July/August 2008

Ten Web Startups to Watch

We profile some of the most innovative ideas of the Social Web.

By TR Staff and Freelance Writers

Greg Woock (left) and Joe Sipher Credit: Howard Cao

Instant Voicing
Send voice messages without calling, and listen to them from a phone--or a laptop.
By Larry Aragon

Company: Pinger

Founding date: 2005

Funding amount: $11 million

Worldwide, people sent 1.9 trillion text messages last year. That's a lot of tedious triple-tapping on mobile phones, and it's not free. Pinger, a startup in San Jose, CA, is giving us a voice version of text messaging that's Web accessible, so picking up messages need not trigger mobile-phone charges.

Pinger lets you send voice messages without calling (and interrupting) the recipient. Instead, you speak a name or phone number into your cell phone and then leave your message, which sits on Pinger's servers. A text notification lets the recipient know that a voice message can be picked up by phone or on ­Pinger's website. Pinger cofounder Joe Sipher, a former executive at smart-phone maker Palm, describes the service as "noninterruptive voice mail."

Sipher and cofounder Greg Woock conceived of Pinger as a quick, practical way for businesspeople to leave messages. But its biggest fans are turning out to be women between 15 and 25--a possible sign that it could become an important Web 2.0 tool. And since these eager voice messagers provide personal information upon sign-up, Pinger can make money by selling that information to companies that do targeted mobile-phone advertising. AT&T, T-Mobile, and Sprint have launched similar offerings.

Randy Komisar, a partner at Kleiner Perkins Caufield and Byers, which incubated and funded Pinger, says that because Pinger built its service with free or low-cost open-source software, it can quickly add or change features. In Komisar's view, that flexibility could allow Pinger to adjust more nimbly than larger competitors

Sharing, Privately
With Pownce, think Twitter meets Napster.
By Lissa Harris

Company: Pownce

Founding date: 2007

Funding amount: Undisclosed

You've got mail. You've also got Twitter feeds, Facebook groups, blogrolls, and instant-­messaging clients. Why do you need Pownce? Launched in June 2007, Pownce joins the likes of Twitter, Jaiku, Seesmic, and Kadoink in the rapidly expanding world of microblogging. But it's really a file-sharing platform disguised as a micro­blogging service--and possibly the next big thing to inflict insomnia on entertainment industry lawyers.

Pownce allows users to send and receive large multimedia files, and to precisely control who receives those files and updates--something you can't do with Twitter. The file-sharing capabilities have been critical to Pownce's growth so far, says Leah Culver (see our cover), the 25-year-old who cofounded it with Digg.com cofounder Kevin Rose and Digg's creative director, Daniel Burka. "File sharing is kind of difficult online," she says. "There's not a good way to do it on IM. We did an embed feature, so you can watch videos and photos right in line, and that really took off."

Pownce has been a work in progress. Allowable file sizes were initially too small; recently they got a big upgrade, from 10 to 100 megabytes (250 for the "pro" account, for which users pay $20 a year). Users complained about the lack of a mobile-phone-friendly site; Pownce built one. Last October, the company rolled out a public API (application programming interface) enabling features such as rePownce, which publishes Pownce to your Facebook page. One thing that hasn't changed is the business model. From the start, Pownce has embedded ads in its message feeds. Culver thinks ­the service could give people a reason to jump on the Web 2.0 bandwagon: "We have people who say, 'This is the first social network I've ever used.'"

Cell-phone Streaming
Qik lets tourists--and reporters--broadcast live from phones.
By David Talbot

Company: Qik

Founding date: 2006

Funding amount: $4 million

Wandering the streets of Manchester, NH, during the presidential primary campaign, a self-described "citizen journalist" named Steve Garfield bumped into Duncan Hunter, a minor Republican candidate. ­Garfield pointed his phone's camera at Hunter for a quick interview, whereupon Hunter disclosed that he was about to tell CNN he wasn't quitting the race.

What Hunter didn't know is that Garfield's phone was armed with software from the startup Qik, allowing it to capture video and stream the interview--in real time--on Qik's website and thence to other platforms, including Garfield's Twitter network. Thus, Garfield says, he scooped CNN on this bit of election minutia.

Qik's data center not only converts cell-phone videos to Flash format but allows Web viewers to send text messages back to the person capturing the video. Bhaskar Roy, a former marketing director at Oracle who is a cofounder, says Qik's key is its adaptability--it works with phones and networks of widely differing capacities, and does so in real time. "We have been focusing on speed and live aspects, and the quality," he says. Roy says the company has recruited thousands of trial users in 55 countries.

The company is now working on business models. In one, it would sell ads to Web video consumers who text-message replies; in another, it would take a cut from sales of high-end cell phones that capture the best videos (which would come Qik-equipped). Garfield is happy to pay: "Viewers can type in a window while watching, and affect the coverage. That's, like, totally amazing and groundbreaking!"

Traffic Master
A dashboard gadget brings the Internet to highways, for traffic and local search.
By David Talbot

Company: Dash Navigation

Founding date: 2003

Funding amount: $71 million

This spring, after years of development, Dash Navigation finally released Dash Express, a two-way Internet-­connected dashboard traffic gadget that brings a kind of social network to the highways. At its heart, the device is a traffic reporter; the company draws on existing traffic data and turns users' cars into networked sensors that broadcast their speed and location (based on GPS data) to other Dash-equipped cars, warning of tie-ups and suggesting routes. Because Dash cars provide data from all roads, not just highways that may already have sensors, they fill in blank spots. In addition, the gadget is a search tool that taps the Web for any number of purposes, including location-based search for, say, Thai food, cheap gas, movies, or apartment rentals. Because it has an open programming interface, new search applications will keep popping up, says Robert ­Currie, Dash's president. Dash makes money on sales and subscriptions.

Crisis Sourcing
Ushahidi's platform allows text messages to feed into the Web.
By David Talbot

Company: Ushahidi

Founding date: 2008

Funding amount: Undisclosed

In the chaos that followed Kenya's disputed presidential election last December, 1,200 people were killed, and several hundred thousand more fled their homes. Skeptical of the accuracy of official reports, a group of Web developers and bloggers with Kenyan ties cobbled together a Web application that could receive citizen incident reports via text message from any mobile phone in Kenya and display them as a Google Maps application.

Cofounded by Erik Hersman, an American son of missionary parents who was raised in Kenya (he is author of the blog Whiteafrican.com and now lives in Florida), the group called the creation Ushahidi--the Swahili word for "testimony." They have formed a nonprofit company and are finalizing funding with a large foundation to turn Ushahidi into a platform that can be deployed easily and rapidly in areas of crisis. Already, a version of Ushahidi is being used to track anti-­immigrant violence afflicting South Africa.

"While there have been a lot of projects to do citizen reports, they are all Web-based," says Ethan Zuckerman, a research fellow at Harvard's Berkman Center for Internet and Society and founder of Geekcorps, a technology volunteering agency. "There is no strong content management system designed to take content off of SMS [text messaging]. It's pretty sophisticated."

Now anyone with a mobile phone can become a node on the network. "Whenever a crisis breaks out and you want distributed data gathering and visualization, our goal is to make it a lot easier to do," says Hersman. The technology won't require much expertise; "people can either download Ushahidi or we will host it for you." And it's not just for Africa. He says the technology could help chronicle fast-­moving U.S. calamities such as Hurricane Katrina.

Partial Recall
QTech's reQall makes custom reminders for scatterbrains.
By Lissa Harris

Company: QTech

Founding date: 2004

Funding amount: $5 million

Sunil Vemuri, cofounder of QTech, observes that "one of the dark secrets of memory aids is that people forget to use their memory aids." The company hopes to solve this problem with a Web-based tool called reQall, which grew out of Vemuri's doctoral research at MIT. Users enter calendar items, grocery lists, brilliant ideas, and other snippets of information into the system; they can do this as text over the Web or via a toll-free phone number. Then reQall uses a combination of speech recognition software, human transcriptionists, and proprietary algorithms to generate reminders by phone, text message, RSS feed, or e‑mail, or through a Web interface (the details are customized to the user). "Our main competition is the Post-it note," Vemuri says.

QTech's advisors include leading figures in digitally assisted memory, including Microsoft's Gordon Bell. Former MIT Media Lab head Walter Bender, Vemuri's PhD advisor, says reQall "helps reduce the instances of forgetting in the first place." But QTech initially forgot to make money from the business. It's now exploring partnerships with cell-phone companies, fee-based "premium" accounts, and advertising models.

Are You ... Influential?
33Across calculates your online social clout for sharper ad targeting--and for you.
By Larry Aragon

Company: 33Across

Founding date: 2007

Funding amount: $1 million

When it comes to social networking, "there are an incredible number of people who want to be known as influential," says Eric Wheeler, CEO of the New York City startup 33Across. Of course, there are also plenty of people--advertisers, namely--who want to know who the influential people are. Wheeler would cater to both. A number of companies try to help target ads based on users' behavior; a visitor to Cars.com, for example, might see Ford ads. In June, 33Across announced its first partnership with a social-networking site--Meebo--to build anonymous profiles of users' actual influence.

The profiles are drawn from the usual sources--self-provided information and Web browsing history--as well as from details on users' networks and their propensity to communicate. The goal: to find gossipy influencers who will be the "viral promoters" of, say, a new product, says Christine Herron of First Round Capital, an investor. "All this data can be used to understand an incredible amount of detail about a person's influence," she says.

Mainly, "it allows advertisers to be much smarter in how they deliver a message," says Wheeler, formerly CEO of ad agency Neo@Ogilvy North America. In exchange for giving 33Across nonprivate user data, social-networking sites get a piece of the resulting ad revenue. Users could benefit, too, since the social-­networking site could share the data with them. Measures of influence might be important to bloggers, among others. 33Across plans a full launch in September.

Semantic Ads
Peer39's algorithms promise better ways of mining language.
By Lissa Harris

Company: Peer39

Founding date: 2006

Funding amount: $11 million

The semantic web is coming. That means that software will comb blogs, social networks, and forums for information about the meaning of a page, reading it ever-more intelligently--and, of course, better targeting advertisements.

This last bit is where Peer39, a semantic-advertising company founded by entrepreneur Amiad Solomon, comes in. Peer39's investors are betting that the company's algorithms--built on research at the Technion Institute of Technology and Princeton's Institute for Advanced Study--will improve on existing methods. "These guys find organic expressions of demand on the Web, on blogs, on forums and chats--all kinds of specific areas where people are talking about products," says Jon Medved, an angel investor in the company. Then they instantly deliver custom advertising. "It's a more compelling user experience," Medved says.

Mashups Made Easy
ByLissa Harris

Company: Mashery

Founding date: 2006

Funding amount: Less than $5 million

Websites once stood alone. Now they talk to each other, exchanging bits of data and piggy­backing on each other's communities. One key to this change was the development of application programming interfaces (APIs), which allow all sorts of information sharing and hybridization. But startups often have trouble managing their APIs effectively. Mashery, a San Francisco startup, makes it easier--providing security, keeping abreast of shifting industry standards, and introducing potential partners to each other. This spring, Mashery helped Reuters launch its Open Calais project, a public API that gives developers access to semantically tagged news content, says Oren Michels, Mashery's CEO.

Video Packet-Switching
Anagran helps the Internet handle growth in streaming media.
By Larry Aragon

Company: Anagran

Founding date: 2004

Funding amount: $40 million

As a Pentagon researcher in the 1960s, Lawrence Roberts led development of what became the Internet. But breaking information into packets that could take numerous redundant network paths "wasn't designed for streaming media," Roberts says. Network routers treat packets equally and can delay or drop them; this means blips and dead spots in voice and video.

Roberts' s company, Anagran, promises a fix. Its technology, which prescreens data before it enters a router, can tell that certain packets belong to streaming media and give them priority. (Or it can lower their ­priority, if the goal is to limit file sharing.) Anagran's approach is different from that taken by Roberts's previous company, Caspian Networks, which shut down in 2006 after consuming more than $300 million in venture capital. Caspian made a large, expensive router that required costly network redesigns. Anagran's device, by contrast, plugs into existing routers to handle up to four million simultaneous data or media streams.

Last year, Anagran started shipping products to government and university customers seeking to ensure that peer-to-peer file sharing doesn't overwhelm their networks. (The technology is better at identifying peer-to-peer traffic than an existing technology called deep packet inspection, which can miss encrypted files, Anagran says.) ­Warren Packard, who invested in Anagran for Draper Fisher Jurvetson, says the tech­nology will be critical to future Internet growth, "especially when you consider its impact on real-time streams that require high quality of service."

Bill Gates: Eine Legende tritt ab

Computer | 27.06.2008

Bill Gates: Eine Legende tritt ab

Großansicht des Bildes mit der Bildunterschrift: Visionär? Bill Gates, Microsoft-Gründer

Bill Gates zieht sich endgültig bei Microsoft zurück. Ab dem 1. Juli konzentriert er sich auf seine "Bill & Melinda Gates Foundation", die sich für den Kampf gegen Krankheiten engagiert.

An Bill Gates scheiden sich noch immer die Geister. Die einen bewundern ihn als großen Visionär, dessen Computerprogramme aus den kryptischen Rechenmonstern von einst Geräte gemacht haben, die heute wie selbstverständlich benutzt werden, für elektronische Briefe, Musik, Bilder, Videos und vieles mehr. Für die anderen ist er dagegen ein rotes Tuch, um nicht zu sagen: ein Hassobjekt. Er habe nie eigene Ideen gehabt, sagen sie. Nur die Ideen anderer imitiert und besser vermarktet - zur Not auch mit seiner schieren Marktmacht und seinen Rechtsanwälten.

Was sagt Bill Gates selbst dazu? Früher waren Computer Maschinen, die Millionen von Dollars kosteten, und die nur für große Unternehmen konstruiert wurden, erinnert er sich 1999 in einer Rede vor den Schülern in Bonn: "Sie wurden gebaut, um Rechnungen auszudrucken und riesige Datenbanken anzulegen. Sie hatten nichts mit dem Individuum zu tun, mit persönlichen Bedürfnissen der Menschen. Was die Sache dann wirklich verändert hat, war das Wunder des Mikroprozessors, die riesigen Möglichkeiten und Kapazitäten auf einem einzigen Chip." Sein Freund Paul Allan und er hätten diesen Chip gesehen und sich gesagt: "Das ist etwas, was den Computer zu einem persönlichen Instrument für jedermann machen könnte."

An der eigenen Legende stricken

Bildunterschrift: Großansicht des Bildes mit der Bildunterschrift: Bill und Melinda Gates bei einer AIDS-Konferenz 2006 in Toronto

So kann man auch an seiner persönlichen Legende stricken. Tatsache ist: Keine revolutionäre Idee stammt von Bill Gates selbst. Nichts hat seine 1975 gegründete Firma Microsoft als erstes gemacht. Bill Gates hat nur die Fehler der Pioniere vermieden und aus guten Ideen anderer als erster Kapital geschlagen - in dieser Disziplin aber hat er sich allerdings sehr wohl als wahres Genie erwiesen.

Mit seinen Windows-Betriebssystemen, die einem Computer erst das Laufen beibringen, hat er eine weltweite Monopolstellung erreicht, Konkurrenten drückt er erbarmungslos aus dem Markt, selbst die amerikanische Regierung hat sich an seinem Monopol mit juristischen Mitteln die Zähne ausgebissen.

"Teil von etwas Faszinierendem"

"Das ist alles lange her, inzwischen sind die Computer besser und besser geworden. Wir hatten das Privileg, mit einer Reihe von Freunden eine Firma im Weltmaßstab aufzubauen, und wir hatten das Privileg, ein Teil von etwas ganz Faszinierendem zu sein. Dabei stehen wir erst am Anfang der digitalen Revolution", sagt er.

Einen Revolutionär freilich stellt man sich gemeinhin anders vor. Bill Gates wirkt auch heute noch wie der Junge von nebenan, der nervös an seiner Brille nestelt. Die freie Rede ist auch nicht sein Ding. Aber das hat er auch im Grunde nicht mehr nötig. Er lebt mit seiner Frau Melinda in einem - natürlich voll digitalisierten und automatisierten - Haus am Lake Washington in der Nähe von Seattle und betätigt sich als "big spender", als großzügiger Gönner, der verschiedene Stiftungen gegründet hat und Milliarden verteilt - unter anderem für Impfprogramme in der Dritten Welt. Und um diese Stiftung will er sich jetzt voll und ganz kümmern.

Rolf Wenkel

Das Ende der Werbung, wie wir sie kannten

Internet | 26.06.2008

Das Ende der Werbung, wie wir sie kannten

Großansicht des Bildes mit der Bildunterschrift: Virales Marketing? Noch nie gehört!

Die klassische Werbung steckt in der Krise. Egal ob Fernsehen, Print oder Online - für Kaufentscheidungen sind die Kampagnen zunehmend bedeutungslos. Aber wie bringt man Produkte dann unters Volk. Wird jetzt alles viral?

Täglich prasseln unterschiedlichen Schätzungen zufolge rund 1500 Werbebotschaften auf uns ein. Offenbar ohne großen Erfolg. "Menschen haben gelernt, wie Werbung funktioniert, und können nicht nur im Fernsehen, sondern auch draußen in der Welt Werbung ganz gezielt ausblenden", erklärt Marketingberater Michael Domsalla.

Bildunterschrift:

Trotzdem fließen derzeit 90 Prozent der Werbebudgets in die klassischen Medien. Dabei hat das Internet mit den verbleibenden zehn Prozent Budget inzwischen eine doppelt so hohe Relevanz für Kaufentscheidungen wie das zweitplazierte Medium Fernsehen. Zu dem Ergebnis kommt eine neue Studie, die die renommierte Public Relations-Unternehmensberatung Fleishman Hillard in Auftrag gegeben hat.

"Der Begriff Werbung löst sich auf"

Kaufentscheidungen werden nun maßgeblich im Internet getroffen. Allerdings ist der Anteil der Werbung daran in vielen Bereichen völlig bedeutungslos, sagt die Studie. Egal ob ein neuer Computer, ein neuer Stromlieferant, ob DVD oder die Urlaubsreise - Nutzer im Internet informieren sich in Foren und auf Bewertungsseiten. Werbung als Informationsquelle? Meistens irrelevant, so die Studie.

Bildunterschrift:

"Werbung gilt nur in Ausnahmefällen als wichtige Information", sagt Marketingberater Domsalla und zieht ein drastisches Fazit: "Der Begriff der klassischen Werbung löst sich auf." Überraschen, Aufsehen erregen oder erschrecken gelinge immer weniger Werbe-Kampagnen. Die Konsumenten reagierten ablehnend bis aggressiv auf Werbung.

Werbung, die nicht wie Werbung aussieht

Die Rettung aus der Misere ist unscharf, verwackelt und meist ganz schnell wieder vorbei. "Ein von Werbefachleuten gern genutztes Mittel ist das Platzieren von witzigen Werbespots in Video-Portalen wie YouTube", berichtet der Computer-Informations-Dienst.

Doch das so genannte virale Marketing ist weit mehr als ein paar witzige Videos. "Im Kern meint der Begriff, dass Menschen sich so oder so über Produkte austauschen, man versucht einfach diese Gespräche zu forcieren und zu lenken", erklärt Domsalla.

Wie ein Virus soll sich die Botschaft eines Produktes verbreiten. Die dafür nötigen Anstrengungen stehen den klassischen Kampagnen im Arbeitsaufwand um nichts nach.

30 Cent pro Zuschauer

Allein um in der Flut der minütlich eingestellten Videos bei YouTube nicht unterzugehen, braucht man erst einmal 50.000 so genannte Views, um zumindest auf der Startseite des Videodienstes aufzutauchen. Werbeagenturen bieten deshalb inzwischen virale Marketingpakete an. GoViral zum Beispiel garantiert dem Kunden pro 30 Cent einen Abspielvorgang.

Flankierend vonnöten sind zudem noch Blogeinträge, Kommentare und Verlinkungen. Das alles, damit eine virale Marketing-Kampagne überhaupt startet.

Bildunterschrift:

Ob und wie eine Werbekampagne der neuen Art die Zielgruppe erreicht, das ist allerdings völlig unklar. Denn wenn sich etwas viral verbreitet, dann hat man es nicht mehr unter Kontrolle. Zudem reagiert die digitale Kundschaft höchst sensibel - vor allem auf versteckte Werbung.

July/August 2008

Internet Gridlock

Video is clogging the Internet. How we choose to unclog it will have far-reaching implications.

By Larry Hardesty

An obscure blogger films his three-year-old daughter reciting the plot of the first Star Wars movie. He stitches together the best parts--including the sage advice "Don't talk back to Darth Vader; he'll getcha"--and posts them on the video-sharing website YouTube. Seven million people download the file. A baby-faced University of Minnesota graduate student with an improbably deep voice films himself singing a mind-numbingly repetitive social-protest song called "Chocolate Rain": 23 million downloads. A self-described "inspirational comedian" films the six-minute dance routine that closes his presentations, which summarizes the history of popular dance from Elvis to Eminem: 87 million downloads.

Video downloads are sucking up bandwidth at an unprecedented rate. A short magazine article might take six minutes to read online. Watching "The Evolution of Dance" also takes six minutes--but it requires you to download 100 times as much data. "The Evolution of Dance" alone has sent the equivalent of 250,000 DVDs' worth of data across the Internet.

Star Wars: Episode IV according to a three-year-old.

And YouTube is just the tip of the iceberg. Fans of Lost or The Office can watch missed episodes on network websites. Netflix now streams videos to its subscribers over the Internet, and both Amazon and Apple's iTunes music store sell movies and episodes of TV shows online. Peer-to-peer file-sharing networks have gradu­ated from transferring four-minute songs to hour-long ­Sopranos episodes. And all of these videos are higher quality--and thus more bandwidth intensive--than YouTube's.

Last November, an IT research firm called Nemertes made headlines by reporting that Internet traffic was growing by about 100 percent a year and that in the United States, user demand would exceed network capacity by 2010. Andrew Odlyzko, who runs the Minnesota Internet Traffic Studies program at the University of Minnesota, believes that the growth rate is closer to 50 percent. At that rate, he says, expected improvements in standard network equipment should keep pace with traffic increases.

But if the real rate of traffic growth is somewhere between Nemertes's and Odlyzko's estimates, or if high-definition video takes off online, then traffic congestion on the Internet could become much more common. And the way that congestion is relieved will have implications for the principles of openness and freedom that have come to characterize the Internet.

Whose Bits Win?
The Internet is a lot like a highway, but not, contrary to popular belief, a superhighway. It's more like a four-lane state highway with traffic lights every five miles or so. A packet of data can blaze down an optical fiber at the speed of light, but every once in a while it reaches an intersection where it has the option of branching off down another fiber. There it encounters a box called an Internet router, which tells it which way to go. If traffic is light, the packet can negotiate the intersection with hardly any loss of speed. But if too many packets reach the intersection at the same time, they have to queue up and wait for the router to usher them through. When the wait gets too long, you've got congestion.

The transmission control protocol, or TCP--one of the Internet's two fundamental protocols--includes an algorithm for handling congestion. Basically, if a given data link gets congested, TCP tells all the computers sending packets over it to halve their transmission rates. The senders then slowly ratchet their rates back up--until things get congested again. But if your computer's transmission rate is constantly being cut in half, you can end up with much less bandwidth than your broadband provider's ads promised you.

Sometimes that's not a problem. If you're downloading a video to watch later, you might leave your computer for a few hours and not notice 10 minutes of congestion. But if you're using streaming audio to listen to a live World Series game, every little audio pop or skip can be infuriating. If a router could just tell which kind of traffic was which, it could wave the delay-sensitive packets through and temporarily hold back the others, and everybody would be happy.

But the idea that an Internet service provider (ISP) would make value judgments about the packets traveling over its network makes many people uneasy. The Internet, as its name was meant to imply, is not a single network. It's a network of networks, most of which the average user has never heard of. A packet traveling long distances often has to traverse several networks. Once ISPs get in the business of discriminating between packets, what's to prevent them from giving their own customers' packets priority, to the detriment of their competitors'? Suppose an ISP has partnered with--or owns--a Web service, such as a search engine or a social-networking site. Or suppose it offers a separate service--like phone or television--that competes with Internet services. If it can treat some packets better than others, it has the means to an unfair advantage over its own rivals, or its partners', or its subsidiaries'.

The idea that the Internet should be fair--that it shouldn't pick favorites among users, service providers, applications, and types of content--is generally known as net neutrality. And it's a principle that has been much in the news lately, after its apparent violation by Comcast, the second-largest ISP in the United States.

Last summer, it became clear that Comcast was intentionally slowing down peer-to-peer traffic sent over its network by programs using the popular file-sharing protocol BitTorrent. The Federal Communications Commission agreed to investigate, in a set of hearings held at Harvard and Stanford Universities in early 2008.

It wasn't BitTorrent Inc. that had complained to the FCC, but rather a company called Vuze, based in Palo Alto, CA, which uses the BitTorrent protocol--perfectly legally--to distribute high-­definition video over the Internet. As a video distributor, Vuze is in competition, however lopsided, with Comcast. By specifically degrading the performance of BitTorrent traffic, Vuze argued, Comcast was giving itself an unfair advantage over a smaller rival.

At the Harvard hearing, Comcast executive vice president David Cohen argued that his company had acted only during periods of severe congestion, and that it had interfered only with traffic being uploaded to its network by computers that weren't simultaneously performing downloads. That was a good indication, Cohen said, that the computers were unattended. By slowing the uploads, he said, Comcast wasn't hurting the absent users, and it was dramatically improving the performance of other applications running over the network.

Whatever Comcast's motivations may have been, its run-in with Vuze graphically illustrates the conflict between congestion management and the principle of net neutrality. "An operator that is just managing the cost of its service by managing congestion may well have to throttle back heavy users," says Bob Briscoe, chief researcher at BT's Networks Research Centre in Ipswich, England. "An operator that wants to pick winners and chooses to say that this certain application is a loser may also throttle back the same applications. And it's very difficult to tell the difference between the two."

To many proponents of net neutrality, the easy way out of this dilemma is for ISPs to increase the capacity of their networks. But they have little business incentive to do so. "Why should I put an enhancement into my platform if somebody else is going to make the money?" says David Clark, a senior research scientist at MIT's Computer Science and Artificial Intelligence Laboratory, who from 1981 to 1989 was the Internet's chief protocol architect. "Vuze is selling HD television with almost no capital expenses whatsoever," Clark says. Should an ISP spend millions--or billions--on hardware upgrades "so that Vuze can get into the business of delivering television over my infrastructure with no capital costs whatsoever, and I don't get any revenues from this?" For ISPs that also offer television service, the situation is worse. If an increase in network capacity helps services like Vuze gain market share, the ISP's massive capital outlay could actually reduce its revenues. "If video is no longer a product [the ISP] can mark up because it's being delivered over packets," Clark says, "he has no business model."

As Clark pointed out at the Harvard FCC hearing, ISPs do have the option of defraying capital expenses by charging heavy users more than they charge light users. But so far, most of them have resisted that approach. "What they have been reluctant to do is charge per byte," says Odlyzko, "or else have caps on usage--only so many gigabytes, beyond which you're hit with a punitive tariff." The industry "is strangely attached to this one-size-fits-all model," says Timothy Wu, a Columbia Law School professor who's generally credited with coining the term "network neutrality." "They've got people used to an all-you-can-eat pricing program," Wu says, "and it's hard to change pricing plans."

Absent a change in pricing structures, however, ISPs that want to both manage congestion and keep regulators happy are in a bind. Can technology help get them out of it?

The Last Bit
To BT's Bob Briscoe, talk of ISPs' unfair congestion-management techniques is misleading, because congestion management on the Internet was never fair. Telling computers to halve their data rates in the face of congestion, as the TCP protocol does, is fair only if all those computers are contributing equally to the congestion. But in today's Internet, some applications gobble up bandwidth more aggressively than others. If my application is using four times as much bandwidth as yours, and we both halve our transmission rates, I'm still using twice as much bandwidth as you were initially. Moreover, if my gluttony is what caused the congestion in the first place, you're being penalized for my greed. "Ideally, we would want to allow everyone the freedom to use exactly what they wanted," Briscoe says. "The problem is that congestion represents the limit on other people's freedom that my freedom causes."

Briscoe has proposed a scheme in which greedy applications can, for the most part, suck up as much bandwidth as they want, while light Internet users will see their download speeds increase--even when the network is congested. The trick is simply to allot every Internet subscriber a monthly quota of high-priority data packets that get a disproportionately large slice of bandwidth during periods of congestion. Once people exhaust their quotas, they can keep using the Internet; they'll just be at the mercy of traffic conditions.

So users will want to conserve high-priority packets. "A browser can tell how big a download is before it starts," Briscoe says, and by default, the browser would be set to use the high-priority packets only for small files. For tech-savvy users who wanted to prioritize some large file on a single occasion, however, "some little control panel might allow them to go in, just like you can go in and change the parameters of your network stack if you really want to."

Just granting users the possibility of setting traffic priorities themselves, Briscoe believes, is enough to assuage concerns about network neutrality. "I suspect that 95 percent of customers, if they were given the choice between doing that themselves or the ISP doing it for them, would just say, Oh, sod it, do it for me," Briscoe says. "The important point is they were asked. And they could have done it themselves. And I think those 5 percent that are complaining are the ones that wish they were asked."

In Briscoe's scheme, users could pay more for larger quotas of high-priority packets, but this wouldn't amount to the kind of usage cap or "punitive tariff" that Odlyzko says ISPs are wary of. Every Internet subscriber would still get unlimited downloads. Some would just get better service during periods of congestion.

In order to determine which packets counted against a user's quota, of course, ISPs would need to know when the network is congested. And that turns out to be more complicated than it sounds. If a Comcast subscriber in New York and an EarthLink subscriber in California are exchanging data, their packets are traveling over several different networks: Comcast's, EarthLink's, and others in between. If there's congestion on one of those networks, the sending and receiving computers can tell, because some of their packets are getting lost. But if the congestion is on Comcast's network, EarthLink doesn't know about it, and vice versa. That's a problem if the ISPs are responsible for tracking their customers' packet quotas.

Briscoe is proposing that when the sending and receiving computers recognize congestion on the link between them, they indicate it to their ISPs by flagging their packets--flipping a single bit from 0 to 1. Of course, hackers could try to game the system, reprogramming their computers so that they deny that they've encountered congestion when they really have. But a computer whose congestion claims are consistently at odds with everyone else's will be easy to ferret out. Enforcing honesty is probably not the biggest problem for Briscoe's scheme.

Getting everyone to agree on it is. An Internet packet consists of a payload--a chunk of the Web page, video, or telephone call that's being transmitted--and a header. The header contains the Internet addresses of the sender and receiver, along with other information that tells routers and the receiving computer how to handle the packet. When the architects of the Internet designed the Internet protocol (IP), they gave the packet header a bunch of extra bits, for use by yet unimagined services. All those extra bits have been parceled out--except one. That's the bit Briscoe wants to use.

Among network engineers, Briscoe's ideas have attracted a lot of attention and a lot of support. But the last bit is a hard sell, and he knows it. "The difficult [part] in doing it is getting it agreed that it should be done," he says. "Because when you want to change IP, because half of the world is now being built on top of IP, it's like arguing to change--I don't know, the rules of cricket or something."

Someday, the Internet might use an approach much like ­Briscoe's to manage congestion. But that day is probably years away. A bandwidth crunch may not be.

Strange Bedfellows
Most agree that the recent spike in Internet traffic is due to video downloads and peer-to-peer file transfers, but nobody's sure how much responsibility each one bears. ISPs know the traffic distributions for their own networks, but they're not disclosing them, and a given ISP's distribution may not reflect that of the Internet as a whole. Video downloads don't hog bandwidth in the way that many peer-to-peer programs do, though. And we do know that peer-to-peer traffic is the type that Comcast clamped down on.

Nonetheless, ISPs and peer-to-peer networks are not natural antagonists. A BitTorrent download may use a lot of bandwidth, but it uses it much more efficiently than a traditional download does; that's why it's so fast. In principle, peer-to-peer protocols could help distribute server load across a network, eliminating bottle­necks. The problem, says Mung Chiang, an associate professor of electrical engineering at Princeton University (and a member of last year's TR35), is the mutual ignorance that ISPs and peer-to-peer networks have maintained in the name of net neutrality.

ISPs don't just rely on the TCP protocol to handle congestion. They actively manage their networks, identifying clogged links and routing traffic around them. At the same time, computers running BitTorrent are constantly searching for new peers that can upload data more rapidly and dropping peers whose transmissions have become sluggish. The problem, according to Chiang, is that peer-to-peer networks respond to congestion much faster than ISPs do. If a bunch of computers running peer-to-peer programs are sending traffic over the same link, they may all see their downloads slow down, so they'll go looking for new peers. By the time the ISP decides to route around the congested link, the peer-to-peer traffic may have moved elsewhere: the ISP has effectively sealed off a wide-open pipe. Even worse, its new routing plan might end up sending traffic over links that have since become congested.

But, Chiang says, "suppose the network operator tells the content distributor something about its network: the route I'm using, the metric I'm using, the way I'm updating my routes. Or the other way around: the content distributor says something about the way it treats servers or selects peers." Network efficiency improves.

An industry consortium called the P4P Working Group--led by Verizon and the New York peer-to-peer company Pando--is exploring just such a possibility. Verizon and Pando have tested a protocol called P4P, created by Haiyong Xie, a PhD student in computer science at Yale University. With P4P, both ISPs and peer-to-peer networks supply abstract information about their network layouts to a central computer, which blends the information to produce a new, hybridized network map. Peer-to-peer networks can use the map to avoid bottlenecks.

In the trial, the P4P system let Verizon customers using the Fios fiber-optic-cable service and the Pando peer-to-peer network download files three to seven times as quickly as they could have otherwise, says Laird Popkin, Pando's chief technology officer. To some extent, that was because the protocol was better at finding peers that were part of Verizon's network, as opposed to some remote network.

Scared Straight?
Every technical attempt to defeat congestion eventually runs up against the principle of net neutrality, however. Even though ­BitTorrent Inc. is a core member of the P4P Working Group, its chief technology officer, Eric Klinker, remains leery of the idea that peer-to-peer networks and ISPs would share information. He worries that a protocol like P4P could allow an ISP to misrepresent its network topology in an attempt to keep traffic local, so it doesn't have to pay access fees to send traffic across other networks.

Even David Clark's proposal that ISPs simply charge their customers according to usage could threaten neutrality. As Mung Chiang points out, an ISP that also sold TV service could tier its charges so that customers who watched a lot of high-definition Internet TV would always end up paying more than they would have for cable subscriptions. So the question that looms over every discussion of congestion and neutrality is, Does the government need to intervene to ensure that everyone plays fair?

For all Klinker's concerns about P4P, BitTorrent seems to have concluded that it doesn't. In February, Klinker had joined representatives of Vuze and several activist groups in a public endorsement of net neutrality legislation proposed by Massachusetts congressman Ed Markey. At the end of March, however, after the Harvard hearings, BitTorrent and Comcast issued a joint press release announcing that they would collaborate to develop methods of peer selection that reduce congestion. Comcast would take a "protocol­-agnostic" approach to congestion management--targeting only heavy bandwidth users, not particular applications--and would increase the amount of bandwidth available to its customers for uploads. BitTorrent, meanwhile, agreed that "these technical issues can be worked out through private business discussions without the need for government intervention."

The FCC, says Clark, "will do something, there's no doubt, if industry does not resolve the current impasse." But, he adds, "it's possible that the middle-of-the-road answer here is that vigilance from the regulators will impose a discipline on the market that will cause the market to find the solution."

That would be welcome news to Chiang. "Often, government legislation is done by people who may not know technology that well," he says, "and therefore they tend to ignore some of the feasibility and realities of the technology."

But Timothy Wu believes that network neutrality regulations could be written at a level of generality that imposes no ­innovation-­killing restrictions on the market, while still giving the FCC latitude to punish transgressors. There's ample precedent, he says, for broad proscriptions that federal agencies interpret on a case-by-case basis. "In employment law, we have a general rule that says you shouldn't discriminate, but in reality we have the fact that you aren't allowed to discriminate unless you have a good reason," he says. "Maybe somebody has to speak Arabic to be a spy. But saying you have to be white to serve food is not the same thing."

Ultimately, however, "the Internet's problems have always been best solved collectively, through its long history," Wu says. "It's held together by people being reasonable ... reasonable and part of a giant community. The fact that it works at all is ridiculous."

Larry Hardesty is a Technology Review senior editor.

Why Web 2.0 Is No Bubble: Corporations Are Willing to Pay for It

Why Web 2.0 Is No Bubble: Corporations Are Willing to Pay for It

Posted by Josh Bernoff on June 9, 2008 11:18 AM from Harvard Business Publishing

Everyone seems to want an answer to the question "When will Web 2.0 startups start making money?" The implication is that unless we can answer the question, the "bubble" of Web 2.0 will burst and all of us who believe in this stuff will be revealed as fantasists.

The fact is, it's incredibly hard to make money as a Web 2.0 startup aimed at consumers.

There are hundreds of these companies, and they all clamor to brief us at Forrester. Each has its own twist on blogs, social networks, ratings, user generated video, or whatever. It's hard to get people to pay attention to a new tool, and the value of the tool depends on lots of participation -- the classic chicken-and-egg problem. Your competitor is always one twist ahead of you. Some of these startups will succeed but the odds are one in a thousand -- you need just the right idea, at the right time, with the right push or set of potential customers, and you need to take off with such velocity that you leave the competition in the dust.

Once a startup like this does take off, there's that other pesky little problem -- monetizing the success. Google transformed the online world by first generating huge traffic, then finding a business model. But Google's success was based on a fantastically clever advertising mechanism that was automated, attracted new advertisers, and served searchers nearly as well as it served advertisers. Facebook hasn't yet unlocked that advertising gold mine, and flubbed up its most prominent try with Beacon. Twitter has no business model yet. Ning has hundreds of thousands of visitors, but still runs Google AdSense ads. And these are the successes. No wonder people are skeptical.

A few of these companies may (and likely will) unlock that genie as Google did and take off. But for any given startup, the odds are astronomical.

The amazing thing is that there are a class of startup companies making good money right now from Web 2.0. They're not flashy and they don't grow like mushrooms. But they've got all the business they can handle and they are growing. I am talking about companies that serve corporate social application needs. This isn't the typical Web 2.0 business paradigm, since serving corporate customers means lots of client service, which is people-intensive -- it doesn't lift off miraculously like a pure technology startup. In fact, in many of these companies, the technology itself is positively mundane. But the startups grow because they deliver value for which they can charge a premium and get customer loyalty. The customers of these companies don't defect when something shiny and new comes along, because they like the service they're getting.

Here are some examples, listed by the objectives they help companies accomplish (for more on these objectives see Chapters 4 through 9 of Groundswell).

Listening. Communispace now has hundreds of private communities that its client companies are using to learn about their customers. It succeeds because it's unlocked the key to running and moderating these communities effectively, and grows despite charging $150K or more per year per community. The other class of listening companies are the brand monitoring companies, and the track record here is great. Research giant Nielsen bought BuzzMetrics. Another research giant, TNS, bought Cymfony. J.D. Power & Associates bought Umbria. MotiveQuest, which is still independent, has typical clients happily paying $30K and up to work with it.

Talking. Talking with the Groundswell is tricky, but there are plenty of agencies ready to help you with it. After building dozens of campaigns and sites, Blast Radius was bought by mega-agency Wunderman. Brains on Fire ignited the spectacular success of Fiskateers. The digital divisions of companies like Edelman also compete in this space, as do the big Web service companies like Avenue A/Razorfish (now part of Microsoft).

Energizing. Ratings and reviews are the easiest way to energize customers to sell others, and the companies that provide them are taking off. Bazaarvoice's clients have generated over 10 billion customer reviews. PowerReviews works with over 200 retailers. And ExpoTV has built a business around consumers creating reviews on video.

Supporting. Support forums work -- they please customers and they reduce costs. Lithium has an impressive client list including Dell, AT&T, Comcast, and Sprint. The community space is crowded, but other companies with growing client lists include Jive Software, Awareness, and Mzinga/Prospero.

Embracing. Startups that enable clients to source ideas from their customers have a bright future, because customer-generated innovation is hot right now. Salesforce.com bought Crispy News and turned it into Salesforce Ideas, which powers idea sites for Dell and Starbucks. And Innocentive is growing rapidly, with 50 companies including Procter & Gamble offering prizes of $10,000 or more to innovators that can solve their problems.

While many were distracted by sparkly consumer-facing startups, these companies were building and growing solid businesses. Look how many of them were acquired! This is no bubble, because companies that deliver business value to clients have durable growth potential. Could this be the Web 2.0 business model everyone is looking for?

Wednesday, June 25, 2008

A Record-Breaking Optical Chip

Intel researchers have built a superfast silicon chip for optical networking.

By Kate Greene

The road to a faster Internet, data center, and personal computer is paved with silicon. Or so believe researchers at Intel who have unveiled a test chip--made entirely from silicon--that can encode 200 gigabits of data per second on a beam of light. In contrast, the most advanced chips used in today's fastest optical networks operate at speeds of 100 gigabits per second. And these 100-gigabit chips, which are made from nonsilicon materials, have limitations that Intel's chip doesn't: they can't scale to faster speeds as inexpensively as can those made from silicon.

While silicon is the material of choice in the electronics industry, it has been overlooked in the photonics industry because its optical properties are inferior to those of other semiconductors. Silicon doesn't produce, detect, and manipulate photons as well as materials such as indium phosphide and gallium arsenide. But within the past few years, optical engineers have been giving silicon a second look and cleverly engineering around some of its natural limitations.

The new Intel test chip splits an incoming beam of light into eight channels. Within each channel is a modulator, a device that encodes data onto light. After the beams are encoded with data, they are recombined. In the tests, each modulator ran at a rate of 25 gigabits per second, and each performed nearly identically, says Mario Paniccia, director of the company's silicon-photonics lab. He notes that only one modulator was tested at a time but says that in a future paper his team will publish the results from running multiple channels simultaneously. The multiple channels could produce cross talk, electrical or optical activity that could hinder performance. However, preliminary results, Paniccia says, show that due to the design, cross talk is limited.

In 2004, Intel researchers, led by Paniccia, proved that silicon could be used to build a one-gigabit-per-second modulator; in 2005, the team boosted the speed to 10 gigabits per second. Also in 2005, the researchers built a remarkably good all-silicon laser, and in 2006, they introduced a hybrid laser that combines indium phosphide with silicon, allowing a practical telecom laser to be fabricated on a silicon wafer. Most recently, they have sped up the modulator to 40 gigabits and built a silicon detector.

Light it up: The silver-colored rectangular chip in the middle of the copper-colored holder is Intel’s latest advance in silicon photonics. The chip contains eight modulators that encode data onto light that enters and exits from the side via optical fibers (not pictured). This chip can process 200 gigabits of data per second and is used to test designs that could ultimately process a terabit of data per second.
Credit: Inte

Other companies are now also exploring the capabilities of silicon for photonics. IBM and Sun Microsystems have active research groups, and a startup called Luxtera has already made advances in silicon-based optical interconnects for data centers. At Intel, however, the pieces are coming together to make a single chip that could process a terabit of data in the space of a thumbnail. This chip and its accompanying electronics could replace racks full of expensive hardware that currently occupy rooms at Internet switching stations. And if all goes well, optical devices made of silicon could allow engineers to replace copper wiring in computers with beams of data-encoded light.

"Intel has pioneered a lot of high-speed silicon-photonics devices, and it's certainly one of the premier research groups," says Jack Cunningham, co-principle investigator of Sun Microsystems' proximity interconnect project, which focuses on low-power interchip communication for high-performance computers. Cunningham says that the Intel test chip is another important step in the evolution of silicon photonics. "It's the right direction in the sense that high-bandwidth optical signaling on silicon chips is very important," he says.

Paniccia notes that there is still a lot of work to do before Intel's optical chips find their way to market. Instead of having only 8 modulators, the goal is to have 25 on a chip. In addition, the modulators will run faster--at 40 gigabits per second. And it's still unclear how light will be piped into the modulators in the future. Currently, it enters via an optical fiber on one end of the device, but future versions of the chip may include hybrid lasers fabricated on the chip. Paniccia hopes that in three to five years, Intel's silicon-photonics chips will be ready for market.

Listening on the road

Listening on the road

American Merchant Marine at War, www.usmm.org

Loose lips might sink ships Artist: Essarge Dimensions: 28 x 21.5 inches This poster is published by the House of Seagram as part of its contribution to the national victory effort Published New York : Seagram-Distillers Corp.	because somebody talked! Artist: Wesley, 1944 Dimensions: 28 x 20 inches [Washington, D.C.] : U. S. Government Printing Office : Office of War Information: 1944--O-579038"

Posted by:

Economist.com | LONDON

Categories:

Working habits

BUSINESS travellers are nosy, it seems—and the Brits are worse than the Americans. Regus, a provider of office spaces, asked 1,000 professionals on both sides of the Atlantic about their working habits when travelling. To no great surprise, it found that many have no qualms about eavesdropping, while the absence of an office often forces them to work in undignified surroundings. The figures suggest there's an awful lot of foolish chattering going on, reminding me of those second-world-war posters about "careless talk".

The survey found that:

• 67% of Brits travelling with work have eavesdropped on someone else's business conversation, versus 59% of American professionals
• 35% of travelling British professionals have caught sight of sensitive company documents, along with 34% of Americans
• 13% of British professionals have been able to use the information they have overheard in public versus 19% of American mobile professionals

When they’re not busy overhearing things they shouldn’t, British travellers end up working in some bizarre environments:

• 16% have worked from toilets and public bathrooms
• 51% have worked from bars or pubs... (57% of men opposed to 42% of women)
• 46% have worked from shopping centres
• 12% have worked from a gym

For the record, Gulliver eavesdrops readily enough: if someone is nattering into their phone or to a colleague in a public space, then their conversation is open to all listeners. Especially if it's disrupting what would otherwise be a peaceful train ride.

July/August 2008

Part II: The Business of Social Networks

Can social-networking sites ever make money?

By Bryant Urstadt

Bad Neighbors
Another problem that targeting may not be able to solve is the one posed by what advertisers call "content adjacency."

Unlike a newspaper or television show, social networking is a medium whose content is deeply unpredictable. In the sports pages of a newspaper, an advertiser knows roughly what kind of material its ads will be running next to. But an enormous, highly visible brand may not want to risk seeing its ad wind up on a page such as that run by the actual Facebook group "I've Had Sex with Someone on Facebook," which at press time had 59,353 members. Or consider the MySpace profile (turned up after about two minutes on the site) of 18-year-old "Nikki AKA Death Angel!," which is adorned with the motto "Don't fuckin fuck with ninjette bitch we'll cut ur fuckin head off an give it to ur momma."

This is not content that commands high rates, although certain buyers mind less. "Right now, the low-hanging fruit is entertainment, because they're agnostic about content adjacency," says Goldstein. Indeed, Nikki's badass profile features an ad for the Warner Bros. film Get Smart. But even entertainment companies are steering clear of the user-generated communities offered by Ning and KickApps. "It's not a controllable universe right now, with the porn sites and such," Ruxin says. "It's a blind buy."

Not everyone is so pessimistic. Andrew Braccia, a partner at Accel, one of Facebook's early investors, thinks advertisers will eventually become more accepting of the "breathing, dynamic" nature of social networking and grow to understand that its unpredictability is part of its allure. And Facebook's Palihapitiya, perhaps naively, doesn't seem to think the adjacency problem will arise much on his site; Facebook, he says, has "a tremendous amount of user content moderation, with a very simple mechanism for flagging inappropriate material."

Fancy, this: In spring 2007, artist David Choe painted the walls at Facebook’s Palo Alto offices. Credit: Jamie Kripke

Multimedia Timeline of key events in the rise of social-networking sites. See a comparison of Myspace and Facebook’s traffic and advertising growth. View a graph on U.S. ad spending on social networking sites relative to U.S. online ad spending. • View a graph on worldwide online social-networking advertising spending.

Users' ideas of what's appropriate are hardly the same as advertisers', though. Such arguments may not be enough to sway the enormous, image-conscious brands that drive the majority of the advertising market. And Palihapitiya, deliberately or otherwise, may be missing the point: advertisers dislike rude content not merely because it might reflect badly on their brands, but because people reading such stuff are probably not thinking about buying many things that advertisers are selling.

Still, backers of social networking feel strongly that so many eyeballs must have value. Braccia points out that while more than 6 percent of advertising dollars are spent online, 20 percent of media consumption now happens there. "It's a significant opportunity," he says. "We're so young, so in our infancy here."

"These sites are no different from traditional media properties," says Paul Kedrosky, who writes Infectious Greed, a much-read blog on venture capital and the Internet. "We're holding these sites to an absurd standard. The advertising allocations will follow the consumer, and right now they're badly out of whack."

Roger McNamee remains convinced that Facebook is too alluring, too useful, and too established not to be profitable somehow. The answer is out there, even if he doesn't have it. "Someone," says McNamee, "is going to have to get creative. I take it on faith that it will emerge. After all, I'm an investor. I'm hopelessly biased."

Marc Canter has a few ideas. Canter, who cofounded ­MacroMedia, is now CEO of the company that produces the social-networking tool PeopleAggregator, which aims to allow communities, tools, search engines, and the rest of Web 2.0 to interconnect in one giant open mesh. He imagines ads of all kinds making up only about a third of revenue, with profits coming from a "long tail" of sources--from Craig's List-style marketplaces to on-demand music downloads to branded apparel to ad-free premium services.

Chamath Palihapitiya expects Facebook to generate revenue by selling a variety of such services to users. The site has rolled out a "gift" program, in which friends spend real money to "give" friends virtual items, such as an image of a box of tissues with a get-well note. He also suggests that Facebook may at some point see reve­nue from ads served through applications on its site, a growing and potentially major source of income from which it currently gets nothing.

Perhaps most optimistic of all is venture capitalist Ron ­Conway, the subject of the book The Godfather of Silicon Valley, who has invested in Google, PayPal, and dozens of Web 2.0 companies. "MySpace projected it would do a billion dollars' worth of reve­nue this year. They came up short and did $800 million," he says. "Rupert Murdoch only paid $570 million for the whole thing. It's been called the best acquisition of all time. I think Facebook is a couple of years behind MySpace but on the same trajectory. It's a hugely monetizable business. I think it's a slam dunk."

A GLOOMY FORECAST
Can social-networking sites continue to make significant inroads into the U.S. online advertising market? The outlook is uncertain. A shaky economy and setbacks in ­targeted-advertising initiatives have caused leading online marketing research firm eMarketer to project more modest revenue growth for social-networking sites over the next four years than it had previously predicted.

THE GLOBAL VIEW
Social networking is a global phenomenon, and reaching users outside the United States will become increasingly important as advertising dollars flow to Western Europe, Asia, and beyond.

Things Fall Apart
The ghosts of vanished giants haunt social networking. So many formerly great Internet companies are struggling or dead. Consider CompuServe, AOL, Netscape, Napster--even Yahoo. Lycos, a search engine that was sold to Terra Networks in 2000 for $12.5 billion, was sold to a Korean firm for $95 million four years later.

What CompuServe and many of the others have in common is that they were portals: gateways to the Web. Facebook wants to be something similar: more than just a useful and fun social tool but the first page people open on the Web, and the platform they use for all their other communication on the Internet.

As would-be portals, however, social-networking sites are vulnerable to one of the problems that brought down those earlier Internet businesses. The portals were "walled gardens" where inexperienced Internet users congregated for a time but where they became restless at last--leaving for the wider, wilder Web. Facebook and MySpace understand this and are now struggling to achieve an appropriate balance between openness and control.

They're also struggling with faddishness. Danah Boyd, a doctoral candidate at the University of California, Berkeley, studies social networking as a cultural phenomenon. She describes online hot spots as though they were popular pubs. "It's supercool when all of your friends go there," she says. "Then all sorts of other people come in. Even if the pub doesn't start feeling physically crowded, it starts feeling socially crowded when your ex is at the other end of the bar talking to some creep who brought his fellow gang members. How long until you say, 'Enough--I'm outta here'?"

Home Page
Several attendees at EconSM took the same flight home, and anyone paying attention on that red-eye from Los Angeles to New York got a lesson on social networking's place in modern life.

Just before the plane began its descent, a 28-year-old woman named Erin fainted on the way to the bathroom. She was possibly overtired, or maybe weirded out by the inhumane crush of economy class. Even she didn't really know what happened. By the time we were on the runway, she had regained her senses. Her first question to the flight attendant was, "Did anyone get my phone?"

As soon as the attendant handed her her iPhone, she opened it up and went right to her Facebook account. She wasn't looking for ads and she wouldn't have noticed one, unless it annoyed her by getting in the way. She wanted to reach her friends, and that was all.

Bryant Urstadt has written for Rolling Stone and Harper's.

July/August 2008

Part I: The Business of Social Networks

Can social-networking sites make money?

By Bryant Urstadt

Leah Culver, a cofounder of Pownce Credit: Stan Musilek

Multimedia Timeline of key events in the rise of social-networking sites.

KickApps is an 80-person social-networking startup with its head office in a loftlike space just off Fifth Avenue in New York. In less than two years it has created the underlying structure for more than 20,000 social-networking sites--"mini-Facebooks" with an aggregate of 300 million page views per month. You've probably never heard of it.

KickApps gets a fraction of the press coverage of a giant like Facebook, but its growth has been sufficiently impressive that venture firms like Spark Capital and Prism VentureWorks have backed it with $18 million in startup financing, hoping for the payoff of a monster IPO. Its software allows companies to quickly roll out social networks with many of the features of Facebook or MySpace. Its clients--which include local radio stations and newspapers, national networks like NPR and ABC, and brands like AutoByTel, Harley-Davidson, and Kraft--want to offer fans a place to gather and share their love of a team, a product, or anything else.

KickApps' CEO is Alex Blum, formerly of JumpTV, an online television service specializing in sports. "We have 35 programmers working in this office," says Blum, leading a reporter through a sea of desks and flat-screen monitors, "and we only have two marketing people. We don't really have to sell our product."

Like most of the social-networking sites enjoying huge growth, KickApps is giving its product away, expecting that the communities built around it will generate ad revenues. It's a model that stirs memories of the first Internet bubble: build the user base and hope the money comes--from an IPO, a buyout, or ads. At this point, KickApps does not reveal revenue figures, or even what kind of a cut it is taking from the ads. That, too, brings back memories: staying mum about revenue was always a sign that there wasn't much to talk about.

Many Users, Few Dollars
Social networking is the fastest-growing activity on Web 2.0--the shorthand term for the new user-centered Internet, where everyone publicly modifies everyone else's work, whether it's an encyclopedia entry or a photo album. The growth of social networking is astonishing, and it has spread to sites of all sizes, which are increasingly intertwined as platforms open (see "Who Owns Your Friends?"). Even small players are soaring.

Ning, for example, is similar to KickApps but caters to individuals. Founded in 2004 by Netscape's Marc Andreessen and former Goldman Sachs analyst Gina Bianchini, it has been backed with $104 million in venture capital by a variety of firms, including Legg Mason. "We've got 267,787 sites," boasted Bianchini in May. "And we're adding 1,500 to 2,000 a day." ComScore, a firm that measures Internet usage, reports that the Ning domain, on which all the sites reside, sees three million unique visitors a month.

Meanwhile, Bebo, a social-networking site more popular abroad than in the United States, sees more than 22 million visitors a month. (AOL bought it for $850 million in March.) Club Penguin, a network for kids, sees five million. LinkedIn, a ­business-­networking site, gets nearly five million unique visits.

But that's just the smaller players. Facebook, according to ComScore's latest research, saw 33.9 million unique U.S. visitors in January 2008, nearly double the number from the previous January (but down by about 2 percent from December 2007). MySpace doubled Facebook's numbers again, with nearly 72 million unique visitors in the same month.

Nevertheless, the sites seem largely incapable of generating revenues commensurate with their popularity.

Last year, Microsoft bought a 1.6 percent stake in Facebook for $240 million, giving the company a dubious valuation of $15 billion. But Facebook is likely to lose $150 million this year, according to a January conference call heard by Kara Swisher of All Things Digital, a Wall Street Journal-affiliated site devoted to "news, analysis, and opinion about the digital revolution." That's based on projected earnings--before interest, taxes, depreciation, and amortization--of $50 million and an expected $200 million in capital expenses, including new servers.

Revenues for MySpace parent Fox Interactive Media fell $100 million short of predictions this year, apparently leading to the dismissal of the chief revenue officer. And Google met with disappointment after paying $900 million in 2006 to get a piece of MySpace's traffic, buying the right to deliver ads for three years against keywords entered on the networking site. "I don't think we have the killer best way to advertise and monetize social networks yet," said Google cofounder Sergey Brin in a call with investors after Google announced its fourth-quarter 2007 results.

Ning does not release numbers about ad sales. All Bianchini will say is, "The number of networks we have is our leading indicator." If Ning's experience is anything like MySpace's and Facebook's, its leading indicator just indicates a lot of users.

Lookery, an advertising network that buys ad space on Facebook in bulk, has been reselling that space at 13 cents per thousand times an ad is served, or in ad industry jargon, at a $0.13 cost per mille (CPM). Facebook sets a minimum CPM of $0.15 for its "social ads," which allow advertisers to target ads to Facebook users and groups according to characteristics like location and age. And over the last year, MySpace has lowered its banner-ad rate from a CPM of $3.25 to one of less than $2. By way of comparison, a banner on ­Mashable, a blog covering the world of social networking, has a CPM of $7 to $33, depending on its size. Websites with clearly defined audiences of executives and technologists who purchase corporate products and services, such as TechnologyReview.com, do best of all. Technology Review's site boasts a CPM of $70.

But even low rates haven't been enough to lure advertisers and media buyers to social networking. "A lot of advertisers are very hesitant to get into MySpace," says Anthony Acquisti, who oversees strategy for emerging media at OMD, an advertising agency in New York. "We've even flat-out told interested brands, 'You don't want to be there.'"

Why not? The problems with social-network advertising revolve around three main issues: attention, privacy, and content.

Attention Deficit
In the last week of April, around 400 people who spend their days trying to figure out how to make money in social networking gathered at the Skirball Cultural Center in Los Angeles. The conference went by the not very catchy name of EconSM, short for Economics of Social Media.

The point of the conference was clear enough. As Kara Swisher, one of the panel moderators, joked on her blog: "I'm in search of the elusive profit, which I don't think I'm going to find."

Almost every player in the game was represented: smaller companies that sent their CEOs, like Alex Blum; investment banks that wanted to take them public; and companies like Yahoo, AOL, and Fox Interactive Media, which were in the market for acquisitions. (Facebook sent no one.) "This is a huge conference," Blum said. "All the people we work with are here."

But they didn't seem very engaged. Audience members were jumpy, posting updates to the micro­blogging service Twitter, checking e-mail, reading blogs, dipping into the newspaper, and--occasionally--listening. Specific problems addressed in panel sessions quickly sorted themselves out into a general problem and a general response. People weren't paying attention to the ads (as, indeed, people at the conference weren't much paying attention to the panels). One panelist, Seth Goldstein, put it this way: "Right now, 'social' advertising is anything on a social-networking site that users are pretty good at ignoring."

Goldstein should know, since his company, Social Media, sells advertising linked to the applications developed for Facebook and MySpace--products like Scrabulous and Compare People, which are hugely popular among the sites' users. "The trouble," says Goldstein, "is we're putting ads up in front of users, where they can ignore them. We've got to get them between users."

Goldstein's comment had the air of a slightly worn sound bite, but it did acknowledge a problem that outside observers describe more bluntly. "It's a really bad place to advertise," Jason ­Calacanis, founder of Webblogs and Mahalo.com, says of social-­networking sites. As he wrote in an e-mail, members of social networks "are busy in conversations and don't want marketing messages."

Compare the situation of social networks with that of Google, which manages to make money putting ads in front of users.

With about 140 million unique visitors per month, Google earned $16 billion in 2007, largely from ads that people did pay attention to. (It may bear mentioning that Facebook recently hired Sheryl Sandberg away from Google, whose phenomenally successful ad program she had led.) Google's AdWords auction sells ads on a cost-per-click basis: advertisers pay not for a thousand viewings but for each individual click on a particular keyword. Advertisers choose how much to spend over any period of time, and they can influence the placement of their ads by paying more. Bids vary according to keyword, of course, but they were averaging around 70 cents per click in the first quarter of 2008.

Advertising on Google works because visitors come to Google looking for specific information. If a user who types "scooter" in the site's search field is hoping to buy a scooter, the keyword ads that appear at the right of the search results can be more useful than the results themselves. In social networks, on the other hand, users show up to find friends; ads are, at best, irrele­vant to that goal. The click-through rates on social-­networking sites bear this out. While around 2 percent of Google users actually click on a given ad (and the number is much higher when users are conducting searches for purchasing reasons), fewer than .04 percent of Facebook users do, according to a media buyer's report obtained last year by the Silicon Valley blog Valleywag.

Users in the Crosshairs
When social-media insiders are asked how advertising could capture users' attention, they always answer, "Targeting."

Targeting is at the core of traditional advertising; apparel manufacturers advertise in Vogue, for example, to reach readers interested in fashion. In the case of social-networking sites, targeting means sifting through the data in your profile to get an idea of what you're interested in. Social networks know more about you, your preferences, and your behavior than most businesses, and profiles are generally considered, in the words of former Fox Interactive Media executive Ross Levinsohn, "digital gold." Mining that gold is the best way for a social-networking site to make money--but, given users' attitudes toward privacy, the trickiest.

Startups that help advertisers and marketers better target the users of social-networking sites are fashionable investments for venture capitalists in North America and Europe. Such startups hope to sell advertisers detailed information about individual social networkers. They include the brand-new 33Across (which we profile in our list of 10 notable startups, which begins on page 50) and the more established Finnish company Xtract, which counts Vodafone, T-Mobile, and Blyk among its customers and has begun selling its software to advertising agencies and online marketers and publishers.

For social-networking sites, targeting will necessarily entail getting "between" users, as Seth Goldstein put it. You come to a social network because you are interested in your friends; ergo, the thinking goes, in order to get your attention, advertisers need to let you know what your friends are buying or thinking about buying, or they must somehow get you to send each other ads. It's either a beautiful idea or a creepy one, depending on whether you're an ad executive or the user of a social network.

In November 2007, Facebook tried to get between its users with its Beacon program. Announcing the program in New York, Facebook founder Mark Zuckerberg declared, "The next hundred years will be different for advertising, and it starts today."

Beacon was an advertiser's dream--and, like many things that are good for advertisers, very annoying to ordinary folks. ­Working with commercial websites like Blockbuster and eBay, Beacon tracked Facebook users' purchases and displayed them to their friends.

The problem was that users were enrolled in the program automatically. If a user went to, say, the Blockbuster site and rented a movie, that information was automatically sent to everyone in her Facebook network. (That's what happened to ­Cathryn Elaine ­Harris of Dallas; she is suing Blockbuster for violating the Video Privacy Protection Act.) Online petitions and negative press ensued, and the program was clumsily scaled back. On the company blog, Zuckerberg wrote, "We've made a lot of mistakes building this feature, but we've made even more with how we've handled them. We simply did a bad job with this release, and I apologize for it."

Still, "Beacon is alive and well," says Chamath Palihapitiya, Facebook's vice president of product marketing. "What happened was unfortunate," he says. "We took a step back and tried to figure out how to improve it." Now it's an opt-in system, and users can choose what information to share--or whether to participate at all. About 30 companies are still with the service, he says.

Most of the industry members at EconSM liked Beacon, wished it had worked better, and felt it would work eventually; Goldstein called it a "sign of things to come." But maintaining the user's trust in how data is used is paramount, says Roger McNamee, a venture capitalist who made early bets on companies like Electronic Arts and Intuit. "Facebook is so much more personal than Google," says McNamee, who invested in Facebook and is a confidant of Zuckerberg. "It really matters to people how their information is used."

Not every attempt at targeting has aroused as much protest as Beacon. In 2007, MySpace launched its HyperTargeting system, which scans users' profiles for information about their interests and demographics. It sorts the profiles into 10 rough categories--such as sports and entertainment--that are subdivided into more than 1,000 narrower categories, such as baseball or a specific film. (E-mail and personal messages are currently not scanned at either Facebook or MySpace.) Says Adam Bain, president of the Fox Interactive Media Audience Network, "People are essentially hand-raising every single day on MySpace and other social-media sites. What we want to do is take that and put it into easy-to-buy segments."

Bain says MySpace did extensive research before the launch. "The users said, 'I understand I have to live with ads, and I don't mind them,'" he says. "The concept of relevance really resonated with users." The algorithm is constantly modified by a 150-person team; it is already on its 12th revision. Although the program has not yet led to riches, "it has led to an unprecedented amount of advertisers coming to MySpace," Bain says. "We're getting blue-chip brand names like Adidas, Schwab, and Electronic Arts, Frito-Lay, Kraft, General Mills, and McDonald's."

Are those advertisers as excited as Bain is? "We've bought a little bit," says Marc Ruxin, director of digital strategy and innovation at the advertising firm McCann. "It's been okay." Well, that's better than nothing. Still, it doesn't exactly settle the question of whether targeting, even if it avoids the worst of users' privacy concerns, will ever be able to punch through the attention barrier.

Bryant Urstadt has written for Rolling Stone and Harper's.

Part II will be featured online tomorrow, June 24.

July/August 2008

The Future of The Web

We asked technology innovators, luminaries, and users what the Web might be in five to ten years.

By Kristina Grifantini

Jonathan Abrams
Founder of Socialzr and Friendster; San Francisco, CA

"In five to ten years, we will all have chips in our brains. When you look at someone's face on the street, your Google Brain software will automatically call up every embarrassing photo of them from ancient websites such as Flickr, Facebook, and MySpace; list all mutual friends; and remind you of the person's annotated bio. As a response to the perceived slowness and verbosity of antiquated services like Twitter, people will send everyone they know nanobursts of information about anything they might do or think before they actually do or think it. Every website, blog, and social-networking profile will include an aggregated feed from every other website, blog, and social-networking service, resulting in an exponential and infinite length of repeated content on every possible site, overloading our brain chips and causing frequent nosebleeds and occasional cerebral hemorrhage."

Mena Trott
President and cofounder of Six Apart; San Francisco

"With the popularity of blogging and online video and photo sharing, we already know that people want to publish significant portions of their lives online. In 10 years, I can easily see someone putting 75 percent of their day online. But it won't all be public. The ­majority will be for that person's eyes only; it will be more a record for that individual."

Sir Tim Berners-Lee
Director of the World Wide Web Consortium and inventor of the Web; Cambridge, MA

"I would like to see the Internet reach people in rural areas and help alleviate poverty. I would like to see more people reaching the Web from devices big and small, fixed and mobile. I look forward to more voice technology--in hands-busy scenarios such as driving, and also to increase accessibility (e.g., for people with low vision). The long tail of video on the Web is creating a new market of direct access to independent films and also has the potential to help with literacy issues. I hope for the proliferation of Linked Open Data: the Semantic Web 'done right.' I hope that governments will open their data stores to all citizens. A mashup sphere will feast on a wealth of Semantic Web data and herald the next wave of progress and creativity on the Web."

Leah Culver
Cofounder of Pownce; San Francisco

"Open standards will always be the future of the Web. Developers should be able to rely on their programs' running well on multiple platforms. Simple and open API standards such as Microformats, ­OpenSocial, OAuth, and OEmbed will help developers build the next generation of Web applications that we love."

Jonathan Zittrain
Professor of law and cofounder of the Berkman Center for Internet and Society at Harvard Law School and author of The Future of the Internet--and How to Stop It; Cambridge, MA

"The future of the Web may be its past: an abandonment of open standards and services (like the collective hallucination that is our distributed e-mail system) and a return to the gated communities that offered consistency and security--and also lock-in. To avoid this future, application developers must pressure the makers of cool new platforms like Facebook and Google Apps (or the iPhone, for that matter) to abandon their ability to kill any apps at any time for any reason."

Erik Hersman
Cofounder of Usha­hidi and author of the blog Whiteafrican.com; Orlando, FL, and Nairobi, Kenya

"The future of the Web in Africa is the mobile phone. SMS and voice will be used to augment existing social networks, empower trade, and increase information sharing. While there will be continued development in the traditional Web space as data networks become more robust, the true explosion will only come on a ubiquitous and affordable device."

Bjarne Stroustrup
Professor at Texas A&M University and designer of the C++ programming language; College Station, TX

"The total end of privacy. Governments, politicians, criminals, and friends will trawl through years of accumulated data (ours and what others collected) with unbelievably sophisticated tools. Obscurity and time passed will no longer be covers."

Vint Cerf
Vice president and chief Internet evangelist at Google and co-designer of the TCP/IP protocols and the architecture of the Internet; McLean, VA

"There will be higher-speed Internet access by fiber and wireless media. Seventy percent of all mobiles will be Internet enabled in 10 years or less. Gigabit speeds in wired and wireless modes will be more widely available. Many more appliances (home, work, car, on your person) will be online. IPTV will offer radical new consumer-controlled advertising opportunities. IPv6 will be the dominant mode of access and use of the Internet. Multi­touch and voiced interfaces will be very common. Devices will discover each other when they are local and interact in a P2P fashion."

Marc Benioff
Founder and CEO of Salesforce.com; San Francisco

"The future of the Web will all be about developer empowerment. We have seen the Web disrupt and dis­intermediate content and commerce, and now software development is next. Companies such as Salesforce.com, Google, and Amazon are making it possible to create and run powerful business applications in the cloud, and that will change the economics of the software industry forever."

James Pearce
Vice president of technology at ­dotMobi; Dublin, Ireland

"The mobile Web. In 10 years' time we will look back at those quaint few years when our online experiences required us to sit at a lonely keyboard and screen. You don't have to sit by a hi-fi to listen to music in the 21st century. Why should you have to sit at a PC to use the Web?"

Mohit Hira
Director at ­Indiatimes.com; Gurgaon, India

"Web 2.0 and social networking are the latest fads in India, like the rest of the world. But here there is also a quiet--almost underground--movement to incubate new ideas specifically relevant to the Indian user's needs. From languages to mobile applications, we will see adaptations of existing sites and platforms that will appeal to Indian youth. Cricket, movies, and music are likely to be the three cornerstones on which most of the Web will evolve."

Erik Hersman
Cofounder of Usha­hidi and author of the blog Whiteafrican.com; Orlando, FL, and Nairobi, Kenya

"The future of the Web in Africa is the mobile phone. SMS and voice will be used to augment existing social networks, empower trade, and increase information sharing. While there will be continued development in the traditional Web space as data networks become more robust, the true explosion will only come on a ubiquitous and affordable device."

Mohamed Nanabhay
Head of new media at Al Jazeera; Doha, Qatar

"In the Middle East, the Web has allowed a wider spectrum of voices to be heard in a region where the media has traditionally been tightly controlled by governments. I expect this characteristic of the Web--its ability to amplify the voices of those who could not be heard--to become more significant, and the Web's impact upon society to grow, as Internet and mobile penetration increase and the online ad market matures. There will be an explosion of ­activity on the Web over the next decade, driven by the region's youth boom."

Jonathan Abrams
Founder of Socialzr and Friendster; San Francisco, CA

"In five to ten years, we will all have chips in our brains. When you look at someone's face on the street, your Google Brain software will automatically call up every embarrassing photo of them from ancient websites such as Flickr, Facebook, and MySpace; list all mutual friends; and remind you of the person's annotated bio. As a response to the perceived slowness and verbosity of antiquated services like Twitter, people will send everyone they know nanobursts of information about anything they might do or think before they actually do or think it. Every website, blog, and social-networking profile will include an aggregated feed from every other website, blog, and social-networking service, resulting in an exponential and infinite length of repeated content on every possible site, overloading our brain chips and causing frequent nosebleeds and occasional cerebral hemorrhage."

Miles-Per-Gallon Math

Miles-Per-Gallon Math

When a 2-miles-per-gallon improvement is better than improving by 16 miles per gallon.

Friday, June 20, 2008

By Kevin Bullis

Say you've got two cars in your garage. One of them gets 34 miles per gallon; the other gets only 12. You drive both cars 10,000 miles in the course of a year.

Would you save more gas by a) trading in the 34-miles-per-gallon car for one that gets 50 miles per gallon, or by b) trading in the 12-miles-per-gallon car for one that gets 14 miles per gallon?

New experiments suggest that people tend to pick a). After all, a 16-miles-per-gallon improvement seems better than an improvement of just 2 miles per gallon.

The right answer is b).

If you start driving the 50-miles-per-gallon car instead of the 34-miles-per-gallon car, you'll save 94.1 gallons of gas per year.

If you start driving the 14-miles-per-gallon car instead of the 12-miles-per-gallon car, you'll save 119 gallons per year.

The math is simple arithmetic. Divide the total number of miles driven (10,000) by the miles per gallon to get the total gallons used to drive that distance. For 12 miles per gallon, the answer is 833. For 14 miles per gallon, it's 714.

The fact that people guess a) rather than b) suggests that miles per gallon isn't a useful metric for describing a vehicle's gas consumption, say the researchers who did the recent experiments. A much more direct way to measure fuel consumption is an estimate of the amount of gas required to travel a given distance.

Such a number would also make it easier to convey just how much could be saved by moving closer to work or taking public transportation. And it renders the difference between a 12-miles-per-gallon SUV and a 50-miles-per-gallon hybrid more impressive, making it clear just how much fuel gas guzzlers are using. It takes 833 gallons to travel 10,000 miles in the former vehicle; it only takes 200 gallons to go 10,000 miles in the latter.

Tags: gas consumption, miles per gallon, vehicles