Startup Cooliris could show some promise with software that offers 3D-like Web browsing and a new spin on e-commerce shopping carts
For as long as I can remember, I have been highly skeptical of the concept of browser plug-ins as a business. Whenever I'd learn of a browser plug-in startup fetching millions of dollars in venture funding, I'd just shake my head. And while my skepticism hasn't really gone away, I am beginning to view a select few of these players with fresh eyes.
What brought on this change of heart? A chance meeting with a senior executive at two-and-a-half-year-old Menlo Park (Calif.)-based startup Cooliris, which has developed software that can be added on to any popular browser on either Mac or Windows and essentially allows you to browse the web in 3D. I have been using this plug-in for a few weeks now, and have become a reluctant admirer, as it allows me to sift through copious amount of information—images and videos in particular—very quickly.
For as long as I can remember, I have been highly skeptical of the concept of browser plug-ins as a business. Whenever I'd learn of a browser plug-in startup fetching millions of dollars in venture funding, I'd just shake my head. And while my skepticism hasn't really gone away, I am beginning to view a select few of these players with fresh eyes.
What brought on this change of heart? A chance meeting with a senior executive at two-and-a-half-year-old Menlo Park (Calif.)-based startup Cooliris, which has developed software that can be added on to any popular browser on either Mac or Windows and essentially allows you to browse the web in 3D. I have been using this plug-in for a few weeks now, and have become a reluctant admirer, as it allows me to sift through copious amount of information—images and videos in particular—very quickly.
Cooliris (formerly known as PicLens) recently hired Shashi Seth, formerly chief of monetization at YouTube, as its chief revenue officer. Last week, he shared some interesting facts about the company. Among them:
• Since launching the software back in January—and without spending a dime—Cooliris now has 2.4 million monthly active users, and continues to add between 30,000 and 50,000 new users every day.
• An average active user spends at least 30 minutes using Cooliris to sift through information.
• There are 9 billion pieces of content that have been shared by their users, and nearly 270 million pieces have been "interacted" with.
Advertisers Wade In
Outstanding numbers aside, can Cooliris make money? Seth thinks it can. Indeed, the company recently ran a test advertising campaign that resulted in a clickthrough rate of more than 5%, a very high number considering that most online ad campaigns get clickthrough rates of less than 1%.
The early results have attracted a few advertisers, each of whom is willing to wage a few thousand dollars on the plug-in. And Seth was even more enthusiastic about a new kind of shopping cart Cooliris has developed for Amazon (AMZN), which in a test led to a total bill of around $32 per cart. As this could be a way for the company to generate commissions, Cooliris is now planning to launch an extended version of that shopping system that would include several other online retailers, including Apple's (AAPL) iTunes Store and Wal-Mart (WMT).
Admittedly, these are early days for Cooliris. But its test stats were intriguing enough that I was inspired to more closely examine the other browser plug-ins installed on my Firefox browser that I use most often, just to see if there were some with similar utility, usage, and potential as Cooliris.
Others to Note
Apart from Cooliris, my short list includes Digg, AdaptiveBlue's Blue Organizer and FoxMarks. While Digg is hardly a browser-based company, those four browser plug-ins all do the following:
• They offer me something valuable as they try to make money off my surfing habits.
• With the exception of Digg, the other three mask complex technology behind what seem like simple browser add-ons. Take for instance Foxmarks, which is essentially a simple tool that allows you to sync your browser bookmarks across multiple computers. All this information when harnessed and processed can be used to build a "better recommendation service" for Web-based information.
• Most important, they allow me to either save or organize information I gather on the Web on a daily basis. And by doing so, they help me sift through tons of information very easily.
If browser plug-ins have these essential qualities, then maybe there's a standalone business there after all. We'll see.
Senin, 01 Desember 2008
Can Browser Plug-Ins Be a Business?
Music Downloads: Is the Price Right?
Label: Business WeekA federal panel will decide if Apple, Amazon and the like should pay higher royalties to music publishers. But 99¢ songs likely aren't going anywhere
A contentious battle between Apple and part of the music industry is set be decided today (Oct. 2), when a panel of judges appointed by Congress is expected to rule whether Apple (AAPL) and other online music distributors should pay higher royalty fees to music publishers.
The ruling by the Copyright Royalty Board affects not only Apple but also Amazon.com (AMZN), EMusic, RealNetworks' (RNWK) Rhapsody, and Best Buy's (BBY) Napster. Music publishers, who represent creators of song lyrics and sheet music, want an increase in royalty payments while Apple and the other companies are pushing for a reduction.
Their dispute underscores the larger debate over the best methods for distribution and how to divide the proceeds from online music sales. As more consumers access music over the Web and eschew compact disc purchases, a cross section of companies led by Apple has emerged as a conduit between consumers and the music industry, keeping a share of sales.
Publicly, Apple has railed against the prospect of a fee increase. During a 10-month trial that concluded earlier this year, Apple executive Eddy Cue claimed that a rate increase could narrow already thin margins and that the company "would not continue to operate [the iTunes Music Store] if it were no longer possible to do so profitably." The testimony fueled worry that iTunes, whose downloads have helped drive sales of iPods and iPhones, would shut down or drastically change its business model if a royalty increase comes down the pike.
Strange Bedfellows
Many within the industry expect the board to leave the current royalty rate unchanged at 9.1¢ for every 99¢ music download. The panel is due to provide the parties with a written decision on Oct. 2 before making it public on Oct. 6.
Music publishers would like to see the rate raised to 15¢ for every 99¢ sale, arguing that online music distribution costs much less than those of CDs, which also carry a 9.1¢ royalty. "You don't have to ship them, there aren't any breakage problems," says David Israelite, president and CEO of the National Music Publishers' Assn..
In an unusual twist, Apple's opposition to a royalty increase puts it on the same side of the debate as the Recording Industry Association of America, which represents record labels including EMI, Sony BMG, Universal Music Group, and Warner Music Group (WMG)—and is often at odds with Apple. Under existing agreements with online music sellers, the recording industry would be forced to absorb royalty increases, at least until it could strike new accords with Apple and others. Record labels currently receive 70¢ of every 99¢ song download. They, in turn, dole out the portion that accrues to publishers.
The RIAA and the Digital Media Assn. say the current rate is already too high and want it reduced to about 4¢ per download. Record labels are competing against music that's distributed freely, explains DiMA Executive Director Jon Potter. "It's a difficult thing to do," he says.
The 99¢ Price Is a Hit
If royalties are increased, Apple is unlikely to change its tune on what it charges per download. CEO Steve Jobs has adamantly clung to the 99¢-a-song price tag. And even if Apple eventually coughs up a few pennies a song, the company's bottom line won't take a big hit, says Trip Chowdhry, an analyst at Global Equities Research. The iTunes Music Store accounts for less than 5% of Apple's sales and just a sliver of earnings.
Analysts also don't expect much change in Apple's pricing or business model either. JupiterResearch surveys show that the 99¢ price strikes a chord with consumers. Higher prices and different approaches, such as subscriptions, apparently do not find favor with the mass market. "Going to subscriptions is not a simple solution," says Jupiter analyst David Card.
Ultimately, the music industry could suffer if Apple were somehow forced to raise its prices, some analysts say. "If the price is too high, everyone is going to go the other way, which is free," says Daniel Ernst, an analyst at Soleil-Hudson Square Research, which has a buy rating on Apple.
Whatever decision the board announces, it's highly unlikely to go uncontested. Parties to the dispute can petition the board to revise its decision within 15 days. If a rehearing is refused, combatants can appeal to the U.S. Court of Appeals for the District of Columbia Circuit. Congress is another means of recourse. Just this week, House and Senate lawmakers passed legislation asking the music industry and Webcasters to reconsider royalty rates that the board imposed on Internet radio stations in 2007.
How Digital Technology Has Changed the Brain
Label: Business WeekThis is the second in an eight-part series (BusinessWeek.com, 11/3/08) of Viewpoints by author Don Tapscott, who draws on the $4 million research project that inspired his new book, Grown Up Digital, to explain how digital technology has affected the children of the baby boomers, a group he calls the Net Generation.
Last spring, I met with the management and academic leadership of Florida State University to talk about the future of higher education. I was there to share my views on pedagogy and how it needed to change now that the interactive, user-generated Web has altered the way an entire generation learns and thinks.
One of the deans turned to Joe O'Shea, the 22-year-old student body president attending the meeting, for his thoughts. O'Shea indicated that my views resonated with him, adding an unexpected kicker: "I don't read books," he said. "I go to Google, and I can absorb relevant information quickly." O'Shea explained that he can use Google (GOOG) Book Search to grab the information he needs. "But sitting down and going through a book from cover to cover doesn't make sense," he said. "It's not a good use of my time, as I can get all the information I need faster through the Web. You need to know how to do it—to be a skilled hunter."
O'Shea, it turns out, has used his hunting abilities to make a real difference. He set up a medical clinic in New Orleans after Hurricane Katrina and co-founded an international student exchange system along the lines of the Peace Corps. His style of Google learning may shock the academics at Florida State, but it hasn't slowed down his academic career. This year, O'Shea is at Oxford, studying philosophy on a prestigious Rhodes Scholarship.
Effects of Digital Immersion
O'Shea is a shining example of a generation that thinks and learns differently from its forebears. The differences stem from their immersion in digital technology. By the time they're in their 20s, the Net Generation, as I call them, will have spent more than 30,000 hours on the Internet and playing video games. This is happening at a time when their brains are particularly sensitive to outside influences, and it has changed their mental reflexes and habits, the way they learn and absorb information.
Many critics think all this exposure makes young people dumb. One criticism, for instance, is that young people are reading far fewer books of literature than they once did. I think the decline in reading novels is a shame, but it does not make them stupid. As O'Shea's example shows, the digital world provides new ways to learn that can potentially make this Net Generation the smartest ever.
Scientists are beginning to document the traces that the Internet leaves on sensitive young brains. People who play a lot of action video games, for instance, process visual information more quickly than people who don't, according to a seminal 2003 article in Nature. (The study was initiated by a pre-med student who stayed up all night playing Counter-Strike.)
Digital immersion affects the Net Generation in other ways, too. They don't necessarily read from left to right, or from beginning to end. They're more sensitive to visual icons than older people are, and they absorb more information when it's presented with visual images than when it's offered in straight text. This may help them be better scanners, a useful skill when you're confronted with masses of online information.
Many experts contend that if young people try to absorb multiple streams of information at the same time, they'll make mistakes, slow down, and think less deeply and creatively. My observation of hundreds of Net Geners leads me to a different conclusion: Net Geners are faster than I am at switching tasks and better at blocking out background noise. They can work effectively with music playing and news coming in from Facebook. They can keep up their social networks while they concentrate on work—they seem to need this to feel comfortable. I think they've learned to live in a world where they're bombarded with information, so that they can block out the TV or other distractions while they focus on the task at hand. This is a powerful advantage in a digital environment that's buzzing with multiple streams of information.
New Form of Literacy
The digital world that Net Geners have been weaned on is profoundly interactive. Kids have grown up to expect a two-way conversation, not a one-way lecture. This interactive reflex has a profound effect on what one academic has called their "habits of mind." Instead of simply absorbing information—from a teacher or even a book—they go out and find it. As O'Shea's story illustrates, the Net Geners use Google when they want to find out something. When they do so, they construct their own story, their own idea, rather than following the line of thought drawn by someone else in a book. This obviously doesn't replace conventional book reading, nor should it. But what we're seeing is a new form of literacy that many experts say is just as intellectually challenging as reading a book.
Now some critics say that because Net Geners don't read books cover to cover, they don't get a chance to follow a fully developed argument. The result, according to these critics, is that they never learn to build a frame of reference that the intelligent reader needs to interpret the world. My own view is different: In the online hunt you can develop your own frame of reference, which is based on far more information than we ever had at their age. I think this makes the Net Generation smarter than they would have been had they just spent the time sitting on a couch watching TV.
Google, far from being an anesthetic that dulls young brains, can activate them and help them achieve spectacular results. Here's just one telling sign: The number of students taking Advanced Placement exams increased by 75% between 1999 and 2005, and their scores on those exams have been improving, too.
So maybe we shouldn't be so shocked when we hear a bright student such as Joe O'Shea say he doesn't read books. Googling—or using other digital probes to obtain information that you evaluate and analyze—can be a powerful way to learn and sharpen your mind. Perhaps Google can make you smart after all.
Don Tapscott, author of Grown Up Digital: How the Net Generation Is Changing Your World, is the founder and chairman of nGenera Insight. Other books he has authored or co-authored include Wikinomics, Paradigm Shift, The Digital Economy, and Growing Up Digital.
Who Killed the VoIP Revolution?
Label: Business Week“VoIP Is Dead“.Skype General Manager for Voice and Video Jonathan Christensen declared at an industry conference a few weeks ago. He spoke figuratively, of course, but he may well have been right. While proponents of Voice over Internet Protocol had long promised a decade of creative destruction, they themselves appear to have become the victims.
The full potential of a technology is not always realized once it converges with market forces. In this case, the gravitational pull of the incumbent local exchange carriers (ILECs) has always proved difficult to resist. Most of the VoIP industry, while loudly proclaiming the "session-initiation protocol" SIP era as the beginning of the end for monopoly communications, secretly courted the incumbents in hopes of profiting from replacing their long-amortized investments in the fixed-line business. By tying their fortunes to the whimsy of the ILECs, many of the upstarts suffered, destroying billions of dollars in shareholder value in the process.
Recently, PulverMedia, which spurred the VoIP crowd and rode its financial crest, shut its doors amid a swirl of controversy. As of this writing, Sonus Networks (SONS), once a highflier trading at 95 a share in 2000, goes for about 2.29. Even Cisco (CSCO) has thrown in the towel, discontinuing its BTS series of softswitches, which provide the routing logic for VoIP networks. These dismal stories perfectly mirror the ride of the VoIP industry in general.
Assault on Monopolies
The outlook was once a lot better. In 1999, with the ratification of the SIP specification by the IETF, advocates who wanted to tear apart the monopolies that dominated telecom started to beat the war drums. Following conventional wisdom that the Internet democratizes and deleverages any market into which it enters, they found it easy to persuade investors to pour billions into VoIP products and companies. Regulators seemed to support that theory, too, sealing the deal with the Federal Communication Commission's so-called "Pulver Order," which defended the VoIP industry from over-reaching regulation and tariffing.
The anticipated period of "creative destruction" came, all right. It began in 2001 with the smiting of the competitive local exchange carriers (CLECs) and long-distance competitors, who had not yet even had time to embrace VoIP, by predatory pricing from the incumbents. It continued with the shift from fixed voice lines to wireless phones, as evidenced by the drop in landlines. More recently, the guns have been turned toward the VoIP equipment vendors that begat the revolution in the first place.
So what happened? What clipped the wings of so many VoIP hopefuls can be boiled down to five things:
•Death by Deliberation: The incumbents and cablecos were identified as early targets for the equipment vendors. Their engineers, however, quibbled about curbside protocols and QOS and fiddled with VoIP in the labs, delaying launches by years—far outside the fund-raising cycle of most of the VoIP startups.
•Competition Attrition: The implosion and autopsy of WorldCom signaled to most of the industry that being a competitor in telecom is not healthy. Those high prices were largely arbitrary, and as soon as the market pressured incumbents to reduce them, they did.
•Evolution vs. Revolution: Companies like Nortel (NT), Siemens (SI), and Ericsson (ERIC) rank among the top VoIP equipment vendors today, not startups. Technologists underestimated the sway and leverage that the traditional vendors held over their customers.
•SIP in a Box: SIP might be an open protocol, but networks were built to be proprietary and have not been bridged together. Most telecom services still communicate with each other via public switching, meaning that the wonderful possibilities that SIP might enable are limited by the capabilities of the plain old telephone system.
•Landline Decline: Even as networks were evolving, the number of landlines around the globe was shrinking. People found more convenient ways to communicate via wireless, SMS, instant messaging, or pervasive e-mail.
VoIP technology has clearly been successful in making inroads into traditional telecom networks, but in doing so, the revolution that SIP in particular, and VoIP in general, enables has been largely cast aside, and the entire industry has coalesced in a race to the bottom. With this revolution went the volume of equipment and software sales that could have revitalized the supplier business and stimulated more innovation.
Of course, while the telecom industry was eating itself alive, a plucky little company from Luxembourg called Skype delivered on VoIP's promise by almost completely ignoring the Public Switched Telephone Network, not to mention the pundits and experts that cling desperately to SIP's potential. The point of Christensen's superpoke at what's left of the telecom business is that Skype has been successful because it threw away the playbook, ignoring the obsessions of so-called telecom experts and focusing instead on solving the practical needs of everyday users.
Tens of millions of people use Skype's network today for text messaging, file-sharing, videoconferencing—and, yes, voice calling. All these services are made decidedly more convenient because of presence—you can see who's there before you contact people and use that information to choose what the most appropriate means of communication should be. And with less than a $40 million investment (prior to eBay's rather more substantial buy-in), Skype's user growth has outpaced the entire rest of the consumer VoIP business combined.
The bottleneck for innovation appears to have been Alexander Graham Bell's (no relation) PSTN—the plain old telephone system. By going after low-hanging fruit and forcing their innovations to be defined within the walls of the PSTN, the vast majority of VoIP companies voluntarily muzzled their own revolution and ultimately cost their investors billions.
Where's the Money in Online Video?
Label: Business WeekThe sharp growth in online video viewing, increasing availability of TV online, and proliferation of high-quality, Web-originated content has made it easy to point the arrow for online video advertising up and to the right. But while video will probably continue to be a bright spot of growth in a dull economy, that's mostly because it's just getting started. The reality is revenues will be close to nothing for a long time, and the growing number of tech entrepreneurs and creative types in the space should probably be worried that industry watchers are now cutting their expectations for growth in online video revenues based on factors other than the shaky U.S. economy.
EMarketer, which has been putting out good research on online video recently, back in August chopped its estimate for 2008 U.S. video ad revenue by more than half, to $505 million from $1.3 billion. That's a pretty significant downgrade more than halfway into the year, though eMarketer warned it was "more a change of methodology than of perspective." But even with the methodology revision, eMarketer is forecasting growth to start declining after 2012.
In a market in which CPMs (cost per thousand impressions) for very similar ad formats can range from $10 to $100 depending on where they're shown, it's worth trying to pin down the factors affecting video advertising pricing. Everybody agrees that prices for video formats such as in-stream ads and overlays will stay at a premium vs. banner ads, but it's not yet clear where rates will settle.
Depressing Factors
Jason Glickman, CEO of video ad network Tremor Media, attributes the major fluctuations in CPM prices for in-stream (mostly pre-roll) ads over the last two years to a combination of a few key factors. Initially, he says, there wasn't much inventory, so CPMs were "north of $20 to $25 on a constant basis." Then inventory started to increase, causing prices to drop to a range of $12-$20 about a year ago. They've managed to stay stable since then as budgets have started to migrate from television. Today, the most pressing factors affecting CPM prices are better accountability measures (a plus) and pullbacks on budgets (not a plus), according to Troy Young, chief marketing officer at competitor VideoEgg.
Video accounts for a tiny part of the $70 billion to $80 billion spent on TV in the U.S. each year, and that's barely starting to change. TV networks like CBS say they have always been able charge higher CPMs for the same shows online vs. TV, but that their digital revenues are not yet significant enough for that difference to be meaningful. Even by 2013, when eMarketer thinks advertisers will spend $5.8 billion on online video ads in the U.S., that will amount to just 7.6% of total TV ad spend and 9.8% of total Internet ad spend.
So going forward, what else might depress video advertising CPMs? First, online audiences in a post-TiVo world don't much like ads, and in the "lean forward" online video-watching environment, they are more likely to reach for the mute button, employ ad-blocking software, or switch to another window. Second, the aforementioned demand for better tracking and accountability drives forward less lucrative performance-based ads. Third, while more intensive kinds of advertising like sponsorship and product integration are becoming increasingly popular, they're even harder to measure.
Fourth, the amount of inventory will only continue to rise, with more and better video being released and syndicated further out across the Web.
"We recently brought down the average CPM again, to between $15 and $35, because of the development of video widgets," said Brett Garfinkel, senior vice-president of the original online content site maniaTV. "We can now reach more eyeballs for the same cost and afford to cut costs to advertisers and remain competitive."
Hesitance About User-Generated Content
A big question for further growth is when advertisers will start to be comfortable with user-generated content. At this point brands are still extremely cautious about being associated with new content producers, perhaps unreasonably so, given that many of the big viral hits come out of nowhere. However, advertisers are becoming comfortable with a new kind of inventory—made-for-the-Web content with high production values—and also with so-called professional content that is made for a lower budget so as to fit in better online.
But should advertisers accept user-generated content, it would open the floodgates for online inventory, which would surely come at a lower price. This is especially relevant for YouTube, which dominates the U.S. audience but only sells ads when it has a revenue-sharing relationship with the video's creator, partly as a safeguard against profiting from unauthorized uploads. That means YouTube only makes money on an estimated 4% of its total videos. The site has recently been trying to milk that segment for more money by offering content owners the option to monetize copies of their shows and movies caught in YouTube's copyright filter, and automatically playing post-roll video ads after partner videos end.
On the whole, video ads are still looking like a good market. But just like everybody else, online content providers would be well-advised to keep an eye on their balance sheets.
Minggu, 30 November 2008
Buka-bukaan habis !
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