Microsoft spins off social networking site

Back in November 2003 I blogged about a social networking project within Microsoft Research called MyWallop. At the time, fuelled by what I call the first phase of social networking, I speculated that something like this could become an opt-in part of Windows, unleashing an extraordinary ability for people to create useful connections across all PC users. The social networking space has – for now – moved on to focus on the big succcess stories like MySpace, which are based on personal expression, social identity, and entertainment, rather than business or utilitarian links (a space which has not gone away and will return in a different guise). It turns out that Microsoft sat on the project for several years, then finally decided to spin it out, with the expectation that it would be able to do better outside Microsoft’s walls than within them. Given what’s happening with some of Microsoft’s other initiatives, a wise choice. Wallop has now raised $13 million in venture capital, and just released the product in beta, with the intent of taking it to a full release early next year.
Wallop has a significantly different business model to other social networking sites. They have decided to eschew advertising, despite the massive deal MySpace won with Google. Instead, they charge members for the ability to customize their personal space. The personal spaces in MySpace’s are very basic and difficult to personalize extensively. As other commentators have noted, Wallop’s positioning is closer to CyWorld, which has had massive success in South Korea and recently launched in the US. CyWorld enables members to personalize their spaces to mimic their own homes, or create fantasy rooms. However in Wallop, members can also make money – if visitors buy the entertainment or features they have selected to place on their site, Wallop takes just 30%, leaving the rest of the revenue to the member. The idea is that the space becomes a marketplace for a wide range of digital expression, across music, avatars, art, animation, and more. Significantly, the entire site was developed in Flash, which enables Flash developers to create and sell artifacts within the site. In short, Wallop is a very interesting experiment to see whether people will both want to build networks in this environment, and spend money on content there. I think it will do at least fairly well, as it represents a real alternative to the existing social networking sites, but the critical issue here is scale. How well it does will significantly impact which way the social networking space evolves from here, as companies uncover what business models work or don’t work, and copy and refine the ones that do well.

Giving structure to citizen journalism

Jay Rosen has just announced that Reuters is giving $100,000 to NewAssignment.Net, which provides a more structured model for open source journalism, bringing together amateur and professional media creators. The money will be applied to hiring a full-time editor for the site. Jay gives some background to why Reuters is choosing to support this project:

Part of the background to the gift is a speech given March 2nd 2006 by Reuters CEO Tom Glocer to the Online Publishing Association. It was called “The Two-Way Pipe.” Glocer said the news industry “faces a profound challenge from home-created content-– everything from blogging and citizen journalism to video mash-ups.”
In 2005 he and his colleagues were worried about a shift in power they saw coming, but “it was about the consumer as editor,” Glocer said. “You get the news you want when you want it, either pulled by something like an RSS feed or a Tivo box or pushed by the media company.” This was a legitimate demand. And while companies like his are still catching up with that demand “our audiences have already moved on-– now they are consuming, creating, sharing and publishing.” Consumers as producers! That’s a power shift more confounding than the explosion of choice.
His puzzle: “If users want to be both author and editor, and technology is enabling this, what will be the role of the media company in the second decade of this century?” As Scott Karp pointed out (his blog is about the next era in publishing) Glocer’s answers to that question weren’t very revolutionary.
But some of his observations were keen. “On the day the Tsunami struck, Reuters had 2,300 journalists positioned around the world, mercifully none were on those beaches,” he said. “On that fateful day we also had 1,000 stringers around the globe – but none of them were there either.” The only way to get the story was from amateurs to whom the tools of media production had been re-distributed. His conclusion: “You have to be open to both amateur and professional to tell the story completely.”

NewAssignment.Net is explicitly joining traditional and social media in creating a “pro-am”, or professional-amateur model. For example, amateurs can collectively be given fact-checking tasks, or issues identified by amateurs can be passed on to professional journalists. For a long time I’ve believed that what is happening and will happen is a merging and integration of traditional mass media and emergent social media. In our Future of Media Report, we explicitly discussed how the “professionalism” of traditional media both provides standards and expectations, and is also a limiting box. NewAssignment.Net looks like a particularly promising model, though the details are not yet clear. However irrespective of how successful it is, the space in which it is playing, of bringing together the resources and capabilities of amateurs and professionals, is where much of the action will be moving forward in the world of media.

Web 2.0 and user filtered content

Tomorrow I’m heading off to the Influence conference run by Phil Sim’s Mediaconnect. The event brings together media and other influencers (I believe I’m labelled a “new media influencer” there) and corporates, discussing current trends in key technology sectors. I’m on the Web 2.0 panel tomorrow, so I thought I’d briefly capture here my introductory comments, on my chosen topic of User Filtered Content.
The user filtering landscape
+ The primary focus recently has been on the explosion of user generated content, with Wikipedia, MySpace, YouTube and many others just the vanguard of an immense wave of content creation, unleashed by accessible tools of production and sharing. We are moving towards a world of infinite content, further unleashed by the vast scope of content remixing and mashups.
+ With massively more content available, we need the means to filter it, to make the gems visible in vastness of the long tail. Fortunately, Web 2.0 is in fact just as much about user filtered content as about user generated content.
+ As far more people participate in the web, as technologies such as blogging, social networking, photo sharing and more become easier to use, the collective ability of the web to filter content is swiftly growing, and will more than keep pace with the growth in content.
User filtering mechanisms
Clicks indicate popularity of specific content within a site (with many caveats).
Links are stronger and more valid votes on the value of content.
Ratings provide explicit opinions on quality.
Tags describe content with words, locations etc.
Web-wide and site-specific filtering
There are two primary ways of implementating user filtering: taking data from across the web, and from within one site.
+ Google’s PageRank is a seminal example of web-wide user filtering, where people’s aggregated linking behaviors enable people to find relevant content. Technorati more explicitly shows how many blogs link to other blogs or blog posts, to indicate their authority. Techmeme draws on the timing and relationship of new links to uncover current conversations.
+Amazon.com’s book recommendations kicked off site-specific user filtering, notably by identifying related titles. Slashdot was for several years the primary site that enabled communities to select stories and rate each others’ commentary.
In two years Digg.com has reached over 1 million daily visitors with its core model of user filtering of content. Copycats or similar sites such as Reddit, Meneame, and Shoutwire have abounded. Finally AOL-owned Netscape launched a Digg copy, providing mainstream media endorsement of the model.
+Content sites such as YouTube, Flickr, MySpace, and Odeo all embed user filtering as core features of their services.
What’s next for user filtering
+ Effective user filtering will have increasing value, and there will be more plays in this space. Network effects will apply strongly to site-specific filtering, however this will not preclude new players with better models gaining traction quickly. The move by Netscape to hire active raters away from Digg is an attempt to accelerate shifts.
+ Social search engines such as Eurekster and Yahoo!’s Search Builder indicate the next level of sophistication of search, enabling filtering aggregation of specific communities rather than the web at large.
+ Tools such as Last.FM and Yahoo!’s Launchcast will, with permission, use extremely detailed personal taste profiles to provide content filtering for individuals.
+ New mechanisms will emerge that draw on people’s web activities, tagging, specific communities, and combine these perspectives in various ways to create more refined user filtering. This filtering will increasingly be designed to be relevant to people with particular interest profiles and individuals.

A manifesto for the newspaper industry

Tom Mohr, formerly president of Knight-Ridder Digital before its sale in June, has just published Winning Online – A Manifesto, proposing that the US newspaper industry should merge into a single industry-wide network, at least for its digital assets. He suggests that there is $4 billion of additional revenue to be gained by 2010, primarily by gaining targetted advertising. Part of Tom’s argument starts from the fact that in the US market, all but a few newspapers are local. It is important to note that there are very different dynamics in just about every other country in the world, where the newspaper markets are dominated by national players, so this is a particularly US view. Other key aspects of his case are the combined power of the newspapers’ advertising salesforces, and the negotiating power they have collectively, for example being able to withhold their content from the content aggregators such as Yahoo!. However Tom’s last point is that this collective work will take leadership. Indeed. In a network economy, leadership is required to show the potential of collaboration, and to bring participants together to create and share collective value. Having closely studied similar situations across many industries (for example FXall, RosettaNet, XBRL, CPFR), I simply do not believe that the industry structure or the participants in the US newspaper industry will allow this plan to make any headway. Reflecting on Tom’s piece, Don Dodge thinks that newspapers and magazines will die as soon as their current readers die. No way. E-paper will revitalize them in a new form. Don is in a minority of people who are happy to read news and entertainment sitting in front of a screen or on a portable device. Once the current print publications are digital, they will have a new lease of life.

The gradual rise of music collaborative filtering

A piece just out in the New York Times covers the current array of music collaborative filtering services (though it doesn’t call them that), including Pandora and Last.FM. I’ve written about these numerous times in my books and blog, including my initial thoughts on discovering Last.FM in 2003 (still love it!) and http://www.rossdawsonblog.com/weblog/archives/2006/01/collaborative_f.html”>a comparison between Last.FM and Pandora. The article refers to a report by Gartner that predicts that by 2010, 25% of online music sales will be driven by collaborative filtering engines. That’s a high figure, given that social networks and personal recommendations will always be at the heart of individual musical discovery, but I do agree that much of the way new music will become visible will be through these kinds of tools. To review, the concept of “collaborative filtering” is that we collaborate to filter the virtually infinite possibilities we face. This is largely done through tools that compare our tastes with those of others, so we can benefit from what people with similar taste to us have discovered. The magic of this is that it becomes far easier to find what we like (be it entertainment, information, or anything else) in a world of infinite choice. One of the most important impacts of technology has been to uncover creative talent, since access to either high-quality production or distribution is no longer a barrier. This means we have far more entertainment choices than ever before. The growth of the “long tail” is vastly enabled by software that provides recommendations for things that we love, that we would never find otherwise. These collaborative filtering services are fundamental to the way the future media landscape will unfold. Progress on these for the last decade has been slower than I would have hoped, but it is picking up, and the promise is there for all of us to find far more music that we love.

Funds management and investment in the modular economy

Last week’s 25th anniversary issue of BRW focused on the future 25 years forward, so not surprisingly included interviews with both Richard Watson, Chief Futurist at Future Exploration Network, and myself. The extensive interview with Richard was a fun and broad-ranging discussion on the future of technology, which unfortunately is not available online. I was interviewed for an article on the future of superannuation (the British/ Australian term for retirement plans). One of the points I made was about living longer healthy lives, the shift to flexible working structures, the blurring of the age of retirement, and the need for legislative structures to adapt to these changes. What I think was the more interesting issue I raised was about how investors will need to seek new investment vehicles.

“The fact is that listed companies represent quite a small proportion of the economy. We will need increasingly to look outside the stockmarket for investment opportunities,” Dawson says. “Private equity and venture capital are going to become far larger. Even today, private equity funds are pushing valuations up.”
“There will also be a growth in companies that are less capital intensive. They will need less money and so will not be so attractive to investors. Over the net 25 years we will have more services companies and flexible, loosely arranged organisations that do not need investment funds,” Dawson says. “Whole new layers of investment companies will build up around smaller sectors, such as micro-caps. In 25 years, althought it will have taken a long time, there will be pretty large segments of portfolios going into sectors that are currently classified broadly as alternatives.”

There is no question that we are shifting to an increasingly modular economy. Technologies such as web services and Web 2.0 are creating an intensely modular online and application environment, in which elements are combined at will. These technologies, together with the modularization of business processes, and easy flow and integration of processes across organizational and national boundaries, are creating a truly modular economy. The ultimate unit of the modular economy is the individual. Certainly there will be many reasons for organizations to exist in the future, not least in those industries that require significant capital. However as the economy inexorably shifts to the intangible, an increasing proportion of value will be created by aggregations of individuals or small organizations providing knowledge-based services, that mesh with other organizations large and small in economic networks. In many cases they will require little capital, and thus there will be no or little need for investors. Stockmarkets can only function effectively with large, highly capitalized companies that have highly liquid shares. Already the proportion of the economy that investors can reach is limited to fairly large companies, at most one third of the economy. It is likely that an increasing proportion of the economy will fall outside the listed sector, and thus be not directly available to investors. Much is made of private equity companies, but these focus on an extremely small subclass of opportunities. Venture capital also works within quite defined parameters, though it plays a very important role. There is a massive potential market in providing capital and services to very small participants in the modular economy, while also providing opportunities for investors to participate in this burgeoning sector. Mechanisms such as sharing in defined ways in future cash-flows of individuals or very small organizations could prove to be viable for both entrepreneurs and investors. While it is hardly a representative situation, Tom Cruise’s recent deal to fund his production company’s overheads suggests the kind of model that could be implemented on a smaller scale.

Yet more on the future of PR

This week I was interviewed by Nicholas Scibetta, Global Director of Ketchum’s Communications & Media Strategy Network, on The New Media Transformation, looking at the implications for the PR industry. The interview is here. Below is an excerpt from the interview:
NS: What is the future of media and what is the role of both new and traditional media in PR programs, given the current media landscape?
RD: Mass media will not die — what we are seeing emerge is a continuous spectrum from traditional mass media through to small community-based conversations. For any particular client or campaign, PR professionals will have to consider where across this spectrum of media they should be investing energy to achieve results. In some cases, accessing only traditional media will be appropriate, while in others, new-media channels will be the primary target. Usually these will be complementary, especially given that traditional media increasingly takes its cues from key bloggers, and their stories can have little impact if they do not generate a discussion among bloggers.
Newspapers and business magazines, in particular, are actively looking for story ideas from bloggers, not least because it means those stories are more likely to get attention. Anecdotally, major bloggers are often pestered by mainstream journalists to link to their stories. A few high-profile bloggers linking to a journalist’s article means that it will get far more attention. Related to this is the reality that it is not just advertising campaigns that are now measurable and accountable, but also journalists, whose readership is now often directly measurable. Journalists whose articles are not read won’t have a job, and those that get many readers will quickly rise.
Newspapers and bloggers are now competing for scoops. A similar dynamic will soon emerge in the video landscape. The television networks are now experimenting with putting selected programs online, advertising slots and all. This makes sense, as it can only generate additional viewers, and value for their advertising. At that point, the number of viewers will be strongly related to how many bloggers link to the program, or people endorse it on popular video sites, such as YouTube.
NS: What impact do social-networking sites like MySpace and Facebook have on the media and what does it mean for PR professionals?
RD: Advertisers are seeking to reach young people who no longer consume traditional media. They can now do that by positioning themselves at the interstices of their social relationships – for example in social-networking sites. PR practitioners must be enormously careful in this space. Advertising is an overt message, so can be tolerated. Seeking to influence without being seen in the absence of disclosure is more likely to have a negative than positive impact. This means that PR practitioners need their activities in social-networking spaces to be entirely visible and clear, with the clients’ interests evident. For example, if people are rewarded to endorse a product or service, that should be disclosed. There are many possible effective PR activities in social-networking spaces. Complete transparency in these activities must be the guiding principle.

Microsoft’s Zune player enables social networks for music

News is just out that Microsoft’s Zune mp3 player, due out before Christmas to compete with Apple’s iPod, will have social networking capabilities, in addition to its core features of a 30GB disk and a 3 inch screen. Zune users will have the option of using the device’s inbuilt WiFi to send and receive music, playlists, videos, and photos to up to four other players. They can either broadcast these to any Zune player within range, or only to those of their selected friends. If they have the broadcast feature switched on, anyone permitted within range will be able to listen simultaneously to what they’re listening to.
This social networking feature, together with the device’s WiFi capabilities, is the only really significant feature difference to the iPod, and it is one that actually could shift users to the Microsoft player. Particularly for young people, music is fundamental to their identity and relationships, and sharing music is truly at the heart of their social networks. Sharing around musical preferences was the initial premise behind MySpace, and while it has gone quite a bit beyond this, it was the seed and still is at the centre of the largest human social network ever to exist. However I have a few concerns about how the feature is implemented on the Zune. One is that broadcasting to four people is not enough to really enable true social networks. It makes it a little bit more a gimmick than a feature to have it so limited in scope, though it can still act as a social glue for smaller groups. Another issue is probably related, in that WiFi is very energy-hungry. I have not seen any figures on battery life with WiFi turned on, but I suspect that the device won’t be able to last very long while it is broadcasting music, making it far less mobile. It may take, sometime down the track, the use of fuel cells or alternative wireless technologies for this kind of music social networking to be a broadly used application. A final issue is that, given this is Microsoft, we know that there will be solid Digital Rights Management (DRM) in place. In fact the release specifically says that people will be able to share “promotional copies” of songs, which will be just a fraction of what people have available on their players. Given these factors, the question remains whether this feature will prove to be a key differentiator for the Zune here in an extremely competitive marketplace, but I don’t doubt that mobile musical social networking will get massive uptake at the right time, when it’s done right.

Will economic growth transcend flattening population? …keynote speech on the long-term future of investment

Yesterday I did the closing keynote at the PortfolioConstruction conference. The conference, run by Portfolio Construction Forum, was for fund managers and portfolio advisors, covering many of the emerging issues on portfolio analytics, as well as the more interesting asset classes. My role was to pull this all out to the big picture, looking 10-20 years forward at future opportunities for investors. There was probably close to a book’s worth of material in the talk, so I won’t try to summarize it here – I’ll cover some of the issues raised in future blog posts and elsewhere. However I want to share the chart I kicked off my presentation with, which shows the economy over the last four centuries and the next 4-5 decades.

The historical data in the chart comes from Bradford DeLong, an extremely interesting economist at UC – Berkeley. Brad has compiled a thorough analysis of economic history since the birth of mankind, which provides a good complement to some of the more traditionalist approaches. The most evident point from the chart is the acceleration of both economic and population growth over the last centuries. In the year 2000 world population had grown to 2 ½ times its levels 50 years earlier, while in the same period the economy had grown by a factor of 10, resulting in an unprecedented level of prosperity to the individual. We are now at an inflection point in population growth. The United Nations fairly recently revised its world population forecasts for 2050 downwards to 8.9 billion, from the 9.3 billion they were forecasting earlier. Now it is not just developed countries that have low birth rates, but as developing countries progress from agricultural economies, their birth rates too are rapidly falling. Clearly a substantial portion of economic growth since the second world war has been based on population growth, and the associated demands for infrastructure and consumer goods. Barring extraordinary disasters, we know with a fair degree of accuracy what the population will be in 40-50 years. However there is great uncertainty on whether future economic growth can transcend this flattening in population growth. The swift commoditization of goods and services, driven by globalization, on the face of it makes it more difficult to drive economic growth. Yet the associated shift to a highly modular economy facilitates the servicing of needs, and exploitation of economic opportunities, particularly in shifting many poor people into early middle class. I believe that the pace of absolute economic growth in the next 40-50 years will be significantly higher than the last decades, and that economic growth per capita, as human population eventually stabilizes, will grow at an even higher rate. I’ll expand on all of this a bit later.

Will the 1% rule change?

I was recently interviewed by Mediasnackers, a neat site that focuses on how young people consume and create media. The interview, which is on the Mediasnackers site, covers a number of interesting themes, such as power shifting to the edge and edgeio, user generated content, and the shift by Gen Y to heuristic learning styles that Ross Gibson of UTS pointed out at the Future of Media Summit. I was asked about the 1% rule, which, based on research on YouTube, Wikipedia, and other sites, suggests that approximately 1% of a site’s visitors contribute content, and 10% interact in some form with the content. For those old enough to remember bulletin board systems (BBS), the rule of thumb used to be a “lurker” to participant ratio of 1:10. However there are now far more options to consume content, and clearly video and other multimedia content takes more effort to create than text comments. Undoubtedly, as generations shift a far larger proportion of people will create online content. In the US over half of teens have created and posted online content of some form. Yet it’s also important to note that 18% of American over 65s have also created content, so the gap may not be as big as people tend to think. The proliferation of online content sites is likely to keep pace with growth in content creation, leaving the 1% rule a good rule of thumb, especially for multimedia content.