Thursday, February 11, 2010

Predicting the Future of the Web

We've turned our focus to government use of wiretapping and eavesdropping, but let's not forget the other side of the equation - the technology explosion.

One of the dilemmas the government faces in collecting a data stream from every AT&T phone and web connection is the overwhelming volume of information this represents.

Law enforcement officials have said repeatedly in the past 10 years that their problem is not access to information, but what to do with the the overwhelming amounts of information they have.

Considering the growth of the Web and ways to run a profit making enterprise that depends on the Web was the subject of a recent article by Michael Wolff in Vanity Fair magazine.

He looks at the various ways companies are trying to build a business on the Web.

First he looks at the idea of Platforms - his examples here are big names like Facebook, Google and Apple. Facebook just received a large investment from a Russian financier named Yuri Milner.

He says he’s betting on personalities—Mark Zuckerberg, the C.E.O. of Facebook, and Mark Pincus, who heads Zynga—which is something investors often say: it’s all about talent and drive. But a platform bet suggests a view beyond just gifted management. It’s a control-the-universe play.

Having a platform, in this geopolitical theory, makes you a superpower. Microsoft achieved world domination with Windows when operating systems were the ultimate platforms. But a platform is now a more metaphorical construct, suggesting not just functionality but a framework of behavior, and even a point of view, that habituates users and fosters their dependence, with an eye toward subsuming the rest of the digital world. Like Google.

And, in Milner’s view, like Facebook.

Or, in Steve Jobs’s view, the iPhone—another stab at his dream of controlling both the hardware and the software that control the world.

The platform theory of global conquest holds that Internet dominance has, other than for Google, been elusive, in part because of constant shifts in technology. But the Internet, after 15 years, has, in the platform-supremacy perspective, come to a level of maturity. “The Net is now just another utility, like electricity, water, etc.,” says Mark Cuban, who made one of the biggest personal fortunes of the dot-com boom when he and his partner, Todd Wagner, sold to Yahoo for $6 billion, in 1999.

In other words, if you can become a ubiquitous, octopus-like, hydra-headed, chameleon-ish, integrated horizontal and vertical database and command center, it could be years before a new technology challenges your dominance.

Which is why the emergence of another platform is so compelling.

Facebook’s move at the end of last year to revise its privacy settings, an illusory offer of more control to the user, was really part of an ongoing attempt to make more user data public, shareable, and searchable—meaning Facebook has the opportunity to become the platform through which we search, not just public information but individual information, ever growing masses of it (including pictures). Search moves from the Web into people’s lives.

This prospect leads, in just about everybody’s estimation, to an I.P.O. for Facebook this year, which in its size and giddiness will transform the industry with new liquidity and provoke the ultimate superpower platform war, a face-off between Google’s dominance over Web-page-based search and Facebook’s command of the “social graph.”

Next he considers the "crowd-sourcing" movement:

At its heart, the digital-behavior theory is that the old media business imposed an unnatural behavior on its users—not least of all a strict divide between creators and audience. The Internet, with a flat hierarchy, cheap distribution, and virtually no production barriers, lets people express themselves more naturally. We’re collaborative animals, it turns out, and joyful amateurs, interested more in entertaining and informing ourselves than in being entertained and informed by professionals.

Shirky’s research actually concludes that people like to work for free, and that they are more productive when they do so, which, if you think about it, challenges all economic theory, but, if you think about it some more, just says people like their hobbies and are particularly proud of having an autodidactic expertise.

Next he considers companies that are actually trying to make money using Web 2.0 rather than just trying to gather as much attention as possible first and worrying about the revenue afterwords as YouTube and Facebook are currently doing.

Making media, in this calculation, is, as it has always been, about aligning costs and revenues. The problem is that in an online world, where advertising rates are often 10 percent of what a comparable television or print audience might get you, costs are out of whack with the most optimistic revenue expectations....

Barry Diller, who has perhaps experimented with more theories of the next big thing than any other media-and-Internet magnate (he tried local online media, once believed in the killer future of e-commerce, then tried search with, is returning to a basic cost-and-revenue theory of media. “Everything old,” he says, “is new again.”

The Diller-backed has become a company, he says, modeled on the early movie studios. It produces an expanding range of videos, using acting, writing, and technical talent which is on hand and almost all of which is under 30 (that is, cheap talent), with Diller’s company, IAC, owning all the rights. Likewise, Diller has just joined with former NBC head and reality-TV impresario Ben Silverman to create a company which, Diller says, “returns the media model to the 1950s”—when sponsors, such as Procter & Gamble with soap operas, underwrote (and often owned) the shows. Even the Daily Beast, the online magazine, in which Diller has invested heavily, is a revenue experiment. Diller says he refuses to take low-priced advertising. Rather, he’s trying to create a showcase for ads, around which “lightning might strike,” and, in the manner of old media, vast amounts of merchandise might move.

Nick Denton, the founder of Gawker, has applied even more strictly the rules of pay-as-you-go to create what might be the most successful original-content company on the Web. His is an old old-media approach, in which media workers are not in the least glamorous or cosseted, but rather hack-like and expendable.

But Denton’s model is relatively humanistic compared with the even more advanced pay-as-you-go ones. Demand Media, for instance—a kind of old-fashioned Sunday supplement multiplied a million-fold—harnesses Shirky’s free Internet workers and chains them to an algorithm which looks at the search stream, figures out the most valuable search terms, then orders up content keyed to those words and works aggressively to push these cheaply manufactured content nuggets up to the top of the search results, where they attract traffic which is then funneled to advertisers. In this view, needing human beings to create content is a minor inconvenience which will be sorted out over time by algorithms.

He also discusses the possibility that the current media Goliaths will re-assert their dominance:

But then there’s the expensive-content counter-offensive theory, holding that the next big thing is Big Media. However challenged, Big Media, in this view, still holds a monopoly which, if it just shows some teeth and gumption, can prevail over Google, changes in audience behavior, and even the Internet’s everything-free culture.

“Five companies”—Time Warner, Disney, Viacom-CBS, Comcast–NBC Universal, Fox—“control 85 percent of video-viewing hours in America,” says the media analyst Craig Moffett. “At the end of the day this train ain’t going anywhere that those five companies don’t agree to.”

This sense of last chance has suddenly given old media a new militancy and belief that it can disrupt the disrupters.

It is behind Rupert Murdoch’s declaration that he will put a pay wall around his company’s online content. And it is behind Comcast’s deal for NBC Universal: damn it, brand-name content is king.

At this point, it's really a guessing game as to where it's all headed!

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