Internet Web Help

I had to write the article for the headline alone, but its true:

The founder of Digital Playground, one of the porn heavyweights in the U.S., told ConceivablyTech that it will abandon Flash as soon as the desktop browsers fully support HTML 5. We also learned that 3D is just not there yet and that online movie streaming is unlikely to replace Blu-ray discs anytime soon.

The reason is that HTML 5 is making it redundant:

We have HTML 5, which is generally praised as the next major evolutionary step for HTML that automatically questions the future of Flash. Conceivably, Flash could co-exist next to HTML 5, but if we look at the possibilities that are provided by HTML 5, it is entirely possible that Flash will be obsolete in the not distant future.

And thus the Adult industry, a tech kingmaker in the past, is looking at the next thing – the iPhone! No flash on the iPhone + lots of iPhone usetrs + a wa of making money from content = HTML 5.

That will probably be the evolving story of all online video media going forward, at least until there is another way of making money from it.

There was shock and even awe today when Mary Meeker of Morgan Stanley said the Mobile Internet “will be huge”:

The Morgan Stanley analyst says that the world is currently in the midst of the fifth major technology cycle of the past half a century. The previous four were the mainframe era of the 1950s and 60s, the mini-computer era of the 1970s and the desktop Internet era of the 80s. The current cycle is the era of the mobile Internet, she says — predicting that within the next five years “more users will connect to the Internet over mobile devices than desktop PCs.” As she puts it on one of the slides in the report: “Rapid Ramp of Mobile Internet Usage Will be a Boon to Consumers and Some Companies Will Likely Win Big (Potentially Very Big) While Many Will Wonder What Just Happened.”

“Some companies will do very well” – now that is a devastating insight.

Those whose memories go back to Ms Meeker in the DotCom era are absolutely stunned, stunned I say! by this walk on the wild side. Throughout that period she was the very model of the carefully considered forecaster, a paragon of predictive parsimony, a doyenne of discriminating, dispassionate data-driven delivery, an angel of ambivalent analysis

Or then again…………

It would appear that 1/3rd of all mobile searches pertain to local information:

Speaking at a Mobile Marketing & Advertising event in Las Vegas to coincide with CTIA Wireless 2010, Diana Pouliot – director of mobile advertising at Google – revealed that one-third of all Google searches via the mobile web pertain to some aspect of the searcher’s local environment.

Not quite in the “whoddathunkit” bucket, but the interesting thing – to me – is the actual proportion. If I were making an hypothesis, I’d have thought it would be higher. This is all quite interesting, as to my mind only 1/3rd of searches being local militates against the hype-huged location based market. Interestingly, the article also notes that:

……some analysts now project that location-based mobile spending will top $4 billion in 2015. That’s a mind-blowing increase from the relatively paltry $34 million spent just last year.

The $4bn by 2015 estimate intrigues me, as just the other day estimates of $13bn by 2014 were being thrown around – we pooh poohed them at the time, and using our “half the amount estimated in double the time” rule for Planet Mobile we concluded the market would be more like $7bn by 2018* – which $4bn by 2015 is more-like than $13bn by 2014!.

The thing is, usually it takes 2 years for Planet Mobile to halve their heady early day forecasts. This has taken just 2 months. Clearly the Planet Mobile krew have already reacted to the new data. Planet Mobile meets Internet Time

I just hope somebody has told all the location based startups crowding onto the ground floor…….

*You’d be amazed at how accurate its been in the past

Was reading this piece on TechCrunch about location services at SXSW:

At first, I was using all of the services I had on my phone to check-in when I arrived at a place in Austin. This included: Foursquare, Gowalla, Loopt, Whrrl, Brightkite, Burbn, MyTown, CauseWorld, Hot Potato, Plancast, and (at certain places) Foodspotting. Even with great AT&T service, this would take a solid 10 minutes or more to check-in to all of them. And it took even longer when I’d have to pause to explain to my friends what the hell I was doing on my phone all that time.

This was at every venue we stopped at. The situation simply wasn’t tenable.

Indeed. And there are even more location based startups coming…..

I love that all these startups are emerging around location right now (at least a dozen more have emailed me just since I’ve been back from SXSW). But I’m starting to worry that this is going to turn into a repeat of the social wars, where we all have 15 different profiles we constantly have to update across a range of networks.

The outcome of the social wars are well known – concentration into just a few players. This will happen with location based services as well.

In fact I don’t know why any startup after the 4th or so in a space bothers, the chance of success is miniscule and the chance of funding is minimal. Better by far to be contrarian and do something that the maddening crowd is not.

Agence France Presse:

SAN FRANCISCO — A study released on Wednesday indicated that the market for mobile device software programs should rocket to 17.5 billion dollars (US) within three years.

Downloads of mobile applications to handsets will leap from slightly more than seven billion in 2009 to nearly 50 billion in 2012, according to the independent study commissioned by GetJar, the world’s second largest app store.

“It is easy to see how mobile apps will eclipse the traditional desktop Internet,” GetJar chief executive Ilja Laurs told AFP.

“It makes perfect sense that mobile devices will kill the desktop.”

Ah, another piece of cautiously optimistic research work from Planet Mobile

For the record, a rule of thumb we have found to be pretty reliable over 10 years of watching the mobile industry is to halve the prediction and double the time it takes. $25bn by 2014? I could live with that……

iPhone – Books as Apps (from Mobclix data)

Matthew Ingram writing on GigaOm about the fascinating rise of the Book as the Killer App on the iPhone (see above chart):

According to Mobclix, which does mobile advertising for apps, the number of books in the iTunes store now exceeds the number of games for the first time since the device was launched, making books the largest category in the store. The numbers from Mobclix, which keeps a regular tally on the most popular apps and downloads, show that there are more than 26,000 books in iTunes, compared with a little over 24,000 games.

And just yesterday we wrote that the market for small, stand alone apps on the iPhone (and by extension other smartphones) was probably an early adopter fad. Prescient or what As Matthew notes, this is disruptive to an already Disrupted 1.0 industry

This fits in with something Om wrote recently based on data from Flurry, which also showed a substantial increase in the number of books being downloaded to the iPhone. At the time, Flurry said that Apple was “positioned to take market share from the Amazon Kindle” for book reading, despite the small size of the display, and that “with Apple working on a larger tablet form factor [Aka iPad], running on the iPhone OS, we believe Jeff Bezos and team will face significant competition.”

The Battle for the Book is thus looking very interesting, albeit it seems to be taking an initial backward step as various publishers and hardware providers try and jockey for proprietary supply models. This of course will be a hit with the customer like it has been every other time its been tried (not!)

So – some predictions in this space over the next few years:

(i) Greedy and shortsighted players will try and make proprietary content-to-device deals and attempt to lock in high prices of eBooks despite much lower production costs

(ii) This will be accompanied by the wails from the Book Industry that billions are being lost to e-Piracy (oh wait, that’s started) and demand the Government Must Do Something

(iii) One player (my money is on Apple as the have form) will break the logjam allowing you to get most of the content on one (ie their) device

(iv) Les Autres will wail about unfair competition, but they have only themselves to blame – after all, the playout of the music industry is plain for all to see

(v) Authors still won’t see more money for their work, so will start all teh alternative channels as musicians have.

In other words, another Santayana Moment

There are a number of people whose blogs I always read, and when it comes to incisive comment on Planet Mobile one of those is Dean Bubley who writes Disruptive Wireless. I thought his recent piece on Mobile Apps was particularly useful when I read a story about an app on android selling $13,000 pm

Numbers

- About 70,000 downloads of the free version.
- 6,590 downloads of the paid version
- Price of the app was raised from $1.99 to $3.99
- The app steadily climbed the charts, briefly reaching a peak of #4 in the Travel category for paid apps.

Good luck to them, but putting one’s business hat on I asked “is this a business model” – and then recalled Dean’s post:

Wandering around Barcelona last week, I started feeling a deep unease at the current level of hysteria around mobile apps. It is was compounded this week by seeing a T-Mobile advert on the London Underground which didn’t show a phone, but just said “Would you like a free phone with apps for just £20 a month?” [meaning "We'll sell you a cheap Android instead of an iPhone, but don't dare mention it or show it"]. Apple is bombarding the world with “apps, apps, apps” advertising as well.

That was what was on my mind too – as Dean says, this may not be sustainable:

But maybe it’s just a fashion? After all, do you really want any form of ongoing “relationship” with a handset manufacturer? Will the mass market really want to keep adding new stuff to their device?

The first 100-200m owners of PCs bought and installed lots of applications. The most recent 100-200m have probably just got Office, a browser, Norton or some other security package, Skype and their favourite IM client. Apart from gamers, most people don’t continually look for and download PC apps – although they’re there occasionally if need strikes.

……..

Most “cool new stuff” will be in the browser, just as it is with the PC. And maybe, just maybe after you’ve got used to it, you’ll bother to find out if there’s a 20%-better application. Once there are easy metaphors for multiple browser windows and tabs on mobile, and more ubiquitous support for multi-tasking, the idea of a “widget” becomes obsolete. They’re just contrivances to get around small screen size, I think.

And the endgame?

The bottom line is that I’m wondering if the massed billions of phone users will really care about iPhone-style junk applications. Personalisation is all very well – but it’s best done upfront, not on an ongoing basis. The hand of fashion could also start to dictate that people customise something else rather than phones.

A vision of 4 billion “modified” smartphones represents a dystopia of geekiness.

I must admit to having a lot of sympathy with this view, probably the kindest alternative view is to extrapolate the iPhone evolution, where an 80/20 (at best) is emerging – a small number of Apps are selling well (and these are the “$13,000 a month” stories), but a huge number are not.

Incidentally, in case you were wondering where the money really is, news today that the iPhone has a 60% gross margin.

My slides from Mashupevent’s Location Based Service Session last night – these are the notes, they are based on client research we did about a year ago.:

Predictability – of a sort

Location based Services is one of those cyclical hypes, coming round every 10 years or so. Like all overhyped areas, it comes complete with way overoptimistic market projections. The last time round, in the WAP fuelled dotcom atmosphere, $20bn was typical of the froth. 5 years alter, a few millions was more like the truth.

This time round, $13bn are the sorts of numbers thrown about. Suffice to say that we believe these numbers too are way overstated. However, it does give us predictability of a sort, in that the peak of each hype wave is 60% of the last one, which allows us to predict that the peak of the next LBS hype cycle will be c $7bn in 2018

Four Squares

So what is the size of the market? The honest answer is it is too early to tell (a scenario based approach is better, which is our approach of course ). The two key determinants are penetration and Average Revenue Per User.

Penetration can vary between “only smartphone users” (bottom of the chart) and a set of scenarios that imagines location aware consumer devices, cars, etc etc – and if you add low cost “Internet of Things” devices it can be immense

ARPU can vary between “Free” – is location services are given away as part of something else, and directly “paid for” – the horizontal axis – and depending on your assumption here that gives you a number to multiply by your no. of users, and you get a market size.

Update (forgot to add): One also has to be very careful about who gets this new money. The owners of the real estate – the device and the LBS info transport networks (eg operators) – have real market power here and will absorb a lot of any surplus.

We built a number of scenarios for our client, and its worth looking at the two key ones – ie there will be a large number of users for services which are low cost to use, ie are typically funded in some other way (ie the “market” as such will never see the value). Ad funding – the beloved “Ad push discount to find a cool restaurant for your friends” business case – will be a small, and “difficult to get right” part of this in our view, mainly because it is invasive of the very limited real estate on the smartphone.

Another viable market will be niche services that deliver real value to a group of people, and they will pay for these. This will be a market of smaller numbers of users but far higher ARPU.

In our view the $13bn market projections is of the “Pangloss” school of forecasting – assuming the best of all possible outcomes in the best of all possible worlds, and our scenarios tended to give an order of magnitude lower set of answers.

I’m OK, You’re…..

This slide segments the most likely strategies that consumer based mobile services will adopt, and looks at the likelihood of success. We covered this area in more detail in the post over here, and the potential privacy issues over here

There’s always someone looking at you….

We believe that privacy and intelligent usage of people’s digital footprint will be critical – as Google Buzz found out, do this wrong and even the most respected player will be torpedoed below the waterline. The slide mentions two amusing “hacks” that illustrate the privacy issues with LBS

- Robmyhouse.com – shows what you can do to mashup location data for helpful services – for burglars . We covered this in more detail over here

- The Invasion of the Foursquare Bot Snatchers – fun hacks of Foursquare to show what a malicious approach could do – we covered this in more detail here

Other issues that were covered in the Q&A (not on slides)

- Biggest B2B markets? In our view, Logistics (Transport, Scheduling, empty truck ride clearing etc) is the major market.

- Why do people use Foursquare, Gowalla etc? First Gen LBS like Dopple failed, 2nd Gen are more “game” like as that has been shown to be more “sticky” for a user, increases the potential of selling virtual goods, and is more likely to get them to divulge personal data

Somebody asked me afterwards why we are so “down” on LBS. I replied that the problem is not us, its the hype cycle around the industry that is driving it to an artificial overvaluation (hey, even a $2bn industry by 2015 is still good) – and everyone is colluding in this. For example, we were interviewed by one of the MSM’s (fairly well known) tech journalists on this topic last year, and gave our fairy rational prognosis – as above. The piece when it eventually appeared was totally upbeat and didn’t even mention our views as a counter-story. This, if I may say so, is a total dis-service to all those who work in a sector. Big it up by all means, but you are on a hiding to nothing if you don’t understand the limits to growth.

I will be talking about some of our location based service research next week at Mashup events, and one of the areas I want to talk about is abuse of LBS – one of the issues I see is that people who drink the LBS Kool Aid assume that all participants will have good intentions at all times – ie these systems are woefully inadequately protected, and this is a major risk as history show that when money appears, human motives shift from benign and altruistic to power, greed and fear (to quote Machiavelli).

However, instead of me being boring and banging on about it, excerpts from this brilliant essay on how to pervert Foursquare should both amuse you and make the point. Jim Bumgardner first used the Foursquare API to create lots of new locations to make himself Mayor of:

At some point last week, I devolved into a 12 year old hacker, and I spent many spare hours (and my computer’s spare cycles) abusing the system with a set of scripts operating fake accounts. Not only did I add new venues like the North Pole, but I started persistently checking into coveted landmarks, like the Statue of Liberty.

What can I say? It was fun, and foursquare’s incentives (badges and mayorships) spurred me on. Incentives invite abuse, even from mild-mannered folks like me.

Then he started to use the API and a bit of hacking to bump off other people:

I created five “Java Monkeys” which grabbed about 120 different Starbucks in different regions (east, west, midwest, south, intl). I identified and targeted hotly contested Starbucks by searching Twitter for recent oustings. My script automatically visited those ones, to the consternation of the new mayors.

And then he started creating fake personae:

I created a fake Martha Stewart who checks into dollar stores and pawnshops when not visiting Martha Stewart Omnimedia and the set of her TV Show.

I created a fake Simon Cowell who visits massage parlors and gets lunch at Hotdog on a Stick when not visiting the Kodak theater.

I think you can start to see the potential for the damage that can be done, and he also covers how he started to use algorithms to monitor Foursquare activity to pick up behaviour patterns (he used it to get badges for creating swarms, though you can imagine less benign uses). My favourite abuse was when he started to re-categorise landlocked areas as boats:

Finally, I started giving people free sailboats. I found that if you checked into a venue tagged “boat,” you automatically get the awesome “I’m on a boat” badge; and unlike the other badges, it only requires a single check-in. So I started identifying high-traffic places via the above Twitter search, and then adding the tag “boat”. Suddenly, visitors to metropolitan airports and various sports arenas got free sailboats for Valentine’s Day.

Though its interesting what people value:

The “Java Monkeys” got the biggest reactions. Foursquare users get far more irate when they lose mayorship of a Starbucks, as compared to a Statue of Liberty or Mount Rushmore. People are much more attached to the small places they visit over and over, and have some personal investment in. The smaller the venue, the bigger the value.

Now, think of all that wonderfully funny creativity being used to subvert a service that is using real user data and making transactions. As you can see, just a few of these sort of raids would lead to a Google Buzz level of bad buzz.

Location and Privacy

Amidst news that Foursquare is growing like Topsy, (I don’t get it – clunky UI, minimal user benefits, but hey…) interesting thoughts re the tradeoff of User Experience vs Privacy…..Venture Blog’s David Hornik:

Over the last few weeks I’ve started to suffer from Four Square fatigue. After all, Four Square is a lot of work. To get the benefits of Four Square, you need to proactively check in wherever you go. And, while each checkin requires a relatively small amount of work, in the aggregate, it takes real effort to make the most of the Four Square experience.

Which leads to this interesting thought:

Would it be better if Four Square just checked you in automatically any time you lingered at a location for more than 15 or 20 minutes? Or does that cross the privacy line for most of us?

The challenges of Four Square have gotten me thinking more broadly about privacy on the web. On the one hand, the less proactive input a service requires, the less friction there is in maintaining its usefulness. Automatic Four Square naturally will produce more data, on average, than does a Four Square that requires proactive behavior. And, for many, the Four Square experience would be greatly enhanced. On the other hand, when data is being passively collected by a service, there are natural privacy concerns that come with that data collection. How many of us want our every daily stop published to the Web? So perhaps automatic Four Square would turn away more users than it would attract.

This maps to some research we did last year on location privacy (see chart above). In a nutshell, the best interests of the user are not aligned to the best interests of teh service provider and thus we can predict an assault on user privacy – game based LBS services being one of the most effective ways (see our original discussion here). Now, the VentureBlog author isn’t worried:

We have all seen that consumers are willing — often times happy — to trade privacy for utility. I know that I am. And, while Mark Zuckerburg’s statement that privacy is a generational concern was controversial, I think he is absolutely right about that. The coming generations of consumers may not abandon the idea of privacy in its entirety, but they will certainly have very different views of the appropriate balance between privacy and utility. That balance has already clearly shifted in the direction of utility and I believe the trend will continue.

To some this will be viewed as a warning — a cry of the coming privacy apocalypse. I don’t see it that way. As technologies and standards evolve, doors open to new products and services. We are on the verge of an explosion of new ideas.
Automatic Four Square and its progeny are coming. And I, for one, am excited about that.

This Brave New Worldview is very naive, and possibly even irresponsible as worse still it plays into the hands of those who wish to control by monitoring or who wish to use these systems illegally/criminally. As Bruce Shneier has pointed out, the huge privacy defects in Social Media systems guarantee a requirement for strong privacy and anonymity.

We await the first cases of serious LBS privacy abuse in 2010, and the inevitable outcry will make the Phorm brouhaha look like a Phunfair