A conversation with Mitchell Kertzman and Marc Canter. Recorded Thursday, June 12, 2008.

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Steve Gillmor: Hi, this is Steve Gillmor. Welcome to the Gillmor Gang. We’ve got a sort of an interesting news day here, and I’m not sure whether some of the things that have been talked about that happened in the last half hour or so. Or are going to or have happened, namely about Doc.

In the meantime… Marc, what are you using? Is this a cell phone again?

Marc Canter: Yeah. Do you want me to turn off the speakerphone?

Gillmor: Yeah. Please, no speakerphone.

Canter: OK, I’m here.

Gillmor: All right. That’s better. So, I’ve invited my good friend, Mitchell Kertzman, now of Hummer Winblad, formerly of a great number of technology companies that he can talk about.

Mitchell Kertzman: Powersoft, Sybase, Liberate.

Canter: Now, that was an excellent company.

Gillmor: Which one?

Canter: Liberate.

Kertzman: Well, thank you.

Gillmor: And Marc Canter. So, Mitchell, what’s your take on… what’s going on in the Twitter space? Are you on Twitter?

Kertzman: I have resisted being on Twitter. Mostly because I haven’t felt compelled to be drawn in. Nobody in my network has urged me to communicate on Twitter. So, I haven’t’ obviously experienced the value.

For example, when I first got on Facebook, I would occasionally update my status. Then, I stopped updated my status, partly because I didn’t think anybody cared, partly because I didn’t have time to update my status. [laughs] I think, of Twitter as just a way to continually update your status, and I don’t know that anybody cares or if I want to do that.

Maybe, I’m off-base on what the value is.

Gillmor: You’re not going to get an answer from me.

Kertzman: My favorite headline, though, was – Mike Arrington or somebody had a headline I saw in my RSS feed – announcing that Twitter had had some unscheduled uptime.

Canter: That’s a joke. That’s comical.

Kertzman: Yes, that is a joke. [laughs]

Gillmor: So, Marc Canter, do you want to explain why Twitter’s important?

Canter: Why you want status? Well, I don’t think to a venture capitalist it is. Venture capitalists want to stay away from people and not interact with them, sit in their ivory towers and dispense their money to, I don’t know, their country club friends or something, so they can create great companies like Liberate.

It befuddles me why…

Kertzman: That’s great!

[laughter]

Canter: And I see Ann Winblad walking her dogs, and so I guess that’s what venture capitalists do.

No, it has to do with a completely new world, just like the Web turned things around. The term that’s been used is “Live Web.” And the idea is that, through the telecommunications infrastructure we’ve been limited to a certain kind of interaction, and now there are other kinds of interactions.

We experienced AIM and IRC in the ’90s, and now we’re experiencing other forms of interaction that transcend normal communication. Those are the big buzzwords to us. Everybody groks it differently. I know the way I use Twitter and all these things is different than the way Steve Gillmor does.

And that’s the way any good technology is. It has to be used appropriate to the context of each user. So, for instance, this week at the Apple Developers Conference, people were speculating over Steve Jobs’ weight loss. Right? We know about the iPhone, we know about the new version of Snow Leopard.

It was really the fact that he was looking gaunt and not health that people really picked up on. And probably a lot of that traffic was going out over Twitter. I know of no other better way to describe it. It’s appropriate to the context of the people who use it, and a good infrastructure can be used in a myriad of different ways.

Kertzman: It’s also possible that it, to some extent, goes through a funnel of age. So, for instance, I think, of my musical tastes. I’m like many of – now Steve and I come from the same musical generation. I know a lot of people who never went beyond the ’60s. My brother never went beyond the ’60s in his music.

I went up well into the ’80s and the ’90s, but I never quite got into hip hop and rap, and a certain category of music. And I feel now that music has sort of left me behind a little bit. I’m approaching 60 this year.

So, it’s possible, I feel – as both an individual and professionally – that I’m compulsively and excessively connected with email and Blackberry and social networks like Facebook and LinkedIn. So, I feel that I’m really easy to get in touch with. I can find everybody I need to.

So, it may be an age thing. Not for everybody, but for me. And it may be that I haven’t experienced the benefit yet, or witnessed it myself.

Canter: Have you ever done any arbitrage or stock dealing or manipulating the oil prices recently.

Kertzman: No. Not only not recently, perhaps never.

Canter: OK. Because it uses the same mechanism.

Kertzman: So, the timeliness of information to that extent is not important to what I do.

Canter: OK. But, you can appreciate that there are guys who look at spies in the Chinese oil ministry, trying to suss out how much they’re going to subsidize the price of oil so they can jack up the price further.

Kertzman: Absolutely. Now, there are people for whom real-time information is a competitive edge, and the more of that they can get, the better for their business.

Canter: Yeah. And so imagine taking that technology and applying it to everyday use. You know, gossiping about Steve Jobs’ weight. That’s what’s going on here, is that we’re taking this heavy-duty, heavy-lifting technology… and though it does go down once in a while, the fact that they have provided APIs to it. And what’s the number, Steve? About 40-50% of the traffic goes through the Twitter API. It doesn’t go through a web or IM interface.

So, there’s a tremendous upping the ante of what infrastructure is. And that’s what folks like Steve and Dave Weiner and Robert Scoble are embracing.

Kertzman: Yeah. I don’t think it’s bad; I don’t see any negative to it. It’s just not something that I’ve particularly embraced. But, I don’t think it’s bad.

Canter: Well, thank you.

Kertzman: [laughs]

Gillmor: I don’t ascribe to much of what either of you just said, on this subject.

Kertzman: OK.

Gillmor: Marc has tried to pigeonhole me as doing something different than I am with Twitter since day one. And I don’t think he’s going to succeed in that.

Canter: I don’t even know what Track is, dude. [laughs]

Gillmor: You don’t?

Canter: No. I need to go over to your house and sit and watch you use this thing.

Gillmor: Well, I can’t. It’s been disabled by the Twitter police for a month now.

Canter: Right.

Gillmor: Yeah. But, I am getting reports that some parts of the system are returning. And, Mitchell, as far I’m concerned, I believe you were the first guy that got me into Gmail.

Kertzman: That may be true.

Gillmor: OK. So, you have been known to be an early adopter of certain types of technology.

Kertzman: In the vast majority of my life I’m an early adopter. And so, actually in most technology I tend to be an early adopter. This happens to be one that I didn’t get there. [laughs]

Gillmor: So far.

Kertzman: So far. And I may be there. Next time, I’m a member of the Gang, I may be Twittering.

Gillmor: There’s a chat room on the streaming site. And according to Tina, there are a number of people who are requesting you to get a Twitter handle so that they can follow you, so that they can…

Canter: But, if he’s not posting anything, there’s nothing to follow.

Gillmor: Well, I didn’t post anything for about eight months when I was on Twitter.

Kertzman: I just got an email from Larry M., saying, “Please join Twitter, it will change your life.”

Gillmor: Well, there you go. You see, it’s already starting to happen.

Kertzman: [laughs]

Canter: If only they could have done that with Liberate accounts, huh?

Gillmor: OK. So, let’s talk about the Yahoo situation for a second. Mitchell, you got any thoughts?

Kertzman: Well, my thoughts today… first of all, apparently the latest is that Yahoo and Microsoft are reading this somewhat differently. So, that’s just consistent with what they were doing all along. [laughs]

Gillmor: But, how do you know…?

[crosstalk]

Kertzman: Yahoo says it’s all over. Microsoft says not as far as they are concerned. But…

Gillmor: Who said that for Microsoft?

Kertzman: Good question. I just grabbed that before I came online. It was in a Forbes article online. So, it may take me a moment to find that.

But, so the most interesting thing that I experienced recently, I was down at the D Conference – the Mossberg Kara Swisher Conference – and Jerry Yang and Sue Decker were onstage together being interviewed. And Bill Gates and Steve Ballmer were onstage being interviewed.

Rupert Murdoch was onstage being interviewed. The biggest Rupert Murdoch surprise was how enthusiastic he was about Barack Obama – that surprised everybody.

But, related to Yahoo/Microsoft, I think, after Jerry and Sue were done – and they’re both smart, nice people – people were puzzled as to why they haven’t sold the company because they haven’t articulated a vision of an alternative to being part of Microsoft that was more attractive to shareholders.

And Rupert Murdoch’s advice was very interesting. He said – you know if that his philosophy of acquisitions is you got only one bullet and you should fire it and make sure it hits your target.

So, effectively he was saying if he were Microsoft he would have made sure that the deal got completed and that it seemed like having the deal fall apart – a deal that’s that big and that strategic over a dollar or two of stock price seemed kind of crazy.

So, everybody was left going away from there scratching their heads about both Microsoft and about Yahoo. And sort of puzzled as to why they couldn’t figure out a way to make it happen.

Gillmor: So, why do you think that Microsoft bailed on it?

Kertzman: I don’t think they’re used to doing their acquisitions this large. I think that this is something they don’t have the practice at, the temperament for. And so, I think that it’s partly having the experience to do something like that.

The bigger puzzle to me is Yahoo and having been the CEO of three public companies and having gotten pretty sensitive to the whole area of corporate governments and shareholder responsibility, the behavior of Yahoo and it’s board seems like a bit more of a mystery to me.

Gillmor: You mean actionable in legal terms?

Kertzman: Yeah, I mean, particularly around this so called poison pill that they put in place. That seems to be pretty… it could be interpreted as being fairly incompatible with the interest of Yahoo shareholders, not employee shareholders.

Gillmor: Do you take Icon’s strategy seriously?

Kertzman: Well, Icon is looking out for Icon, right? So, he’s looking to make money and only make money for himself. If in the process of doing that it benefits other Yahoo shareholders, so be it. But, that’s not why he’s doing it.

I think… so, I’m not a big fan of that kind of activity. On the other hand, I think that in a sense Yahoo and its board have invited that kind of thing. So, I don’t, you know, whether Icon is in it for the greenmail or what other reason, I’m not sure. But, Yahoo is inviting that kind of response, I think.

Gillmor: Preach Apparel in the chat room says, “Perhaps had to do with the confusion, at Microsoft, of who is actually in charge,” as we talked about yesterday.

Kertzman: Whether Steve or Bill is in charge?

Gillmor: Yeah.

Kertzman: Yeah, I guess, he got the pretty strong view down at D when listening to both of them and watching both of them. That although there’s been some reporting lately on the struggle they had of figuring that out in the first year or so of Steve being the CEO. You got that pretty strong sense that Steve is in charge.

Gillmor: Well, you get the… my way of putting that would be that Bill has turned being in charge over to Steve. It doesn’t mean that Bill doesn’t have his own opinions.

Kertzman: Oh, I’m sure Bill has his own opinions.

Gillmor: Right.

Kertzman: My guess is that Bill communicates those opinions, but not to the public. [laughs] And there was no way…

[crosstalk]

Kertzman: … to discern that.

Gillmor: He never has been one to really speak to the public about what he thinks.

Kertzman: Yeah, yeah.

Gillmor: So, I don’t see any real change at that level, but I think that operationally, Microsoft is in the throes of struggling as to how to deal with the fact that Bill is no longer connected to the company in a significant way.

Kertzman: I agree with that. And you know the company in general, I mean it’s a strange company to observe because it continues to, in some measures, kind of continue to do well in its core businesses – you know their growing businesses like SharePoint into significant businesses – you know without a lot of external visibility.

On the other hand, you know, you can’t say that Vista has been a success. I have an interesting data point which is… you know we in the venture capital business, we see softlaunch-preneurs come in and see us all the time.

You know, we see multiple people a day come in and they all bring in laptops and they all make presentations. And in that group, I would say something like 75 or 80% of the entrepreneurs who come in to present are presenting on Macs. And their companies are all Mac.

So, you know Microsoft is… you can’t say it’s in trouble, but you know it’s hard to find any really exciting kind of vectors of growth or new and innovative stuff coming out of there these days.

Gillmor: You know I don’t agree with that one either.

Kertzman: OK. Well, you pay a little more attention to people like Ray and what he’s saying and you know I…

Gillmor: It’s not what Ray is saying, but what they’re doing with Mesh I think, is extraordinarily comprehensive in terms of moving into the Internet space.

Kertzman: Yeah.

Gillmor: And, you know, the fact that it works…

Canter: They also…

[crosstalk]

Gillmor: I’m sorry, Marc. Go ahead, Marc.

Canter: I was just going to say that it turns out they are the only one who do provide APIs into their date store of users and allow users to move their data around. So, there are aspects in parts of Microsoft that are some of the most cutting edge innovative efforts around.

The problem is, of course, with all their legacy – the legacy stuff. And you’re right, Vista has been a failure.

Gillmor: Yeah, I totally agree with your… with Mitchell’s comment about the fundamentals of Microsoft.

But, if you look at what Mesh applied in terms of abstracting the hardware layer, you know pertaining to what Marc’s talking about in terms of the control point of access to the great majority network. But, moving to an operating system that effectively services the Mac just as well as it services Windows, I think, that’s a really interesting way.

Kertzman: That is and we are huge believers in Cloud, you know, whatever you call Cloud computing. We, at I’m A Wind Bladder, are big believers in that and are investing in that.

And you know the tension there is for Microsoft always is that Microsoft tries to sort of connect that to the desktop. So, the question is, are they really going to build a business that is really not connected in any proprietary way to the desktop – to the Windows desktop?

Gillmor: I’m not sure I understand what you mean by not proprietary. I mean, of course, it’s proprietary because the Windows desktop is controlled by Windows.

Kertzman: Well, the way…

Gillmor: They already have that control. I mean, why do they need to seed it?

Kertzman: Well, I don’t…

Canter: It’s in the connection to the Mac, right?

Kertzman: Yeah. They don’t need to seed it. The question is if it’s then the Mesh computing, Cloud computing, is it an alternative or is it the future?

Gillmor: Well, I want to put it another way. Apple has always had problems scaling up beyond its audience. They have the same problems that Microsoft has. Once you get up above a certain number of Mac machines, how are they going to expand their sphere of influence to the majority of machines on the planet? What are they going to do?

So far, what they have done is to create a step called iTunes and put it out into Windows. They don’t take the step of getting into management of the hardware, storage – any of the issues on the Windows devices that they are talking to through the iTunes port.

Kertzman: Right.

Gillmor: OK. So, why would they want to go beyond what they have had? If they can chuck out the money for the entertainment side through that portal, they are good.

Kertzman: I agree, they are good. I don’t think Apple wants to be in Microsoft’s business.

Gillmor: All right. So, let’s take the other question, I think, you are asking, which is, what about Microsoft having an uber operating system that talks equally to both Windows and OSX. What about that is a threat to Microsoft in terms of Windows? As they seem to be completely complementary.

Kertzman: Well, ultimately the question is, once you see the worlds on the Cloud and your software for accessing that world and all of its applications and all of its data, is a browser, then that browser doesn’t have to be a Windows browser. It doesn’t have to run on Windows. It could run on Linux. It could run on anything.

The point of it is more why would you need Windows? If you look far enough down the road, then all your needs can be met by applications and data in the Cloud.

Gillmor: But, my original point was that Apple has seemed to shy away from a tangential connection to hardware manufacturing, and therefore, they have shown no desire to overcome Windows or to eat into that marketplace more than they already have in the last couple of years, which is certainly profitable, but it is not a potential threat to Microsoft. There are certain people who want to use Linux operating system just to pitch all of that. I don’t mean it that way.

I don’t see any kind of threat to Windows that comes from there being a browser-based platform on top of Windows and OSX. I mean, what is the threat? Are people going to stop buying Windows machines for this reason? I don’t see it.

Kertzman: Well, I don’t see it in the near term and I never have. I always believe that people are committed to some software that needs the desktop OS, and that the Utopian vision that says everything will be in the Cloud is unlikely to actually be realized. Because the major stuff will be in the Cloud; Office can be in the Cloud. But, something that you have that you like for your own personal use, probably won’t be available on the Cloud.

So, I actually don’t think that people will give up Windows, or whatever desktop operating system.

Gillmor: Right. So, if you look at Microsoft as being a company that exploits the relationship between individuals and computers on the consumer level, and between corporations and computers on the corporate level, what about those two contracts is going to be affected by the advent of Cloud computing once Microsoft has a role in Cloud computing.

It doesn’t seem to be a negative for Microsoft except for this possibly long term theoretical way that probably won’t happen.

Kertzman: Yeah, I think, Microsoft’s connection to the enterprise is significantly stronger in the long term than Microsoft’s connection to consumers. I do think that…

Gillmor: Marc, can you put that on mute just for a second?

Canter: Sorry.

Kertzman: I do think that the proliferation of interesting consumer devices and services, of which the iPhone is perhaps the recent and best-known example, is the issue that Microsoft has to face most with consumers. So, I think that connection is where Apple is strongest and where Microsoft, potentially, is the weakest.

Microsoft, in the enterprise, is incredibly strong, and is absolutely the market of which they understand better than almost anybody, and probably is the thing that is least threatened by any of these developments.

Gillmor: Well, I would turn that around and say that if you look at what happened with the iPhone announcements on Monday, the iPhone is about to be a transcendent enterprise device.

Kertzman: That’s right.

Gillmor: OK. So, Apple is going right after Microsoft with the iPhone.

Kertzman: Let’s look at why it is a transcendent enterprise device, which is its Exchange synchronization. It is not going after Exchange. I mean, me.com and mobileme could ultimately be used by the enterprise, but I don’t think it will. I think, Exchange is the strongest franchise that Microsoft has in any of its businesses. And that’s the important one to Microsoft.

So, I think, in the enterprise, Apple’s iPhone announcements in some way reinforces and strengthens Microsoft on the backend. It threatens Microsoft in terms of Windows Mobile devices and all that. That’s important to Microsoft, but I don’t see that as being a threat to Microsoft’s enterprise business.

Gillmor: OK. I don’t think that the iPhone is a threat to Microsoft’s enterprise business. I think that Google is much more of a threat. They are trying to charge for services that Google is building out as advertiser supported or at least attention supported systems.

Kertzman: Well, Google is the first competitor that Microsoft has ever faced in its entire history that effectively has the similar kind of ability and willingness to be patient and invest that Microsoft has had.

They have this machine from Microsoft that was the Windows and Office product lines, and they were just spinning off cash. And for Google it was the advertising business that was spinning off cash. That effectively Microsoft has been able to compete for much of its history by simply having more resources to put into projects and being more patient with them – look at the Xbox, for example – than anybody else.

Google is the first competitor that they have had that has both the resources and the patience and long term vision. I think that’s serious.

Gillmor: I agree. So, the iPhone coming into focus as an enterprise tool, suggests that first of all, what it did for the consumer market it will also do for the professional markets, which is it completely changed the consumer’s notion of what was acceptable as a net experience on a mobile device. Now, every other platform, and particularly Android, are going to come along and basically cement that deal.

We have talked about Android a lot on the show in the last week or so, mostly because, at least in my opinion, Android is going to be a severe threat to Nokia and perhaps Motorola, although they’re much less of a significant player. The other one would be Microsoft and Windows Mobile.

Kertzman: Yeah.

Gillmor: And the reason that I think that Mesh presents such an opportunity and I would like to hear Marc join in on this in a second, is because it allows Microsoft to be able to, through this open protocols portal that OSCI is opening up via the Mesh technologies, it allows Microsoft to potentially align with Android, rather than do what they have done for years, which is use Apple as sort of a farm club on the mobile side and on the device side.

Does that make sense to you? Mitchell are you still there?

Kertzman: Sorry. I’m still here, yeah. I’m here I’m back, sorry.

Gillmor: OK. So, Mitchell do you understand what I’m saying, that basically, Mesh offers this virtualization platform for obscuring or making irrelevant the differences between the enterprise and the consumer audiences, in much the same way that Google has started to do that, or has certainly attacked Microsoft at an earlier stage with the Google apps and the Gmail, etc.?

Kertzman: I mean, if you look far enough in the future I think that’s true. I think, it takes a longer for that to penetrate the enterprise than it does perhaps consumer markets.

Gillmor: Well, but I mean, if you are right, which I think, you are, that Microsoft has tremendous strength in the enterprise, then what they have to do is to be able to bring Cloud computing to their stronghold in the corporate environment.

They can do that faster if they are open to it than Google can. I mean, as much as Google…

Kertzman: Yes, because they understand the requirements and the applications and the environment better.

[crosstalk]

Kertzman: … Google understands the environment as well as Microsoft does.

Gillmor: They understood it before Microsoft did and they understood it well enough to be able to sort of crack open Microsoft’s revenue around Office, in particular.

Kertzman: Yeah. No, I was thinking more of the environment on the back end, the enterprise infrastructure not the… that’s the part that Microsoft understands better than most people at Google. Eric Schmidt obviously understands that from all assignments on the Novelle and places like that. And Adam Bosworth understands. Well, Adam’s not there any more, is he?

Gillmor: No.

Kertzman: No, Adam’s not there so there are people, there are individuals there probably that come out that world, but one doesn’t get the same sense from looking at the migration of people in the industry that Google is bulking up on enterprise people.

Gillmor: All right. Marc, did you have a comment or were you not listening?

Canter: Yeah. So, I’m really glad you mentioned Xbox and Windows Mobile, because I think that when you take the Borg, as we know Microsoft to be, that they have proven that they can make investment and take over a particular niche market, be it the browser or the game console.

They certainly are persistent enough with trying to get things right that I think, they are onto Windows Media 12 or Windows Media 13 and that’s what’s called Silverlight. I got to think that they’ll eventually get Windows Mobile right. So, they’ve got iPhone, they’ve got Android, and that opportunity to learn from, and they will eventually, over time, get the right, too.

Gillmor: Forget learn from, they may just use the Android platform.

Canter: There you go. That would be incredible, right. I mean, I would love that. So, having this sort of Mesh approach which again, we talked about this earlier, Mesh puts a desktop server onto every machine. That’s how it does its offline synchronization.

I think, there is a tremendous opportunity there. They are basically getting it from the P2P business with Cloud, with their owning the desktop. And owning a large percentage of the game console market. Let’s see, what’s left? The car and the living room.

So, Mitchell probably knows a little bit about the set top box business and the status of Windows Mobile Media and it’s an incredible world out here. I don’t see Google getting into the living room. To me, it’s an incredible world out there and Microsoft certainly appears to be hedging their bets.

Kertzman: By the way, Microsoft is actually further along in the car than virtually anybody else in the industry. It’s not for most part where most of the other players are playing, but Microsoft is getting a bunch of car manufacturers like Ford to adopt this platform of theirs in the car.

Canter: Yep. [crosstalk]

Gillmor: I want to focus this a little bit, because we’ve been talking about these subjects for the last week or so. I think, we’ve got most of these ideas on the table. But, what I wanted to hear from Mitchell is: I want to go back to the original thing that I was discussing, which was that Microsoft has this struggle going on inside the company.

I think, it’s a mistake, as I said yesterday, for people to assume that the obvious strongholds like Steve Senofsky and owning Windows, Windows 7, etc. is the power broker. And I think, it’s even less obvious that the Office group, which is now controlled by somebody else since Jeff Raikes left to join Gates at the foundation, that there’s a power vacuum here, from one perspective.

Yet, there’s this Mesh opportunity to be able to re-define the politics of how Microsoft is perceived in the industry, not by saying anything but by doing, by literally providing protocols that are open.

And as Marc just said, adding a pier to pier back end and being able to provide services, which are uber OS, that rise above the hardware to the level where they are competing directly with Google. And what I’m looking for from you, Mitchell, is your perspective on whether you think that…

Who’s going to control Microsoft and how long do you think it’s going to take for this shake out to occur? My feeling is it’s going to be very rapid.

Kertzman: The big unknown on that question, to me, is Steve Ballmer. Is Steve a guy that is going to champion that and create an environment that that happens and happens quickly or is he going to cling to, to use a political term these days, is he going to cling to the old, older models and view this more as a technology question than a DNA of the company opportunity.

So, that’s the big question. The big question to me is the… I think, it happens eventually and does it happen on Steve Ballmer’s watch or does it happen on the next CEO’s watch?

Gillmor: All right. Well, my thought is that Ballmer is much more closely aligned with the technical side than people realize. And that he always has been.

Kertzman: I agree with that. Yeah. There’s sales guy.

Gillmor: Used to sort of play the sort of warm, cuddly sales guy act in conversations and stuff, but if you ever throw a mischaracterization of some sort of obscure technology at him, you watch him and his eyes go like, no that’s not right.

He won’t say anything. He’ll just basically… he’ll say something that is at a higher level, which makes it clear that he didn’t accept that characterization. It’s a subtle point, but he’s very, very attuned of what’s going on here. So, I think that anybody who mistakes his strategic or CEO-type messaging around Microsoft’s value proposition. If they think that he doesn’t have, for example, a significantly good relationship with people on the Mesh side, I think that’s a fundamental misreading of what’s…

Kertzman: Yeah. That’s not what I’m saying. I’m not…

Gillmor: I didn’t say you were. I’m just…

Kertzman: Yeah, I’m not addressing the question of his technical chops or anything like that. It’s more a matter of… I mean there are people who have been great CEOs, who then missed some fundamental transition in their business.

So, it has nothing to do with any of your skills, your intellectual skills, your technical skills, even your leadership skills.

Gillmor: Right. But, Mitchell…

Kertzman: Yeah.

Gillmor: We are further along in this transition than many people realize. If you go back to the Yahoo deal, whether or not it’s over or not over is kind of irrelevant.

It was clearly a move on the part of Baumer and at the technical level, it was Ozzie who came in and supported this.

Kertzman: Yeah.

Gillmor: I mean Ozzie was the one, according to the Wall Street Journal, who came in and basically did all the vetting on the technical side in terms of the integration of the two companies et cetera.

Kertzman: But, going back to my earlier comment, if it was that strategic and got that kind of support, why didn’t they pull the trigger?

Gillmor: Maybe because they don’t need Yahoo. Maybe because they were basically saying that they are here and they have – let me put it this way. If you think about the fact that during the time frame that they were creating and rolling out Mesh, Mesh is a two-year project. It’s been underway for two years. It’s stable enough now that they can roll it out in a preview trial. And I have yet to hear from anybody who has been using it who has had any trouble with it.

Kertzman: OK.

Gillmor: Now that doesn’t mean anybody’s pushing it. I mean, there are developers who are in the chat room right now who are using it and probably in projects that they are working on. Just like there are people who are using EC2 and SS3 and all the… EC whatever those acronyms are.

Kertzman: Yeah, EC2 and S3.

Gillmor: Thank you.

Kertzman: [laughs]

Gillmor: Using those in production environments and in startups as well. And there are some, and hopefully more who will be using the Google app engine, et cetera.

To me, this is not rocket science in terms of inventing this stuff. This has moved now to a deployment stage. We are in the early processes of this. But, nonetheless, this stuff is being rolled out.

So, if the company is sitting there on top of this Mesh strategy, and let’s say for the sake of discussion that it’s what I am saying, that it is not only central to the strategy of the company to be able to transition, but it’s also central in the near term to the company engaging with the kinds of companies such as a Yahoo that have traditionally this so-called open persuasion. Right?

Kertzman: Yeah. I mean, I think, the Yahoo thing for Microsoft was all about search and advertising. So, I think, it raises an open question as to whether Microsoft has to win — when I say win I don’t mean beat Google, but certainly be more competitive in search and advertising.

If you answer that question yes, then it leaves the question as to what do they do next apps in Yahoo. If the answer to that question is no, and that might be a valid answer to that question. Maybe, the answer is you skip over search and advertising and figure out the next disruptive thing beyond that.

Gillmor: From my conversation with – I forget who – one of the business magazines in the last week, there were some videos. I forget what the link is. It might have been Business Week. I can’t remember.

And he basically inferred that, whereas Gates in the D Conference from what I can recall basically implied that they had to and will catch up in terms of the technology of search. Baumer said something a little different. He seems to be implying, at least in this interview that I saw, that search is the current way of getting to the majority of the users on the network.

Kertzman: Right.

Gillmor: But, moving beyond that, there may be other ways of doing that. We have talked about this notion of social search, for example.

Kertzman: Yeah, I mean, the key to the advertising business that has made Google so successful is everything about context and about the fact that when users search, they offer up willingly what they are interested in. Therefore, you can direct advertising.

So, if you can come up through social search or other means of a way of essentially targeting advertising – because that’s the way you can make money on advertising is the more targeted it can be – then maybe search doesn’t matter, in which case Yahoo doesn’t matter.

Gillmor: It’s not that search doesn’t matter. It’s just that as the quality of the lead moves from a top down approach or a needle in a haystack approach to something that’s more around affinity groups, for example, the yield of that communication rises dramatically.

Kertzman: Yeah, and one could say that we have yet to tap the notion of – and Facebook hasn’t done this yet – but tap the notion of what do we know about somebody from the groups they associate with, as opposed to what they are searching for today. The groups they associate with may be significantly more important and long lasting than this moment’s search.

Gillmor: Exactly.

Kertzman: Yeah.

Gillmor: If you then look at Mesh as basically being an atomization or a core stripping into core capabilities of the social platform, if you look at what Mesh does, it literally does that.

It separates people, their identities from the resources that they have on their system, in other words, their profile, expands their profile to being not just about what they are interested in, but also about mechanisms that they use to be able to receive and transmit the information.

That’s what… most people think of the Mesh as being about synchronization of data. Much more important is that it’s about, on an interactive, real-time basis, creating or carrying the signals of a person’s identity and what their affinity groups are and what’s their information that is most dear to them and how to be able to establish contracts with those users that are acceptable to those users.

Kertzman: Right.

Gillmor: That information in the model that you were just talking about is infinitely or at least exponentially more valuable than the current strategies.

Kertzman: And that’s potentially true. And so, the question is does Microsoft get there, does Amazon get there – now Amazon is really directing this almost, Amazon is directing its stuff, interestingly enough for a consumer company, completely at business computing.

By the way, Amazon… again we have this seat by which we can see what companies that are starting up and companies that are operating are using, and the penetration of Amazon Web services into the software startup world, that’s now virtually how all software startups start. They start up on Amazon.

I think, that’s a startling fact.

Gillmor: Right. But, if you add to that, I mean, Microsoft has always been a fast follower.

Kertzman: That’s true. Absolutely. Yeah.

Gillmor: So, let’s just say that in a year’s time that 50% of that market will have shifted over to Mesh or be a combination of Mesh, Amazon and Google, which is probably what will happen.

Kertzman: Yeah, I think, they’ll all have some share with that. Yeah.

Gillmor: I mean, literally.

Kertzman: Yeah.

Gillmor: Even within a company, there will be some developers who will be talking to the app engine or whatever Google rolls out in terms of data storage, et cetera, et cetera. Right?

I mean, the interesting thing about Microsoft is with Mesh, either they are open or they are not. They are not going to be halfway. They can’t do it. People will not accept, developers will not accept the proposition that this is only going to be available through Microsoft. And then, Microsoft is going to become the sort of toll-keeper for a percentage of whatever complications are there.

Kertzman: Given Microsoft history, I think, there is a natural level of reluctance to hand that over to them.

Gillmor: Yes, but given the history of every Cloud computing service on the network. I mean, IBM, they are going to get their cut in, I guess, Global Services.

Kertzman: Yes.

Gillmor: Google is going to cut in advertising. Sun, I do not know what Sun is going to do in this. They seem to be the odd man out in this whole thing. Marc?

Canter: Yeah, well OK. Let me jump in by saying that as important as search revenues are, different ways to monetize in the long term, the ultimate thing that the team can do is to out-open each other.

To solve this apathy, the thing you should be bringing up is the moment you can create the right environment to let thousand other flowers bloom, that is when you have got the real entrenched spades. That is what Mitchell meant by saying that all of the entrepreneurs walk in his office and have [inaudible], because right now, they are loyal Apple customers.

And so the question it, who will they be loyal to ten years from now? And how the Cloud computing can be a Mesh? To interconnect, as big as Google, Microsoft, and Yahoo! Are combined, it is not going to equal everybody else. And how you work with everybody else, and how you enable everybody else. When we see the power of RSS and what happens when you’ve got something that nobody controls. We’ve seen the power of the web, of HTML, and nobody controlled it. That is the most powerful stuff.

We are in a position right now, with these giant R&D war chests, that they can actually pay to develop this stuff and scatter it to the wind. That is what Live Mesh is, hopefully. It would not be tethered to Microsoft. It would be a completely open platform that anybody could use for anything they want.

Gillmor: The problem with that kind of rhetoric, and I’m trying to use this advisedly, I’m not suggesting that there aren’t powerful forces in play to push these companies into an open environment. I think that is what you said first.

But, the idea of them using their R&D in order to essentially limit or undercut their previous generation monopolies, is not something that is going to be for the faint-hearted inside these companies.

Kertzman: Let me give a comparable with Microsoft, which is that they don’t do things in, let’s say, proprietary ways with proprietary hooks to existing technology. If you want to take a charitable view of it, imagine that you have a company full of people who have grown up with these technologies, developed all of these existing technologies. They know what they can do. They know their innards. And when they think about developing something new, they are tempted to tie them into what exists, because they genuinely believe, just to take a charitable and hypothetical view here, that that is the best possible solution.

My guess is that there is a fair amount of that that goes on at Microsoft. And this issue of the faint of heart, is people who can come into Microsoft and take a completely fresh view and argue that completely fresh view.

As far as I can see, I think, Ray has done a pretty good job of that. Steve, you communicate with him a lot. Do you think he still has that kind of wipe-the-slate-clean view of the possibilities?

Gillmor: I don’t think that his view is to wipe the slate clean. I think, his view is to… I mean, he came in basically as a very, very strong advocate of the notion of software plus services, which continues to be ostensibly what the plan is.

Kertzman: Right.

Gillmor: Namely, that you have to have, you’ve alluded to this in this conversation, the idea that at the end of the day you have to have a pedal to the metal in order for a certain core part of the things that you do with a computer.

There has to be caching and resources and a CPU, a local CPU kind of a model.

So, I think that he has been adamant. I mean honestly, I felt when I first started talking to him about this, when he was first over there, I felt that he was almost… He was so focused on what I believe are his responsibilities as an important officer of a public company, to be able to return value to the shareholders. I think, it is a no-brainer that he is not going to try to undermine the revenue streams of Office and Windows.

But, I felt that he was overlooking the power that Google was bringing to the network in terms of changing what the customers on the network see as Microsoft’s value proposition.

Kertzman: Yeah, yeah.

Gillmor: Right up until Mesh, I thought that he was, if anything, more tethered to the older view than not.

But, Mesh, to me, seems to be… I’m watching the chat room here, too. There seems to be a discussion about, by Jim Posner basically arguing, and I apologize if I am getting this wrong because I am trying to keep track of both conversations simultaneously. He seems to be arguing that Microsoft cannot deliver an enterprise solution with Mesh.

I fundamentally disagree with that notion. I think that what Mesh represents is… the best way I can describe it is I think, Ray was surprised in their early days of Groove by this concept of swarming, or the actuality of swarming.

He started to see behavior as a result of building this platform, which was based on all of the work he did with Notes and a lot of work he has been doing all of his career. In terms of, he suddenly noticed this and his team suddenly noticed that these groups of people who were not aware of each other five seconds before, something comes up, say there is a discussion like this one that we are having. It breaks out and people join it and somebody else notices that something’s going on and they jump in, and they have some information that they impart to the group.

These swarm answers, self-collecting affinity groups – setting that up was more powerful than the reasons why the technology was enabled in the first place.

Canter: That is exactly why it has to be beyond the Microsoft firewall. Because the swarm can’t be limited within the scope of Vista or what is running on a desktop or what is running on MSN.

Gillmor: Right. And I agree with that, Marc. What I am saying though, is that I am just responding to what Mitchell was asking me about where Ray is coming from.

To me, Mesh represents, OK, something has happened here that we did not anticipate. All of the other reasons why, aggregating and replicating information around to multiple devices, essentially following the user rather than the user trying to copy from one place to another, et cetera, et cetera.

The Advent’s a powerful mobile device, et cetera, et cetera. All of that stuff is the reason that Groove and Mesh were created in the first place. But, this swarm architecture, this ability to be able to not only have at your fingertips all of the information that you have, but also to be able to develop and take advantage of the swarm of people of influence, the group mind capability that was first talked about.

That is sufficiently more advanced from an operating system or from a platform perspective than people have commonly realized.

Kertzman: That is more than MobileMe, right?

Gillmor: Right. If you look at MobileMe, it has got three data types right now – contacts, calendar, and email, and photos. If you look at email, first of all, where is the IM?

Kertzman: Right.

Gillmor: He doesn’t care about the IM because he doesn’t care about Twitter.

Kertzman: You know, I care about IM, you find me on IM all of the time.

Gillmor: I do. I am sort of joking with you. What I am suggesting to you is what Marc is talking about in terms of it has to be global in nature and it cannot be confined to…

Canter: I think, Microsoft’s Mesh.

Gillmor: I don’t think it is, number one. I think that Mesh has been rolled out significantly on top of the Mac, and will be on top of Linux as well.

Canter: Servers across platforms, as well.

Gillmor: Right. So, what the difference is, is that there is this common channel where everybody can talk on this channel and the richness of the clients at either end, as Mitchell has been talking about, is where the processing will occur to be able to take that stream and be able to extract useful data from it in real time.

In other words, be able to filter it so that they can create this process.

Kertzman: I need to interrupt and sign off.

Gillmor: OK. Good luck with your comcasting. Thank you, Mitchell.

Kertzman: OK.

Gillmor: We will pick this up again sometime soon.

Kertzman: Terrific. Thanks. Bye-bye Marc.

Canter: So, what you are saying is Live Mesh is plan B.

Gillmor: Well, yeah. I was just trying to basically give Mitchell some difficulty in arguing it, and I guess, we can push it into the chat room as well.

I think that the idea that this cannot be an enterprise technology is absurd. I think, it is fundamentally enterprise technology.

Canter: OK. What is really interesting is because in the consumer phase, you talk about which Cloud form you are going to support, and which of these behemoths.

But, in the enterprise phase, each company, regardless of its size, is its own firewall, right? And maybe within this industry, they are willing to cooperate and stuff.

The medical people have nothing to do with manufacturing or even care about what is happening in the home.

Gillmor: So again, what about the vision that I was talking about? Using Twitter as an example of how you would define it is a problem for affinity groups at the corporate level.

Canter: Well, each company is going to have a different policy on how to deal with this. Some people really think they own their employees. They can control what they do. Others would encourage a good work environment that you could join a reggae group that would connect in with other reggae groups in other corporate intranets around the world.

Gillmor: Look, I don’t disagree with you that this is going to be something that is going to move rapidly at the non-corporate level. But, try and constrain the argument for a second to the actual corporation environment right now.

What is going to be provided between… I mean, we are already Google with Google Docs is allowing people to be able to either they are shut off from using their Google Apps inside the corporation or they are using it.

When Salesperson Apps is a continued evolution of their understanding with Google next, on the 23rd, we will find out even more about how these types of tools and technologies, these collaborative technologies, are being rolled out in the corporate space.

So, what about what Microsoft is doing with Mesh is so far behind, or so difficult to deploy in the enterprise, as compared to what Google is already doing.

Canter: Right. Well, I agree. As we were saying earlier, Microsoft certainly has some idea who these enterprise folks are. And it is completely reasonable to think that they are going to be able to cleanly fit into and up-sell to their enterprise customers.

If anything, it is going to be much easier for them to up-sell.

Gillmor: Exactly, because they do not have, they almost have a reverse barrier, which is that Google is perceived, no matter how inappropriately, as being a consumer product, while Microsoft is continually dubbed as a [inaudible]

Canter: They also have this incredible opportunity, which is if you are any kind of a long-term vendor who is going back to the same customer for the tenth time, telling them about the upgrades, and how they want to get more money. What those customers want to hear about is credit for all those copies of Office they have bought. Or how many upgrades of Windows have they gone through.

You can just imagine these customers and how much money they have spent over the years. Microsoft is in a position to have the invoices, to know how much money they have spent.

And now, let’s pull out the deal book. Let’s talk about keeping you loyal to the Microsoft platform. I will give you credit, and what you have already spent, come on. That is how to sell it. These are already their customers.

Gillmor: So, how do you deal with this reverse, I don’t want to call it racism because we are talking about companies. You deal with this…

Canter: Bigotry.

Gillmor: You deal with this, that Microsoft is evil and that Google is not.

Canter: A good example, we were talking about Ray, but another example of a newcomer who came in 1999, is Kim Cameron. Kim did a multi-year effort, where back in 2003 or 2004, he approached me and Doc Sills and Phil Windley and Drummond Reed and Esther. He said, “Listen, we are about to roll out a new kind of identity platform.”

It was created in reaction to Passport. It was done in reaction to all of the spam and virus people. He systematically, for three or four years, built up the strength and trust in the identity community.

So, we know that it is something that can be solved. It worked in the identity world. Kim Cameron has tremendous respect as I think, on CardSpace. It is state of the art stuff. Even Microsoft themselves don’t even use it.

But, Kim did solve the problem of this reputation issue, which of course has been haunting Microsoft and will continue to haunt Microsoft, rightly so.

Gillmor: This is right at the doorway of the discussion we were going at today about some of the things that are going on in terms of identity and OAuth and OpenID and the so-called notion of data portability, pardon the expression.

Canter: Well, symbolically speaking, I am in transition. I am now at my friend’s high school graduation at the high school.

Gillmor: All right. Well, thanks so much for joining and hopefully we will see you tomorrow. I am not sure what is going to be going on in the gang.

Canter: Beautiful.

Gillmor: This is Steve Gillmor and the Gillmor Gang for Thursday, June 12. We will see you again next time. Thanks to everybody who showed up, especially those who didn’t. Bye-bye.

[music]

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