for many years to come - that if it fades it will face in the manner of MySpace or Yahoo, not in the manner of Pets.com - nobody knows. That's both a strength (as seen by its ability to hype up its valuation based on potential and the theory (echoing the first Internet bubble) that they'll find a way to generate huge revenues from their user base. If you have the money to gamble, and are in the investor class that is only looking for one in three of your investments to show significant returns, why not buy in? But if Facebook cannot hang onto the elements that lock people into its services, its being the only social service with your great aunt Marge and Farmville, the lock-in effect starts to fade. And with changes to its interface and privacy policy seemingly driven by a desire for profit, whatever its impact on the user experience, Facebook's drive to prove its exaggerated value could turn out to be what triggers its decline.

Joe Lieberman, Offender of the First Amendment

Another wonderful idea from Joe Lieberman.

Now if only we can get the Senate to add buttons to members' pages so users can flag them for "pandering", "obfuscation", "mendacity", "bought and paid for", and "just plain idiotic".

LinkedIn Using Your Name and Face for Advertising?

At Marketing Pilgrim, Frank Reed discusses LinkedIn's plan to use members' names and photographs to boost ad performance:

When LinkedIn members recommend people and services, follow companies, or take other actions, their name/photo may show up in related ads shown to you.

Reed provides instructions on how to opt out - and you have to opt out as by default you're opted in. Reed comments,

Honestly, I am disappointed in LinkedIn doing this. I get what they are trying to do but to stoop to Facebook’s privacy practices level is not cool.

I think LinkedIn presently has more of an incentive than Facebook to play fast and loose with your privacy, or to try to imply your endorsement of advertiser products and services. In both cases it's about boosting revenue so that the companies can justify their absurd valuations. But Facebook can still withhold a lot of information, while LinkedIn is now publicly traded and must file annual reports and answer to shareholders.  LinkedIn got a huge boost from the publicity associated with its going public, but... have you used LinkedIn? Do you do so on a regular basis?

I've been signed up for years, but by far the most significant use I get of my membership is seeing a more detailed profile than is available to me without logging in. Most of the profiles I see haven't been updated for years. I expect that in some industries the networking opportunities offered by LinkedIn, and the ability to avoid having family and social content spill over into your professional profile, makes it more valuable. But if you're not in one of those industries, why bother? I heard from a guy who, prior to the announcement of LinkedIn's IPO, had forgotten that he had signed up and thought the periodic emails he received from LinkedIn were spam. Pay for additional features? You must be joking, right?

Since the IPO, LinkedIn seems a lot more like Facebook, across the board. The new layout seems more like Facebook. The proliferation of ads, leo more like Facebook. And using your profile information to try to advertise products to your network? Unquestionably like Facebook. Whether you consider the Facebook / LinkedIn "cool" or not depends, I suppose, on how much stock you own, but the fact remains that these companies have to do something to justify their absurd valuations - either that or face what I think is the inevitable realization that those valuations are unsustainable.

If I were a LinkedIn insider I would be thinking about how I could sell as much of my stock as possible without causing other investors to recognize what I was doing, just as some Facebook insiders attempted to sell significant amounts of their stock through the failed private investor program that valued the company at $50 billion. If I were with either company I would look at Google Plus and worry - not that it's going to become quickly dominant, but that Google can use Google Plus as a loss leader and won't have to engage in the tricks, gimmicks, avalanche of ads and disrespect of privacy that appear to be a significant part of the business model for stand-alone social networks. People only have so much attention to spread around, and we can already see a litany of dead and dying social networks displaced by Facebook.

<strong>Update</strong>: LinkedIn has modified its policies in the face of the negative publicity, <a href="http://www.marketingpilgrim.com/2011/08/caught-with-hand-in-privacy-cookie-jar-linkedin-makes-change.html">but to Reed</a> there's no reason to trust them in the future.

Building an Economy of Bubbles

Thomas Friedman offers some good general ideas on the future of the job market and information economy, but at the same time he appears to be a poor student of history:

Look at the news these days from the most dynamic sector of the U.S. economy — Silicon Valley. Facebook is now valued near $100 billion, Twitter at $8 billion, Groupon at $30 billion, Zynga at $20 billion and LinkedIn at $8 billion. These are the fastest-growing Internet/social networking companies in the world, and here’s what’s scary: You could easily fit all their employees together into the 20,000 seats in Madison Square Garden, and still have room for grandma. They just don’t employ a lot of people, relative to their valuations, and while they’re all hiring today, they are largely looking for talented engineers.

Friedman could have written the same column back in the 1990's, and he would have been talking about Yahoo!, HotWire, AltaVista, Inktomi, Lycos, AskJeeves.... Or he might have focused on shopping, and lectured us about how Amazon, Pets.com, Boo, Webvan, Kozmo and eToys were going to transform retail - but would have completely missed the boat if he had focused on the market valuation of those companies. Valuation can also be remarkably subjective and unstable. "LinkedIn at $8 billion" - that was "so five minutes ago" - this week it's $10 billlion. In a few months... $20 billion? $2 billion? Time will tell.

Were he to look at that history, Friedman might also notice some serious clustering - companies that are in some senses stepping on each other's toes, copying each other's information, and fighting not necessarily to be the best on the market but to become sufficiently popular that the market consolidates behind them. Facebook has been trying to eat Twitter's lunch ever since the latter service became popular. Google is trying to eat everybody's lunch - and is in the process of rolling out serious competition to Facebook, LinkedIn and Groupon. It's quite possible that a few years from now Google will be the last man standing, and (as with Bing) it's biggest competition in those markets will be from a company that has not yet even entered the market.

Here's another dirty secret: A big part of what these companies is emulation, not innovation - copying the features of their competitors or buying smaller competitors or innovators. Twitter has been on an acquisition spree, consolidating under its roof any number of services that used to be available only as third party add-ons. Facebook was far from the first social network. Like Google with other search engines, they were the late arrival that took down the pioneers, SixDegrees, Friendster, MySpace, Google's own Orkut.... The tech side can actually lag. Facebook would benefit in a serious way from migrating off of MySQL, but they grew so large, so quickly that the technical hurdles to a smooth migration are enormous, so they keep putting it off.

I was joking with a Google employee that they've hired all of the good programmers. I have had nothing but bad luck hiring programmers who prove less than competent, or less than honest about their abilities, in relation to my own web properties, despite paying out quite a lot of money. Those at the top of their game who don't want to work for a company like Google can often make a ton of money developing their own projects, and thus see little need to freelance. Yes, all tech companies are looking for talented engineers, and some of the salary wars between Google and Facebook could make anybody jealous, but part of the issue is that there are relatively few engineers who can compete at that level. They, perhaps more than any other group, do need to stay on top of their fields lest they find themselves able to support only yesterdays' technology, but they're far from a majority of the 20,000 employees that Friedman attributes to his short list of websites. Groupon, for one, employs a great many copywriters and salespeople.

Something else that is interesting about Friedman's list is that the companies he lists are principally about connections - connecting people to people, or helping businesses reach and market to consumers. Friedman later writes that employers want employees who can "adapt with all the change, so my company can adapt and export more into the fastest-growing global markets" - but none of the companies he lists actually produces a tangible product. Ironically, in this "great recession", businesses that actually produce goods often have excess capacity and are thus not hiring or expanding, and depressed consumer demand reduces the export markets. So you have a lot of wealthy people and institutions who have no place to put their money in a conventional economy - so they either sit on their money waiting for the economy to improve, or they help drive up the value of companies like the ones Friedman lists in the hope that the latest group of Internet "rising stars" will fare better than their historic predecessors. History tells us that five years from now there will be two or three social networks, one of which will likely have at least 60% of the market, and one of which will likely be desperately trying to reinvent itself in order to remain relevant. Facebook may be the one on top, or it may look more like MySpace, or it may look more like SixDegrees. When you look at a $100 million valuation, you need to at least consider the following thoughts: "high stakes gambling" and "Pets.com".

At the end of the day, there's a reason that Friedman is only able to identify a small number of highly valued companies with small numbers of employees: even in a bubble the economy can only sustain so many companies that are trying to sell us social games, social networks or social marketing. Were Friedman to expand his list to include established companies with proven revenue streams, or high tech companies that produce and export tangible goods, he would need a much larger stadium. You don't build a sustainable economy by pointing to a bubble and saying, "Everybody should do that," or by pointing to a small industry that employs only 20,000 people (probably no more than 20% of whom are the type of innovator Friedman describes) and arguing that everybody should try to develop the skills necessary to compete for those jobs.

Patents As Both Sword and Shield

Yesterday I suggested,

Although for many years, large companies often seem to ignore each other's intellectual property rights until one or another sues, followed by either a huge settlement and licensing deal or a mutual settlement that allows the companies to use each other's technology without actually testing the viability of the underlying patents.

That reality is not lost on Google.

The tech world has recently seen an explosion in patent litigation, often involving low-quality software patents, which threatens to stifle innovation. Some of these lawsuits have been filed by people or companies that have never actually created anything; others are motivated by a desire to block competing products or profit from the success of a rival’s new technology.

In some cases, a declining company may find its portfolio of patents to be far more lucrative than what remains of its traditional operations. Given the proliferation of patents it's difficult to produce anything without potentially running afoul of somebody else's (often dubious) patent, but sometimes the patents are known and (under current law) defensible and the infringement is deliberate. Apple knew that it had a game changer with the iPhone and likely viewed the inevitable accusations of patent infringement as a cost of business. With the release of the iPhone, every other handset manufacturer made the same business decision.

Google has advocated for patent reform and against patent trolls,¹ but its decision to bid for Nortel's patents is, in a sense, an "If you can't beat 'em, join 'em" response to the problem. Yes, Google can leverage its patents to protect open source software, but the success of open source software represents a significant part of Google's long-term business strategy. Although acquiring Nortel's patents potentially gives Google more even footing when it goes head-to-head with companies that accuse it of violating their patents, it will do nothing to stop patent trolls.

It will be interesting to see who, if anybody, attempts to outbid Google.

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1. Google provides a reasonable definition of the patent troll, "people or companies that have never actually created anything" - they generate or acquire patents then seek out violators, with the hope of demanding settlements or royalties from companies that are producing actual value. But it's important to remember that the system is stacked against "the little guy" - an inventor who comes up with an idea and obtains a patent, with the idea of marketing it to companies that can put it into productive use, shouldn't be denied a return on his invention by large companies that steal the idea, knowing that patent litigation is extraordinarily expensive and beyond the reach of most inventors, while dismissing the inventor as a "troll who never produced anything" even as they profit from his ideas.