Slowly I Turned – The Gang w/Dan Farber, Jason Calacanis, Mike Vizard, Saul Hansell, Robert Anderson, Steve Gillmor.
Steve: Alright well let’s get started. I’m doing my newsgang imitation that there’s a start to this show, which I have to get back into my gang mentality. So let’s just talk about nothing for a few minutes. Just kidding. So Saul, what’s the deal with blu-ray, does a blu-ray player play normal DVD’s?
Saul: The blu-ray laser is a blue laser that doesn’t, by definition, but pretty much everyone who’s making the lasers are also putting the red laser’s in so yes in practicality they do.
Steve: So why do you think it’s gonna take a while for them to ramp up? Because of a natural tendency to want to raise prices now that they’ve won the HD war?
Saul: As best as I can tell there’s a couple things going on here. The technology is more expensive. The people who liked HD-DVD argued that it was a natural extension of the natural DVD technology. The disk production worked on the same production line, the lasers were the same. The blu-ray technically has higher capacity and more specs and is newer and more expensive and so just costs more and the corollaries of Moore’s Law will work and the cost will go down to free at some point or something close to it but you’re not there yet. So you have a $350-$400 player in the market and as we wrote on Bits earlier this week a lot of electronics stores are saying this competed with an up scaling DVD player and while an up scaling DVD player can’t invent detail, the pores on someone’s electronic skin that aren’t there they get very crisp lines and lots of people think that for 79 dollars that’s a very good experience on an HD set and you can go and buy one of those for a while and buy a disc that costs $10 less than a blu-ray disk and be happy until the blu-ray players come down to free.
Steve: Right. Do you have an HD player?
Saul: I don’t. I was ridiculed when I put this up on Bits. We have a 13 inch Hitachi television so it doesn’t attach to any of this stuff.
Steve: An analog TV that’s going to be outmoded in 2009>?
Saul: yeah, the current plan in the Hansel house is to go and buy a flat screen, HD set for Christmas next year but in reality we like most people have a cable line so 80% of the country can ignore the digital cutover so the old Hitachi set will work just fine for the future.
Steve: Dan Farber, do you have an HDTV?
Dan: No. I don’t watch enough TV to merit and for me have a 13 flat screen TV. For watching DVD’s I can’t see that well anyway so I wouldn’t be able to see the pores.
Saul: Steve, what’s in your house?
Steve: I’ve got this HDTV in the living room, however I don’t have any HD input for it.
Dan: Although I have to admit a friend, Chris Matchistic, invited me over to watch the Super bowl on his new Bravia 40in surround sound HDTV.
Steve: That sounds like a commercial.
Dan: I was amazed.
Dan: I was truly amazed.
Steve: I was in Scoble’s house and seen his HD and that’s pretty impressive. The reason I haven’t bought another HDTV for the bedroom which would be a good idea as it would rationalize getting some HD services from…
Dan: See I don’t allow TV’s in bedrooms, because then you’ll never read.
Steve: I don’t think that’s accurate. I don’t do much except read, throughout the day. With the iphone you’re constantly reading.
Robert. With the eBooks you can read on your HDTV in bed.
Steve: Well I think that’s nonsense. Saul, do you have any stats on how many people come to Bits on their iphone?
Saul: I don’t. I think 10% of the readers of nytimes.com are on Safari so some subset is the iphone version of safari. The total iphone users are 4-5 million by now, Bits has 1.7mm uniques in January. The Times in terms of US Comscore numbers is a little under 20. So it’s small yet.
Steve: Dan, we’re going to talk about your transition at Zdnet. Do you have any iphone stats?
Dan: I don’t.
Steve: Maybe your sales department does.
Dan: I’m sure there’s stats that are coming in on how many iphones are accessing the feeds or something I don’t know if we can track that but…
Saul: I mean Blackberry usage for Dealbook is a blackberry product. That’s our wall street blog and email newsletter and that has heavy heavy blackberry usage. And so we know people are going to use mobile devices to read stuff and whether they like the iphone or the blackberry is psychographic.
Steve: And is that newsletters or actual web hits?
Saul: You could do em both, but the easy way of reading on a blackberry is to read text based stuff.
[mike joins the call]
Steve: I was asking Dan and Saul about iphone usage in terms of their sites. Do you have any idea about Ziff Davis Enterprise?
Mike: I don’t. I haven’t been tracking that.
Saul: Are you asking this Steve because you have an hypothesis about the iphone is changing the way people are dealing with content on mobiles?
Steve: Now that you mention it, yeah. The notion that the iphone has been disruptive and transformative, I don’t think people argue with that anymore. The usage patterns that are being reported about the iphone seem to be substantially surprising. Google searches, 27% of mobile devices are iphones which far exceeds the number of iphones to the general phone population.
Mike: That could just mean that people don’t like looking at websites on the iphone and they just go to Google with its cleaner interface to look for things instead of going on the web and surfing for sites.
Steve: The point is that it’s being compared against hits from Smartphone’s from Microsoft and Nokia phones and 28% market share is extraordinarily high. It’s been surprising to a lot of the software vendors who…
Dan: But Steve to follow up on that, I don’t have an iphone. When you do a search on the internet do you go to Google’s homepage or something else? Are all the searches through Google or not? Because on the windows mobile platform it’s not…
Steve: I can try to find the story. There was a story a week or two ago that indicated strong iphone usage. And then two months ago there was a similar story about 1.9% of all web hits were from the iphone which was the largest single mobile device penetration. Now at that point there was very little competition for a reasonable web experience on a portable device.
Mike: So a couple of weeks ago there was this show in Europe where everyone came out with an iphone like somewhere where it was Sony Ericsson. So do we think that those phones are going to gain share in this market space or are you saying that the iphone is going to dominate this whole category?
Steve: Much like apple has taken down the record business, to a lesser extent the TV business and perhaps the movie business, that they’re doing the same thing for establishing a feature set for portable devices that really can’t be argued. Whether or not it’s going to be the iphone alone or not, if you look at the iPod characteristics my bet would be that it would be a significant penetration on the iphone.
Mike: Or you could look at the pc market and say Apple will get its 10% share and do all the innovation work that everyone will copy and get the lion’s share.
Steve: Yeah but that’s not what happened with the iPod. That may have happened with the pc but the iPod has what 75% share?
Saul: Steve Jobs said he would be delighted if he got a 1% share of the billion phones that are sold, that’s 10 million phones and that’s not so bad. Mobile phones is an enormous market. Apple can build a huge and profitable business and apple is never in the commodity business. Nokia can do candy bars given away for free. Steve Jobs has no interest in that. Sell a premium product at premium price so his market is only the top 25%. The interesting question here is the iphone is not the first phone with a browser by any means but there is something about it that makes the experience browsing on the web much better than any other phone even though it’s slower than the 3g phones. Something about the screen, resolution and I think the multitouch display and the way it’s controlled. Lots of people have resolution screens, multitouch can be patentable. Would you Steve, if you got as good a screen on a Nokia phone but didn’t have that particular interface, but it was faster, would you find that as good an experience or do you need the whole interface to make it an attractive web browsing experience for you?
Steve: Well I think that it has to have a reasonably similar web experience for me to switch. Switching costs are the bottom line here and I see no reason and I don’t anticipate a reason. I was talking to someone yesterday on newsgang about his Zune and I make the usual stupid joke about, “what? I’ve never heard of a Zune.” I could never be happy with a Zune, I could care less. Apple has cornered the marketplace for me mostly because I believe that they have more R&D and investment in staying ahead of the market than anybody else does. So why would I want to switch? I’m gonna have to switch when the battery dies, so…
Saul: well there will come a point where other people will say there are enough features in this phone that it’s good enough for me and I don’t want to pay extra for all the features that I may only use when I’m only using 20% of the features on the phone.
Steve: That certainly has been true in the pc market, apple has really over the last 4 years made it difficult to switch away. You combine Google’s capabilities in the software side with apples capabilities with ease of use and just plain enjoyment of use. And at the same time the ability since the application divide is evaporated due to web UI’s, there’s just no reason for me, granted I’m not in a corporate environment where I’m required to be tethered to windows but even in that kind of a situation with the judicious use of imap and also the emulation features of the new Mac’s I can stay away from a PC much more easily than I used to so I have no reason to switch back. The question is what is the percentage of the market relative to gross transactions that occur that are either influenced or route through my machine or the audiences machine. It may be an elitist market, although I would suggest that it’s becoming less so but it’s also an extremely powerful economic market.
Saul: Does anybody think that Google’s gonna have an important effect on this market with Andriod?
Mike: Yeah somewhat more impressive than when Microsoft bought Danger.
Dan: I think this is a long term play for Google, there won’t be immediate impact. There will be some sexy apps and it’ll help drive the other guys crazy but they did align themselves with Nokia, which is huge so I think that’s a changer right there.
Steve: So how do you…
[Jason joins the call]
Steve: Dan was just answering about the possible impact of android
Dan: There’s a long road to go from some spec but I think that the telecom market is ripe for change in a lot of ways and one of those ways is to make it easier to write, develop and deploy mobile applications. For example, despite the fact that Google is working on Android which is not due to launch until later this year, Nokia is including Google in its search client. There’s something going on there, I’m not sure what.
Steve: So it’s kind of like a the iphone leverage to Google wanting to play in that search environment.
???: What they agreed to is that Nokia would use Google as their default search but they ‘re a long way from home in saying that Apple’s going to use Android.
Saul: the thing to think about, apple’s got a couple of year here right? But if you’re saying Apple and its business model which depends on selling hardware and service fees, is going to have an important role in cell phones, sure. But if you say in a commodity business Google’s gonna get paid just by increasing mobile use of the web and they can do the whole android thing for free and make lots of money and they can give operating systems and tools to cell phone makers and carriers that will make a very good web browsing experience. It is in Google’s best interest to make the world’s best web browsing experience on cell phones as ubiquitous as possible because they are going to profit disproportionately from all the advertising that comes along with that. So they have every interest in wishing apple all the success in the world and making sure all the other phones do that. They also though, just because of the nature of their orientation, want all your stuff to be on a server. So Steve talked about switching costs today, I wonder in a world where there’s some widely used operating system like an Android you end up having anything that matters, your contacts, on a server and that makes the device more of a commodity, you throw out this one and get that one and all your stuff replicates.
Steve: There are two things that mitigate against this vision of Android in the way you’re describing. One is the notion that the carriers are going to be interested in supporting a larger framework than their own. They were sort of reluctant but fell into because of the server side implementations that employed java they allowed Sun to get certain ubiquity among the carriers in terms of the java implications and they weren’t real happy about that. So why would they want to give Google, since Google is at the same time going after spectrum that are not in the interest of the carriers. So I think there’s a natural sense of mistrust between the two, like McCain and the Conservatives. And then the other issue is if you look at what continues to happen with Air/Flash on the iphone, in fact there was a story this week someone from Adobe complaining bitterly that they can’t get any straight answers from Apple about when Flash is going on the iphone. I think that the reason is because Jobs doesn’t want to create a level playing field for the rest of the phone vendors.
Saul: That’s all true but at the same time you have the carriers have multiple agendas. Google is an enemy in a lot of ways but Google is willing to give stuff away when Apple wants $15 a month. And they want an exclusive carrier, their business model for the next couple of years is very provocative for the next couple of years and ATT did a deal with the devil and may be ahead for it…if someone else comes in, maybe is Microsoft, they certainly sell a number of windows mobile devices, maybe Danger helps god knows. The carriers want all the revenue and don’t want to pay for the devices and don’t want to give money to anyone they don’t have to.
Steve: All that’s true as you pointed out but I still don’t understand where you see the momentum flowing that’s going to create some sort of a Android impact. I think you’re absolutely right that Android, like gmail and docs, the price is right and there’s no reason why it won’t…
Saul: Is it a good phone? No. we would be sitting here 18 months ago speculating can Apple make a good phone? It turned out they made a damn good phone and that changes the world. If it turns out that the Nokia android phone is in fact a good phone people might want to buy it. there was a period in time when people thought Treo’s were good and Blackberries were good and they both had a good business. Palm sort of fell behind for a bunch of reasons and is sort of irrelevant for the moment but it’s a big world out there.
Steve: the only thing I miss not having is video. And it seems to me since I look at the Iphone when I’m taking a picture and the screen is showing me video that the chances are pretty good since it also has microphones that this is a built in service that just isn’t turned on yet. So what are they going to come up with, is Nokia going to come up with that is going to make is substantially more interesting for me…
Saul: You’ve decided you have a brand affinity so getting you to switch is different than getting the next person who’s not happy with what they’ve got walking into a Verizon store and seeing what they’ve got. Today, if someone had a 3g phone on Verizon in the US, some people would think that’s better than an iphone on ATT.
Steve: We’re just handicapping it as far as I’m concerned and I would look at the iPod and say Apple wins. I see no reason why they don’t. Do you think Hillary’s going to come back?
Saul: President is a winner take all business, I’m not so sure that 1billion phones a year is a winner take all business.
Steve: I think what Mike Lazard said is that over time there will be a tendency for the market to stabilize and catch up. We haven’t seen that happen with the iPod.
Saul: So what’s your guess. 5 years for now market share of the iphone?
Saul: [laughs] Order of magnitude off.
Steve: Compared to who, who do you think is going to have a larger percentage?
Saul: Of the billion phones…
Steve: I see what you’re saying. So right now it’s Nokia in the lead correct?
Saul: Nokia in the 30’s and Apple well under a percent.
Steve: I still say that 5 years from now Apple will retain a larger share unless they make a manufacturing deal with Nokia of Microsoft. It wouldn’t surprise me at all if MS and Apple teamed up in which case the scale would be substantially improved.
Dan: is that US or global because in Asia they already have a lot of phones that do a lot of the things that the iphone does and they look at us and go, ‘what’s your fascination…
Steve: I’m talking about the US market, on the media information triage business that I think we’re all in and that’s a substantial growth market in terms of business in this country. I think that will be dominated by the iphone the way the iPod dominates.
Dan: I think you’re basing that on the iPod experience and there’s a couple of factors here. There really wasn’t a big history of mp3 players before the iPod came out, there is a big history of phones coming out from a lot more established players. Apple was taking on the Rio now they’re taking on international companies much different fight. Also you had iTunes and the selling of songs in a complete ecosystem, closed ecosystem, for apple in terms of the iPod and you don’t have that here, so it’s much harder to make the market share in this space.
Steve: I think there’s synergies with the iPod experience. My daughter has an I phone and she has had, every time a new iPod comes out she goes and begs her grandfather to give her a new one which promptly goes into the drawer. Now she had it on her person, 1000 songs, completely bought into that culture. I think that there are going to be some things that are going to happen in the so called iPod marketplace, particularly in the ability when Apple creates the ability to be able to untether from the phone, which they same to be signaling that they’re doing, although I can’t really get a straight answer about this, with Apple TV 2.0. Apple TV 2 0 can allow you to be able to download rentals of films directly without the intersection of iTunes. And it then allows you to be able to take your viewing experience and move it to your iphone. That is the beginning of opening up to a 3g/wifi network the ab8liyt of the iphone to handle all the right media directly without any intersection with iTunes.
Dan: Which is all interesting stuff but there’s not a billion phones sold a year because people want to watch TV there’s a billion phones sold because people want to talk from anywhere. Unless they can get the iphone to free or 50 dollars they’re not going to get 60% market share. The only way to have very large market share is to sell extremely cheap phones that can actually be given away for free or…
Robert: this is the same problem apple faced years ago; do you want to remain a proprietary system or do you want to be a software company and license your operating systems and instead of selling 10 or 20 million phones you sell a billion software licenses.
Steve: You’re always going to be right if you talk in terms of volume. There’s millions of 1999 cars in Latin America that will continue to not have converters and they’re going to be spewing smoke for the rest of our lives. That doesn’t mean that the cornerstone of the market is going to shift dramatically to the iphone as sort of the center…
Robert: I just don’t think the center is going to shift to these closed boxes.
Steve: this is the discussion we’re having. We’re talking about android. I haven’t heard any rationale for why the actual players…
Robert: let’s assume that the world is fundamentally changed and the phone is the new pc. Everyone’s basically accessing content…
Steve: No the iphone is the new pc
Robert: No just the Smartphone, it’s my theory so be quiet. If the phone’s the new open platform the people I see are going to start writing to phones that are open platforms. And whichever platforms has the most number of interesting and innovative applications is going to win the day. So if Apple is sitting around with a closed system, no matter how cool it is, they won’t win the day.
Steve: But it’s not closed, it’s wide open. I’ve got an application I wrote on the iphone that I wrote. Just because it’s a web portal today until they release the api’s in 2 weeks is ephemeral. There’s no reason…Google is much more of a locked in platform, how much access to the data that you give them to record? They’re busy polluting the anonymous aggregated data space with the Google reader exploit.
Robert: Just cuz I committed a alleged crime in one space doesn’t make me a criminal in all spaces.
Steve: Then I guess we can take Microsoft convicted monopolist status and we can put that on the back burner too.
Robert: Yeah, cuz they’re a convicted monopolist on an OS but they have minimal market share on web site services.
Steve: So the white hat now goes on Microsoft the black hat goes on Google, and do you really think android is going to get carrier share? Forget about people share…
Jason: This is about price as much as it is about platform, that’s the bottom line. It’s about price more than about platform. The average person on the street wants to talk into their phone. They don’t care about the other pieces as much as they do talking on the phone. These other pieces are nice, they’re gonna become more important. People make their choice of what phone to buy on price and its going to be a long time that the feature set we’re discussing here can be lowered to the point of being free or 25 dollars. In the short term, I mean 3, 4, 5 years it’s gonna be a price battle. I think what Google’s doing is trying to get all of these incredible services that are on the iphone to phones for free. Those phone developers who are giving away cheap phones may not have the budget to create all these applications and services. So if they just commoditize them and make them free you’re gonna get all these cool applications like maps and e ail on to handsets for free . who wants to screw around with Verizon or T-Mobile’s mapping service or applications? Those companies probably don’t want to spend money on that stuff…data fees.
Steve: That’s all true, and in fact many of the services that I use on my iphone are Google services and I’m very happy about it. on the desktop I exclusively use Google services, makes that all the more a reasonable experience for me.
Jason: Anybody here have a blackberry? And if you have a blackberry, anyone use the Google apps for blackberry they’re outstanding. Google maps, gmail, they’re really doing a killer job. Facebook on your blackberry a lot of these applications are getting really good.
Steve: I don’t dispute any of the logic/..Saul indicated the first time, or Dan, there’s no reason why it’s not in their interest to spend a relatively small amount of their R&D dollar baking these applications and they’re going to continue to do so. The question is whether or not it’s going to have an impact on the mobile phone market, that’s the question I was asking.
Jason: I would argue it’s already having an impact because on my blackberry I the gmail application. And I find myself going to the gmail app and blackberry is the best email device ever. And sometimes I go into my gmail because the search there is better than the search on my blackberry. They’re going to push these applications to the edge and…
Steve: I don’t dispute that, what I’m saying…that’s having a very important effect which is the ubiquity of their services and the fact that most of your data is stored in their services and you can access it from multiple devices, cuz you also have an iphone too, or at least you did the last time I saw you. what Iphone has done, in terms of tipping the marketplace, toward a specific type of Smartphone device that incorporates the web experience where others before it didn’t, is equally disruptive. And the two of them are performing at pace. Every time Google rolls out a mobile platform update, they roll it out first on the iphone.
Jason: You’ve got a very big anti-Google thing going on recently. why? It is just because Google snafu displaying your social network automatically from your gmail and greader? You’re stuck on that…
Steve: I’m not stuck on that.
Jason: You bring it up every week…
Steve: I’m gonna bring it up till they answer the question.
Jason: You’re kinda getting like the crazy Uncle now it’s like 7 weeks in a row about this issue.
Steve: I’ve been called the crazy uncle for 5,6 years now so you know…
Jason: but what if nobody cares but you?
Steve: Well, you should go listen to one of the NewsGang’s this week and then you might…
Jason: is there something else that Google’s doing that’s making them into the enemy because…
Steve: They’re putting a target on their forehead by not answering the question. And it’s the same target that was put on the forehead of Microsoft when the government was going after them about antitrust and they’re about to be put in the same situation. If Microsoft produces a clone of the Google apps and gmail and sells it for the same price, zero, with respect for users privacy and data flow they’re going to have a real problem. And they’re already starting to show that they have a problem.
Saul: What question are they not answering?
Jason: When you go into Google reader there’s a section of things that you and your friends have favorited. So you see a little story from Bits, your story about Akuna or whatever, and I favorite it. now Steve, without ever having said we were friends, it knows we’re friends because of gmail because we email each other a whole bunch so they basically made an implied social network and then exposed people’s favorites to each other.
Saul: But that was a mistake.
Steve: It was a mistake that they responded to a Slashdot swarm about it by saying we’re going to explain to you how you can route around this problem and of course you always have the opportunity to delete your shared feed. The only problem with that is for the last three years I’ve been sharing stuff to an untraceable, unless I send an email or post it on the website, to an address for the rss feed. If I turn it off with their so-called remedy, it’s gone.
Jason: So the implied thing here, Saul, if you’re not getting it, it is kind of a nuance I want to make sure the audience gets it. Google, like Facebook when they did Beacon, is taking some massive assumptions on what you’re willing to share and making you opt out of it. as opposed to say, hey we’re going to share what movies you buy like facebook did here you’re saying we’re gonna share what items you had without you opting into it.
Steve: There’s no contract between users and there’s no granular controls to be able to change your behavior with your old data so that you can recover from their decision which they did not discuss with the user.
Saul: Pan back, Google…
Steve: Saul before you say anything I just want to point out to you there was an editorial article in the NY Times last week which pointed at this problem in the middle of this article.
Saul: OK. And I’d like to point out this gets lost in some other unrelated discussions this week that the Editorial Department and the News Department have nothing to do with each other and don’t even speak.
Steve: Are we talking about John McCain now?
Saul: I’m not allowed to talk about John McCain.
Steve: I wasn’t bringing it up.
Saul: I did send a nasty note to Jay Rosen saying you should know better. That the, you can say lots of things about stuff but the news department and the editorial department are not allowed to talk to each other. Anyway, the, but, so, you’re right. There’s no question. Google made a mistake in this feature, exposing stuff to people that was personal that they shouldn’t have and because of what happened with Facebook they should have known better. No question. I think what you’re getting at, the bigger issue, Google increasingly knows lots of stuff about lots of people and because it’s all on their server there is ever increasing potential for the wrong pieces of information to be sent to the wrong people because they made a product management mistake, or they’re evil, or the government forces them to…
Steve: It isn’t evil…
Saul: No, this was just a mistake…
Steve: Hangon, it was a mistake. It’s like saying that pesky Watergate thing was a mistake. What was the problem that got Nixon impeached or resigned is that he covered up the response to it. he basically said, I’m not talking to you about this. This is a problem of your perception, go away. And the problem is if there’s a competitive move that’s in the marketplace, which I believe is the Microsoft Yahoo deal, where Microsoft is trying to engage with the Yahoo audience and say to them, we can provide a credible alternative to the Google thing, at that point it becomes much more than public relations mistake it becomes…
Steve: but they can’t retroactively rewrite the policy for data that was collected under different terms of service and that’s what they’re doing here. If you have a legitimate pool of data and then you introduce into it data that is not with the consent of the user, you create a big big problem ,not a little one but a big one. And then not responding to the problem. They could fix this in about ten minutes. They have rolling update capability inside gmail. They could so easily great a way for people like myself to be able to port over that data that I’ve been collecting for three years and then be able to create a switch which they even talked about but is not user friendly right now, so that I can assign a tag to what it is I want to save to a specific shared RSS feed and everyone would be happy. But they don’t do that. Why not? I think you already answered that.
Saul: But they don’t do that, it doesn’t make a difference. That is not about their business case. The hypothesis kicking around Yahoo and Google right now is to compete with Facebook and MySpace, they want to tap the implicit social networks, emails, they’ve got a bunch of engineers who are a little bit insensitive and in the Google-like way they just let em out…
Steve: Oh they’re just following orders.
Jason: You’re saying that there are developers who lack empathy, Saul? I can’t believe that.
Steve: You’re making my case not yours. Saul made exactly the same point that I’m making . he said there’s an economic imperative for Google, and Yahoo and Microsoft as well to try and reverse engineer that they’ve already collected to create the implicit signals of a social network. The only problem with that is that’s not what they said they’re doing with that, previously.
Saul: The other thing is, the only way they win in that game is if users like it.
Saul: there’s no incentive for them to create some sharing thing, for a tenth of one percent of their users, but perfectly reasonable tenth to make a nice product for.
Steve: The opportunity cost of making me shut the fuck up is worth it to them. They, a small group of people in Boston Harbor throwing tea into the water were responsible for some big things that have happened. All I’m trying to say to you, you’ve already made some very interesting connections. You’ve basically said that there’s a group of people, engineers, who aren’t focused on this issue. Fine. But there are people, we see today that Sergey Brin is quoted as saying he’s very worried about this Microsoft Yahoo situation . I’m less worried about Microsoft right now. They’ve been having to deal with these issues in an extremely open and aggressive fashion now ever since the antitrust period…
Saul: Google, this example with sharing items off of Google Reader is an example of Google trying to do what that they shouldn’t be doing?
Steve: Reverse engineer the social graph.
Saul: And why is that important?
Jason: I’ll tell you why. User trust. The users gave that information under one auspices and person used it in another which is exactly the type of information that made Facebook reverse their path twice in the last…
Steve: Google up until now…
Saul: But that’s why is it not a mistake…
Steve: So it’s a mistake, first of all we’re gonna solve the problem for the people who feel their data has been violated. So why haven’t they done that?
Jason: I’ll tell you why, because not enough people have made a stink about it. They’re testing the waters. How much can we get away with. There’s obviously no government oversight in this area yet and that’s the dangerous thing if they’re going to start lighting up the phones in the Government. But Facebook did exactly the same thing they’re like, ok nobody’s watching let’s make this facewall it comes up on all your friends screens so they can go hook up with your girlfriend. They did it they thought they were cute they thought nobody would notice, everybody noticed there were people protesting outside their office. Granted it was only 2, 3 people but they reversed their decision and came out with their granular privacy setting. Then they did it again. With beacon. Again. People pushing the envelope, developer culture.
Saul: That’s all true. And I’m shocked that Facebook didn’t catch that stuff. But that said, if you had to pick…a culture that’s innovative, that did stuff that got criticized for it severely and changed versus a culture that sat around in meetings and said, but somebody might not like it, I still, as much as I think it was a real mistake, I think that the idea of innovating in public and backing off and taking the heat makes for better decision making and better experimenting…
Steve: Absolutely, no one’s arguing with you.
Jason: I agree except for the fact that somebody is going to do something really asinine like, oh Steve just filled out his prescription for Calais and it’s posted on everyone’s Facebook wall. Realize that when you order your drugs on Amazon, they’re syndicating Amazon’s stuff and now Amazon lets you fulfill through some drug warehouse….
Saul: That’s true. We are we have less privacy and if you wanna make sure it’s not told to everybody don’t put it on a server, because people make mistakes…
Steve: And you’ve just again highlighted exactly why this is an important issue. If there was an alternative to this that respected user data.
Saul: I don’t think there’s gonna be
Steve: let’s look at the Microsoft announcements yesterday. You’ve got Ray Ozzie, Steve Ballmer and Brad Smith standing for photographs and answering questions about the opening up of API’s. and we have the usual Microsoft bashing going on. Don’t believe it, they’re going to take that data back and screw with you two years from now and they’re gonna change their minds and we’re all gonna be screwed again. The fact is there’s a thing called Google now. Microsoft is not the only player and how they can deal in an environment like that, according to some of the posts that I’ve seen about this Microsoft announcement, there have been discussions on inside Microsoft email threads. One guy who’s on Dan’s network, John Carroll, wrote a post to the effect that he can’t talk about it but he implied strongly that Microsoft internal documents suggest they are fully away of the importance of them in their economic model to become fully transparent in the area of API’s. that is the first step toward d the kind of strategy that will produce an effective clone of what Google is doing and in fact it would be a very effective play for them to convince the Yahoo engineers that they’re serious about working with them.
Saul: Remember I said two weeks ago that the reason Microsoft is doing this deal was to hire the engineers and it got totally shot down? Guess what? Bill Gates came out and said it; this is a land grab for engineering talent.
Steve: Not just engineering, it’s also a land grab for users. It’s about user’s attention data and…
Saul: And I think also they want to make a transformative move into being open source and open. So if all of Yahoo is run on Hadoop clusters, like they announced this week, and LAMP stacks. Guess what, now half the organization’s revenue comes from open source a third comes from Microsoft’s proprietary stuff. It’s either gonna be like AOL/Time Warner complete disaster or it could be transformative.
Steve: Or they’re patching in a connector between the LAMP stack and .NET. and they slap silverlight on top of it and they’re good to go. They’re being attacked about the API’s because they’re only for non-commercial use. But it clearly states that if it’s for commercial use then you have to get a license. There’s no stack that doesn’t require that I mean the open source tax is management and site setup and services around the software. What’s the difference, this is a big deal.
Saul: I don’t follow this world at all. The people who do, is this a big deal? Is the world actually any different and in what way?
Dan: I don’t think the world’s any different right now but as Steve was saying there’s a lot of signaling right now. Just as we’ve seen with SAAS and Microsoft’s notion of software plus services, inch by inch, Microsoft is basically the polar ice cap of proprietariness is melting. The world is becoming a world of API’s where everything is interoperable and mashed up. And I think they recognize that that’s the new playground and they need to be there. And Jason pointed out that one of the reasons around acquiring Yahoo is getting engineering talent and getting users into the tent because at the end of the day it’s not about selling packet software it’s about selling services and you start looking at what’s your revenue per member of your community. And I think for Microsoft it’s a super hard transition but the Yahoo is a piece in that.
Mike: It’ll just be a few years before you see end users caring about this. I mean a lot of years went by between when a Rousseau and a Locke started talking about freedom and tea in the harbor. So I, until people actually get abused by this it’s still very much a theoretical conversation. So it’s like, I wish it would become a bigger issue but it won’t until somebody gets hurt.
Steve: 40 billion dollars, what are they paying for?
Dan: Some of the people, I think Larry Dignan wrote about it, they’d be better off spending their money buying Salesforce.com and Omniture and few other things than spending all the money on Yahoo and it would be half the cost but I don’t agree with that I think what they’re seeing is, they talk about not giving up the search revenue, not giving up, not letting Google becoming dominant in search. So if they combine together maybe they get 30% maybe they get less because Google will continue to grow and it will take them a while to get their wheels tuned up and that’s a couple years of challenge. But I think the bigger bet is just saying, it’s all about colonizing the web. And having 500 million Yahoo people and trying to keep them, that’s their big bet.
Mike: And what percentage of that will they keep?
Dan: Well they have a lot of them as Microsoft customers already. What percentage can they keep, that’s the whole trick right now. What does Ray Ozzie have up his sleeve.
Mike: Google doesn’t have the equivalent of a Yahoo Finance yet. Even if it goes to Microsoft there’s a lot of Yahoo ads that people will continue to use because there isn’t an alternative sitting over at Google for people to go run to.
Steve: That was the point that Saul was making in reverse that it wasn’t gonna happen because there was nobody who was gonna come along and clone the Google strategy and I would suggest that that’s not true. Saul?
Saul: You’re saying they’re not going to clone the Google..
Steve: No, you’re saying that they’re not, that it’s not in the interests of anybody to…
Saul: No, I’m saying that, the privacy risk implicit of putting your information on the servers is by definition, even if somebody says, we’re going to protect your privacy more than somebody else there will be a competition on policy because of the nature of mistakes because of the nature of governments because of so many other things. The basic vulnerability that people have to their privacy from having their information on servers is irrespective of the corporate strategy. And of course somebody is going to say, we protect your privacy more than Google does, and Google will respond constrained somewhat constrained by their business interests and it will get somewhat better.
Steve: Exactly, it will get somewhat better. Right now we’re in a situation where Google is stonewalling on this issue, which is a mistake on this issue. When Microsoft stonewalled in a previous era…
Saul: I’ve spent a lot of time on this, what does Google does with your personal information? Mostly it’s just stored in their servers and they don’t do a lot on it but they have reserved the right to serve ads on the basis of it and so on.
Steve: They’ve reserved the right to not violate the users sense of what the contract is of that data.
Dan: That’s not true. They’re watching Google reader, bookmark, tool data in order to make the search results better. There’s a lot of SEO’s who are testing this theorem by creating sets of pages that aren’t indexed and having them show up in Google reader, bookmarking, toolbar. And I think that the future of Google search results is going to be based on watching Google data through the toolbar and they also watch which link you click on to make the search results better.
Saul: Absolutely. So that gets you into the interesting question about, things that are more or less anonymous and what kind of privacy violations and what we think about having our ‘anonymous’ behavior tracked. Sometimes anonymous really isn’t anonymous hence the AOL search data publication of a year and a half ago.
Dan: Data Valdez
Saul: and there’s anonymous that becomes not anonymous by one subpoena. Google keeps things by IP address and goes on and on about how IP address isn’t personally identifiable information. One subpoena to your ISP and suddenly yours is personally identifiable information. It’s half of who you are and the other half is kept by someone else and you put them together. So there is going to be a lot of questions, these are real questions. In some sense, the fact that Google watches what I do, strips the id off it and uses it to make the searches better I don’t care. But I might care. And we’re gonna have to understand…your supermarket card is personally identifiable. Your supermarket without your card is still being aggregated, all kinds of stuff is being aggregated about you. and there are real questions but it think they have to be set against not getting back to a world where everything was analog and secrets were more likely to stay secrets but the baseline is everything is known by everybody all the time instantaneously and we’re going to try to put up as good a set of barriers and controls as we can in this world where there is no privacy. You have to turn your brain backwards and work from there.
Steve: Basically what’s happening now is there’s one vendor that’s in control of this type of metadata.
Saul: One data has more than anyone else. The data’s everywhere.
Steve: Comcast sells it for 40 cents per person per month your entire click stream. My click stream’s out there. Doesn’t have my name on it, probably doesn’t have my ip address associated with it but the marketers don’t care. They’re getting gall the information they want to know, what do I do, in what order, for how long.
Saul: Do you object to that?
Steve: Not a question of whether I object to it or not. It’s just happening. And these guys are selling it to the data guys in new York who are laundering it and sending it around to various other data guys. This is completely out of the box.
Dan: You have thinks like Tacoda, which AOL bought..
Steve: That’s what I mean about New York
Dan: They’re putting cookies so they know you’re an Autoblog reader and then when you go read the NY times editorial page where you might not have an advertisement they say well let’s throw a Volvo ad up there. Maybe you don’t care but it’s definitely…
Saul: And they’re going to want to connect it to your supermarket card, your Visa bill..
Steve: Right. And eventually when we start to as customers realize because we are getting pitched by clouds that if they offer us value….the early part of the conversation was about when the phone goes to zero. It’s going to go to zero real fast, this is where the money is. The actual hardware is a trivial part of the overall cost, right?
Saul: The problem isn’t the center but the sides. The people doing this, if you get the same number of ads and they’re targeted more for you, that doesn’t piss people off. People get pissed off when they get ads when they don’t want them, like phone calls and when they have secrets which happens every now and then…
Steve: But you’re looking at this as, who gets pissed off model. It isn’t that. It’s who gets better results for their attention data. For what they are doing if they can get a better deal from Microsoft, with all things being equal the same level of transparency. I think you’re right, Google will come off of this bullshit. They have to. Because they need to get into a much more targeted, socially aware framework. They reported their numbers were way off because what they call social media or the social graph, targeted advertising play, didn’t return good results for them. They need to get into a direct consent with the users. The only way you’re going to do that…
Saul: As much as I respect what you and Seth were doing with AttentionTrust it was three orders of magnitude too nerdy to be practical. And…
Steve: What we were doing with AttentionTrust has nothing to do with what I’m talking about now.
Saul: the Implicit issue of user control, you’ve gotta find the very handful of ways to present to users choices that are so clear, like…
Steve: It has to be a download less client, there cannot be…
Saul: It’s not even that. It’s do business with us and you get phone calls, do business with the other guy and you don’t.
Steve. Ok so there are two clouds that are emerging now. The first one’s Google, and they’re already there, the next ones are Microsoft Yahoo who are going to be there in two months, six months tops, and it’s not going to be me arguing with you it’s gonna be the offers coming from the Microsoft hairball vs. the offers coming from the Google hairball. It’s just economics.
Saul: And they’re going to be more data oriented because they have to be. Google has the economic incentive to be slow in their use of data because they’re making so much money already and they’ve got great insights and…
Jason: Yeah Google is throttling down their revenue, basically trying to play like there’s not much going on here keep moving. The fact is at any point they could punch that revenue number way up, way up. And they’re actually trying to not get to 95% market share, as crazy as that sounds, they’d much rather keep it at 80, than to 95.
Saul: Who thinks they will get to 95 faster, if Microsoft does by Yahoo or if they don’t?
Jason: If they buy it, it’s going to go right to 95. Because you take two relay race teams and put them together is not going to beat the winning relay race team that’s hitting on all cylinders.
Saul: I go back and forth. If I was Ballmer I’d probably wanna buy Yahoo but if I think about it I don’t think that helps. I’m not sure what the right choice is because, they lose if they don’t and they lose if they do.
Steve: It’s like a tax write-off, they’d better spend the money while they have it.
Jason: if you look at Microsoft, they can’t spend their money. People want it back, they want a dividend, they can’t hire fast enough and they can’t compete with Google’s culture allure and so this is a way for them to get that culture allure where everybody is. Microsoft to me seems to be on a legacy bent right now. All of this stuff have to do with the personalities and ego’s at the top, which I’ve been saying for a couple years. And the personalities and ego’s at the top of Microsoft I think are thinking legacy. And they don’t want their third act to be getting their ass kicked. Their first and second acts they kicked ass this is the third act, nobody wants it to end a tragedy people want to end on top and they’re going to go out fighting like dogs. It’s great theatre at the very least.
Steve: OK let’s go around the table one more time, get some content for the last thirty seconds.
Jason: Can we rate the show?
Steve: You wanna rate it go ahead.
Jason: The show’s clearly like an 8.5, 9. If Arrington were here’s it’d be a 10.
Steve: He said he was going to be here…
Jason: I think he’s protesting, you guys are fighting now?
Mike: How does Cnet change in the next year?
Dan: Well I can’t say specifically because I don’t know yet and I’m figuring out what’s going on and who’s who and what’s what. But I will inject what I have learned over the past years into it.
Mike: Mike, let me ask you this, what is Jason doing next?
Dan: I don’t know. He’s been at Cnet almost from the beginning, started news.com and built it into a powerhouse. And a couple years ago he ended up managing all of Cnet which would be Cnet reviews and news.com and that kind of took him out of the news loop.
Mike: He turned me down to syndicate Silicon Alley Reporter in 97 or something like that and he was like, I don’t know if I like the content enough. And he had done a deal with Feed. He took over this responsibility and now he’s gone, Cnet has obviously been on the block for two or three years, I’ve been approached about it, everybody knows it’s for sale and you’re taking it over. Did he – he quit? Or was he replaced?
Dan: I think he decided to take time off…
Mike: Ah so he left, and you’re obviously the next best guy there and so they put you in charge. How did that go down he just called you and said hey we want you to run everything.
Dan: I don’t wanna run everything, I just wanna play with news. And to the degree that reviews and other content that we have, if it’s a first look or review I’ll consider it news and I’ll be able to take advantage of that.
Steve: Are you going to move your blog over?
Dan: Yes, in fact last night I was kind of frenzied because I saw there was this story about Sergey saying he was unnerved by the potential of Microsoft acquiring Yahoo which was really a restatement of what their Chief Counsel David Drummond said about two weeks ago. Is that they’re worried about a company that has a browser and an operating system…
Steve: They’re worried about a company that won’t respond to concerns about privacy.
Dan: There was the whole thing about Microsoft going after Google with double-click.
Mike: Think about the farce of that. Does everybody here on the phone know where 99% of Firefox’s revenue comes from? It’s Google ads. By proxy, Google owns Firefox.
Dan: As I said in my little post, this is like Hillary Clinton saying Barak Obama is not qualified to be in the Oval Office and therefore you really need to think about that before you make a decision about anything. And this is Sergey saying having Yahoo in Microsoft’s lap that’s not a good thing because bad decision, same thing. And so they think that by repeating that all the time maybe and in Hillary’s case Obama won’t get elected, in Google’s case Microsoft won’t be allowed to acquire Yahoo but that’s nonsense.
Mike: They’re so obviously able to acquire it. They’re still going to be distant number two in search.
Mike: If Google has 100% market share in search, would it be a monopoly? Because anybody can switch at any time, so I don’t understand how it’s a monopoly.
Dan: But the whole issue of a monopoly is not that you have a dollar and market share in this case it’s weather you abuse it. Microsoft’s got caught abusing it going in an strong-arming people.
Mike: Not so much a strong arm but a conversation
Dan: No it’s a strong-arm
Mike: Whatever. I think the show is a great show. Dan I am so happy for you for getting a little bit of play finally because you’re one of the top three most insightful commentators on the web. I read your stuff constantly and it feels like you under the ZD brand vs. you undernews.com brand, spearheading it’s long overdue for you to have a bigger platform and I hope that uh…
Dan: I’ve had bigger platforms before and I try to stay away from them because you end up going to too many meetings.
Steve: Dan’s operating under the same strategy as Obama. If he can keep being the underdog he can win.
Mike: The underdog who’s leading in electoral votes. I had a dream last night that Obama won that it was a great country to live it, it was very weird. Like this weird thing like the UN and Obama was there and Israel and China and nukes were going away the middle east was going down. What does it mean?
Steve: Tina interpreted it for you. that Obama’s gonna win and everything’s going to get a lot better really soon now.
Mike: That was my 7th or 8th interpretation of it cuz that’s way out there. There’s obviously many more pragmatic things like obviously it’s a grand conspiracy by Islamic militants to put an Al Queada operative into the White House, that’s the obvious interpretation of it.
Steve: Hey I gotta go to work. This is Steve Gilmour Thanks to all who showed up, and to all who didn’t and we’ll see you next time.