Amazon is moving deeper into at-home grocery delivery with AmazonFresh, which is expanding to L.A. as of last week, and which is set to continue to roll out to further markets over the course of this year and beyond. But it learned to take things slow from Webvan (the name and web presence of which it now own), the famous home grocery delivery flare-out of the 90s, and also to limit delivery areas to only high density urban areas, and to pursue as efficient a warehousing strategy as possible, according to a new Reuters report. How did Amazon learn those lessons? Well it helped to have the guys who made the mistakes to begin with in the room, for starters. Amazon has four former Webvan executives on its staff, and acquired Kiva Systems last year, a robotics company that was founded to solve some of Webvan’s original problems and answer questions raised during its brief tenure before IPO and collapse in 2001. While AmazonFresh does potentially offer the chance to disrupt a massive market in a way that could run parallel to how Amazon has already forever changed electronics, home furnishing, clothing, accessory and other retail markets, groceries are a different beast. Margins are low, inventory is infinitely more perishable, and delivering quotidian supplies to an entire market’s worth of grocery shopper is an entirely different type of logistical problem compared with occasionally sending them off a hard drive or t-shirt. Which is why it has taken AmazonFresh over five years to go from Seattle, to L.A. But now the goal is to cover San Francisco Bay later this year, and then to spread to as many as 20 markets throughout 2014. But the expansion needs not only be city-to-city; a key component of sustainable growth is building up regions within cities to maximize route efficiency, so that plotting customer additions at the level of the neighborhood becomes crucial to successful deployment, the Reuters report says. Another key ingredient, according to the report, is Kiva. The robotics company that Amazon bought presents an incredible advantage for warehousing, as a robotic workforce can work much more efficiently and quickly than the conveyor belt system which was in place at Webvan, and which broke down completely when just a single element went wrong thanks to its linear nature. Those factors, combined with Amazon’s massive existing user base, are what the company is betting will help it succeed where Webvan failed. But Amazon also has something that Webvan didn’t necessarily, and that’s massively entrenched brands that have huge existing retail presence, like Walmart, which didn’t really get into groceries in a big way until after Webvan’s collapse, and which is also at least trialling at home delivery. In the U.K., Canada and other locales, other chains are also either trialling or have implemented their own delivery services for groceries, too, which means it’s no longer an uncontested space. Still, there were online stores before Amazon, too, and we’ve seen how that played out. If indeed Amazon’s five year experiment with AmazonFresh has provided the know-how needed to make online groceries work at scale, the next decade could be one in which everything we know about shopping for food dramatically changes.
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We’ve been working on getting more details on a press event that Facebook is having this week. Earlier, we wrote it could launch a news-reading app, but we have since heard more details that point to something else entirely. On June 20, a source says Facebook will unveil that Instagram, its popular photo-sharing app, will begin to let people also take and share short videos. Call it the Vine effect. We are still looking for more information because we understand that Facebook has not wanted the details of June 20 to leak out — so this could be an intentional blind alley. But if the Instagram video report is true, you could say the event invite itself — sent by snail mail, coffee cup stain charmingly in one corner — is a red herring of its own. Earlier reports about Instagram getting video provide some indication, though, that this is not coming out of the blue. Most recently, about three weeks ago Matthew Keys broke a story noting that such a service was getting tested internally. At the time, there wasn’t any information on when it would be coming out, nor whether there would be filters, nor whether this would be in a separate app or part of an Instagram update. The videos would be between five and 10 seconds in length, he noted. Getting video on Instagram is a move that would make sense. Specifically, it looks like a direct response to the rising popularity of video-sharing services, namely Twitter’s Vine. It, and others like Viddy, Cinemagram and Socialcam, sometimes get described as “Instragram for video” apps. The Vine app — which lets users take six seconds of video footage on an iOS or Android handset and then share those clips to Vine’s own network, Twitter or Facebook — has shot up in popularity since going live in January. After Twitter debuted an Android version of Vine in the beginning of June, usage reached a tipping point: shares of Vines surpassed those of Instagram photos on Twitter — usage that has only diverged even more since then: Of course, you could argue that part of the reason is because Twitter no longer shows inline views of Instagram photos — that may have affected how many Instagram photos have been shared to Twitter. When those Instagram/Twitter cards disappeared, we noted that part of the reason for the move — taken by Facebook/Instagram, not Twitter — appeared to be to drive more direct traffic to Instagram itself, a popular social network in its own right, with over 100 million monthly active users, rising sharply since Facebook bought the company last year for $715 million. Putting in a video service could serve to further that strategy even more, before new-but-already-popular services like Vine get more of a foothold. It will mean one less app and social network for users to build up, and, for those who like to take and share videos, another reason to visit Instagram. You can see how something like video could be a very sticky complement to its photo service. There could be another reason for adding video to the service: it’s a very attractive medium for advertisers and marketers. Of course, Instagram is not running any ads yet — in fact, Facebook and Instagram got a lot of heat over changes in their terms of service in December over how it could implement advertising services in the future — so much heat that they rolled back the ToS and apologized. And in Facebook’s last quarterly earnings call, CEO Mark Zuckerberg made a point of noting that while big brands were interested in advertising on Instagram, for now there were no plans to implement this. (That’s not to say that Instagram is not already a substantial marketing platform for brands.) And with 100 million+ users, you could argue that there may not be enough scale there yet to really monetize ads properly. Adding in video is laying the groundwork — and providing one more engine to grow that Instagrammer base. Facebook declined to comment for this story. Photo: ripleyb, Instagram Additional reporting: Josh Constine
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Netflix has been using original programming to power its Internet-TV business, luring viewers to flagship programming such as the Kevin Spacey-vehicle House of Cards. Today another development showing no let up in its strategy to use exclusive content created to air on its platform to put clear blue water between its streaming service and rivals’: it has inked its largest original content deal yet, with DreamWorks Animation. Netflix’s other stated goal — as Ted Sarandos, chief content officer, expressed it to GQ earlier this year — is ”to become HBO faster than HBO can become us”. So it’s not just native online streaming rivals like Amazon Instant Video it’s pushing to elbow past here. There are no figures on the multi-year deal with DreamWorks — not unusual, since Netflix has never confirmed how much it spent on House of Cards. But the streaming service said the agreement is “the largest deal for original first-run content in Netflix history”. What exactly is Netflix buying? First dibs on some DreamWorks Animation’s characters moving into TV, in a branded collection of shows that will comprise more than 300 hours of new programming. There’s no word yet on exactly which of DreamWorks’ characters will be translated from silver screen to adventures destined for the living room but the studio owns the IP to the characters like Shrek and Kung Fu Panda, to name two. The first TV series from the original programming collaboration is expected to begin airing on Netflix next year, and will be shown in all the territories in which it operates (currently some 40 countries). The deal between Netflix and DreamWorks builds on an earlier agreement between the pair, announced back in February, for a Netflix Original Series for kids based on DreamWorks’ film Turbo — due to premier next month. That agreement will bring an episodic animated series, called Turbo F.A.S.T, to Netflix in December, picking up the character from where the feature film sets it down. Also today Netflix said viewers in the U.S. and Latin America will get exclusive access to DreamWorks Animation feature films next year, including The Croods, Turbo and Mr Peabody and Sherman. Kids’ content is of a course a bill pull for the parents who pay the streaming TV bills — and as AllThingsD‘s Peter Kafka points out, Netflix’s deal with Viacom’s Nickelodeon expired last month, leaving a colourful cartoon-shaped hole in its portfolio. Amazon then stepped in and bagged Viacom’s portfolio.
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Apple posted a press release on its site reaffirming its “commitment to customer privacy” and stating that it first heard of the Prism program when questioned by news organizations on June 6. The company also said that it received between 4,000 to 5,000 requests from U.S. federal, state and local law enforcement for customer data between December 1, 2012 and May 31, 2013. “Regardless of the circumstances, our Legal team conducts an evaluation of each request and, only if appropriate, we retrieve and deliver the narrowest possible set of information to the authorities. In fact, from time to time when we see inconsistencies or inaccuracies in a request, we will refuse to fulfill it,” Apple stated in its press release. Between 9,000 to 10,000 accounts or devices were specified in the requests and “included both criminal investigations and national security matters.” The press release also states that Apple does not collect maintain personal details about customers: “there are certain categories of information which we do not provide to law enforcement or any other group because we choose not to retain it.” For example, the company says that iMessage and FaceTime conversations are protected by end-to-end encryption so no one but the sender and receiver can read them, and Apple cannot decrypt the data. Apple’s statement comes after other tech companies implicated in the NSA scandal also disclosed the number of government requests for information they had received in an effort to support their claims that they denied NSA special access to their servers and win back the trust of users. Facebook said on June 15 that for the six months ending December 31, 2012, it had received between 9,000 to 10,000 requests for data from U.S. law enforcement agencies. During that same period Microsoft received between 6,000 and 7,000 requests. Meanwhile, Google has asked the U.S. government to be allowed to publish more information about national security requests it has received.
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Buried in the ongoing PRISM debacle, there was actually some hopeful news out of Washington D.C. for startups this week. The Supreme Court ruled this week that naturally occurring genes can’t be patented, which should be a boon for the host of emerging gene testing and patenting companies that are coming out of the Valley. Silicon Valley VCs like Founders Fund, Khosla Ventures, Felicis Ventures and SV Angel have been making more bets in the space, on the assumption that biology is becoming a space that can be attacked by software. In the case, a company called Myriad Genetics had acquired patents on BRCA1 and BRCA2, two genes that are strongly correlated with breast and ovarian cancer. Because of their patents, the cost of testing for those genes had been pushed higher, sometimes beyond the $3,000 range. That would have made it too expensive for many middle- and low-income women to learn if they were at risk for the cancers. At the same time, other human genes were being scooped up with somewhere north of 20 percent of all human genes being covered by patents, according to the National Society of Genetic Counselors. The leading gene patent holders are unsurprisingly pharmaceutical giants like DuPont and GlaxoSmithKline, that startups would have a financially hard time competing against in courts. The court ruled that human genes can’t be patented, but that synthetic genes can be protected. Now that naturally occurring human genes can’t be patented, expect gene testing companies to benefit broadly with lower-cost products across the board. The costs for full human genome sequencing have already fallen to about $8,000 today from $100 million in 2011. One of the remaining barriers preventing lower-cost testing has been whether consumers would be on the receiving end of high licensing fees to the patent owners of these genes. Patent holders like Myriad could also monopolize the testing market for these genes too, which would have also forced prices higher. One company that I’ve written about, Counsyl, tests prospective parents for any hereditary diseases they might pass onto their children like Tay-Sachs Disease. They’ve gotten such broad adoption in medical clinics across the U.S. that they’re now testing for approximately 2 percent of all births in the country every year. While CEO Ramji Srinivasan didn’t want to comment for this story, you could expect that gene testing companies which don’t currently offer tests linked to patented genes to start considering offering them. 23andMe also didn’t immediately respond to requests for comment. At the same time, the host of emerging synthetic biology startups won’t suffer either since the court ruled that synthetic DNA and cDNA or complementary DNA that is synthesized from messenger RNA, can be patented. “For me, it never made sense that you can patent genes from nature,” said Omri Amirav-Drory, who is the CEO of Genome Compiler, a company that makes software where you can design your own synthetic DNA. “It does say that synthetic DNA is patentable, which means that if one designs a novel sequence…. it will be patentable. That makes a bit more sense as you’ve made this novel sequence yourself.” But maybe, synthetic biology patents will become less relevant anyway — just like software patents — as computational genetic design power increases, according to Austen Heinz, who runs Cambrian Genomics. He thinks synthetic gene patents may eventually become outmoded in the same way that software patents seem obsolete because the slow and often bureaucratic patent application process can’t keep up with the pace of change in the industry. “Think of Windows 95′, 98 or Vista,” he said. “Like in the software business, synthetic biology companies will need to ship an updated improved OS (i.e. genome) every few years to stay competitive.”
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Earlier this month many people were surprised to hear the revelation that a number of major web companies may have granted user data access to the U.S. government through a secret program called PRISM. But it’s fair to say that Andrew Keen was likely not exactly dying of shock as these allegations surfaced — he’s been arguing for years that the social web is not nearly as safe as many people presume, and that we give up important rights and principles when we become lax about our privacy. Keen talks about a lot of these ideas in his TechCrunch TV interview series “Keen On,” but I thought it’d be good to bring him to the other side of the table to hear a bit more about his thoughts on the NSA and PRISM and how people should view privacy in light of the news that’s just surfaced. Talking with Keen is always interesting, so I’d recommend you check it all out above.
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If you own a Samsung Galaxy and are a Jay-Z fan, then you will probably be happy to hear that Samsung is giving away one million copies of “Magna Carta Holy Grail” to owners of its flagship smartphone 72 hours before the album’s official debut on July 4. Jay-Z hinted at the endorsement deal on Sunday when he appeared in a TV commercial during Game 5 of the NBA finals, along with Pharrell Williams and producer Rick Rubin. The tagline was “The Next Big Thing”–a teaser for the early release of “Magna Carta Holy Grail” on Galaxy devices. Samsung bought 1 million copies of the album, which is scheduled for release on July 4, to give to Samsung Galaxy owners. The Wall Street Journal reports that Samsung paid $5 each for the albums–reaping Jay-Z $5 million for “Magna Carta Holy Grail” before it even goes on sale. The deal is notable for a couple of reasons. First, it could help Samsung further polish its image in the U.S. as it continues its heated rivalry with Apple. Though Samsung is the top smartphone seller in the world, with a 28.8% percent share of the global market according to IDC, iPhones continue to lead in the U.S. Samsung’s Galaxy series has performed very well in the U.S., but the Korean company still suffers from lingering perceptions that it’s just a copycat thanks to the drawn-out Apple-Samsung legal battles over patents. An endorsement deal with one of the U.S.’s top rap artists may help Samsung gain more cred with consumers, especially younger ones. The deal may also help Samsung’s Music Hub, a streaming music service available on Galaxy devices, compete with Apple’s iTunes Radio, which will be included with iOS devices and offer preview of tracks before they are available elsewhere. If Samsung is successful in building an attractive ecosystem for its mobile devices, that will help it retain consumers even if the phablet frenzy slows down.
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A few people have taken up the challenge of bringing some kind of Vine support to Windows Phone, but so far all the ersatz Vine apps in the Windows Marketplace do is let people view those six-second clips. According to WPCentral’s Daniel Rubino, developer Rudy Huyn’s 6Sec is different — the third-party Vine app crossed a major milestone with a recent update so Windows Phone 8 users (well, ones that are part of the private beta anyway) can now upload their micro-films in addition to just watching them. 6Sec isn’t expected to shed its beta trappings for at least a few weeks, but it’s big news for folks looking to jump on the next big social bandwagon (as I write this, Vine is No. 4 on Apple’s Top Free app list, and No. 5 on Google’s). The app is a remarkably pretty one considering the fact that it was cobbled together by a single person, but that probably won’t come as a shock to Windows Phone app junkies. After all, Huyn’s Windows Phone development chops are well-established by now: He’s perhaps best known for whipping up an equally handsome Wikipedia app that won Microsoft’s curious Next Big App contest a few months back. Of course, 6Sec may find itself pushed to the sidelines if the folks at Vine Labs actually decide to craft their own Vine app for Windows Phone. It’s become increasingly clear that Microsoft has no problem throwing its financial resources around if it means getting developers onboard. A recent report about iOS 7 from Bloomberg Businessweek points out that Microsoft has been shelling out plenty of dough (apparently over $100,000 in certain cases) to developers in a bid to get them creating for the Windows Phone platform. That’s not exactly a new story, considering that the folks at Redmond have been trying to sweeten that particular deal for years now, but it speaks to the level of importance Microsoft has placed on getting companies to create quality Windows Phone apps. Hell, it seems to be working, too — I still see some of those infamous cr-apps pushing their way into the Windows Marketplace, but Microsoft has managed to land surprisingly good WP-specific versions of Zinio, Hulu Plus, and Pandora over the past few months. It wouldn’t be a shock to hear that Microsoft is attempting to tempt Team Vine into building a WP app, especially considering just how quickly Vine shares on Twitter surpassed Instagram shares. Until then though, talented developers like Huyn are working to fill that gap, and I’m looking forward to taking 6Sec for a final spin once it finally graduates from beta.
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Chicago-based Inventables, a marketplace for technology and materials for developers and designers, has raised $3 million in new funding led by Tim Draper (via Draper Associates) with Dundee Venture Capital, Richard Yoo (founder of Rackspace), Georges Harik, and True Ventures participating. This brings Inventables’ total funding to $5 million. Inventables launched in 2010 as a marketplace for software, hardware, and materials for makers, designers, and manufacturers to create prototypes and low volume production runs. Essentially, Inventables sells the parts, machines and materials that many hardware developers or manufacturers need to build their products. The marketplace itself is similar to any other shopping site, where you can purchase supplies online that are shipped to you within a few days. But Inventables has added a few features which make it friendly for makers. For example, on a product’s page, you’ll see what other designers have made with the material or how they used it to develop a product. You’ll also see questions posted (and answers) about the product. Additionally, Inventables develops and sells its own products including a CNC milling machine, called Shapeoko, which is used by a watch maker to design and manufacture its leather and wood watches. The machine allows customers to create products digitally on the computer and then download them into a digital manufacturing machine where they are actually produced and made. Inventables also has one of the largest selections of acrylic sheets. And as 3D printing has taken off, Inventables sells 3D printers (including Makerbot), and has a selection of filament for these printers in 24 colors. As founder and CEO Zach Kaplan explains, Inventables is helping make it possible for a new generation of individuals and companies to manufacture and sell their own products without needing to outsource production. As we are seeing more hardware startups enter the market, Inventables has become a destination to buy the components needed to build these products. Of course, Kaplan acknowledges that its a competitive market, with Inventables going head to head with AmazonSupply. But he thinks Inventables can differentiate itself via its community of designer, makers and entrepreneurs. Already, there is a passionate community around some of the products and functions supplied by Inventables, and the company has even open sourced the software and hardware behind the milling machine. Inventables will use part of the new investment to expand to a new 25,000 square foot facility in Chicago where product development, engineering, and distribution will be co­located. And Kaplan is hiring a larger engineering team to develop additional proprietary software and hardware.
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Editor’s note: Ross Rubin is principal analyst at Reticle Research and blogs at Techspressive. Follow him on Twitter @rossrubin. Stop me if you’ve heard this one. A guy walks into a watch store and a smartwatch business partnership is formed. OK, it’s not a funny joke; in fact, it’s not a joke at all. Secret Labs’ founder and CTO Chris Walker walked into the House of Horology store on Prince Street owned by neighbor Lawrence Layderman. A discussion about the future of watches led Walker to show Layderman a prototype of a state-of-the-art smartwatch he had already been working on for a year and a half. Walker’s company had previously created the Netduino, an Arduino alternative that allows developers to use Microsoft’s developer tools. But as anyone who has ever seen most of those projects knows, they’re usually not known for their aesthetics. Walker knew he had to partner with a company that understood fashion, but he still wanted to maintain control over the project. The partners launched a Kickstarter campaign for its Agent smartwatch, which blew through its funding goal in the first nine hours. Now, with less than a week before it closes, it has attracted nearly $900,000 from nearly 5,000 backers, many of whom will be picking up the American-made device for about $150 even though the watch is expected to retail for $100 more than that. The Agent is a bit thinner than House of Horology’s beefy color-accented Bedlam line, key to attracting more upscale shoppers who will encounter the device at its store and other retailers. Despite this, it brims with state-of-the-art components. These include a charging coil to support the Qi wireless charging standard. One of its two processors is a new chip from ARM — the Cortex M4 – that won’t be shipping until the summer. “We’ve effectively done for watches what Haswell has done for processors,” Walker says. The processors team with a next-generation Sharp Memory LCD for some of the best battery life in the category. Agent even supports a licensed version of the Monotype font library to display foreign language characters. The team has also thought about how to protect against things not going so well. It can be restored via a button-press combination in the event a firmware update goes awry. In addition, it searched globally for a rechargeable lithium ion watch battery that wouldn’t explode if punctured, a concern for something kept so close to the body. But some things will remain out of reach. For example, the team couldn’t yet find a color display that presented anything richer than pastel colors. And as for using the phone as a headset, Walker says the project looked into integrating a speaker or microphone to activate features, such as Siri, as the Martian watch does. But the team decided against it, with Walker characterizing taking a call through a watch as “the worst speakerphone experience you’ve ever had.” The Agent may be loaded with the latest components. Technology, though, becomes available to many in successive generations and it’s easy to imagine a second-generation watch from one of the Smartwatch Class of 2012 upgrading beyond what the Agent has locked down. That said, not all watches are open platforms and, as many Kickstarter projects go, some only create development kits optionally after reaching a stretch goal or shipping. Not so for the Agent, which was created with third-party developers in mind. Here, too, it is not the first. WIMM Labs worked on whittling down Android before being entering into an exclusive, confidential relationship with an unnamed company. MetaWatch, another Kickstarter alum, served as “a lot of the inspiration for what we did,” according to Walker. The Agent, though, relies on Microsoft .NET, which allows developers to use a wide array of tools to create apps for it, as well as take care of lots of things under the hood. That might not matter much for a watch face, but it could become more of an advantage as capabilities grow. Despite this, don’t expect too much to differentiate Agent apps at launch. The Agent will be hosting the kinds of apps, including weather, golf swing analyzers and sleep and exercise trackers. Walker expresses faith that developers will create the kind of unforeseen titles that came to flood the Apple app store. While the House of Horology support has helped with the design up front, it will be at least as helpful when it comes to distribution, a challenge that confronts many tech products after a successful Kickstarter campaign. As the steward of a young luxury brand, Layderman says that his consumers are now looking for a more well-rounded timepiece. While the first Agent is being designed as a unisex watch, interest from women is driving exploration into even smaller casings. The partners think that they can expand far beyond the current watch market to target retailers in the fashion space, phone accessory and electronic enthusiast markets. Still, despite attracting dalliances from the likes of Sony and Motorola, as well as less ambitious efforts from Casio and Citizen, many of the smartphone-tethered smartwatch market entrants have attracted mostly crowdfunded startups, and the big ecosystem providers have all been rumored to be developing wristwear; Walker provides the classically optimistic take that their entrance will validate the category. But the particular areas on where the Agent watch partnership has focused — Secret Labs’ development and House of Horology’s distribution — seem particularly vulnerable to the entrance of an Apple smartwatch. “Hopefully, we can all move this forward together. They’re welcome to call us,” says Walker. Still, for any new smartwatch, the clock may be ticking.
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My father put together a Heathkit shortwave radio in his youth. The radio is still there in my childhood home. He’s still alive so this isn’t saccharine reminisces of a man who passed. Dad still sits in that room with the radio, the radio still works, his hands pound away at the Internet all day now, the radio forgotten but still as vital as the day he built it. My Dad is a little less vital, but he’s hanging in there. My hands are like his. The knuckles tend to callous for some reason and, although he has his Hungarian father’s miner’s hands, meaty and thick (he earned those hands, I like to think), and mine are weak, you can still see the potential for density in mine. If hadn’t ended up behind a keyboard I’d probably really have his hands. Instead I can play a guitar and put transistors into a breadboard with my own kids and marvel at a world that he and my mother made entire when they were married and had my sister and I and how my sister and I had kids and how we all, in turn, are worlds entire. That’s what Dads are good for, sometimes: for reminding you that you came from some place that was rougher and meaner or far different than your own place and that Dad escaped that rough, mean place to try to make a nicer place with a nice woman he met somewhere. And my Dad passed along all sorts of habits that helped me on the way. He told me about his Heathkit radio, for example, and told me that with the right schematics you can fix anything. He had me hold open a Chilton repair manual as we tore the brakes out of our old Ford Fairmont so I could learn to follow directions. He let us trample his spring onions while he dug up the garden with a roto-tiller and he explained the oil and gas mixtures needed for his old Toro so I could know the pleasure of simple machines. He told me to always use anti-seize compound and, to my chagrin, I still do whenever I have to fix something big. He taught me to plan ahead. He also taught me a love of words and bought hundreds of books at a used book sale at the Columbus Public Library. If I needed to know something – Soviet history, the botany of poison ivy – the book I needed was right there. If it wasn’t he’d take us back to the library. He taught me to read with care and caution and to write with wit and intelligence. He worked every day of his life pushing papers at a military depot so we could have a big house with enough room for all the books he amassed. He taught me to look back and to create. Your Dad, if you had one who was close and didn’t die early, was hopefully like mine. I like to think a lot of them are, even given the horrors some Dads have inflicted on their kids, horrors I’ve witnessed firsthand and heard about from friends. I like to think that when that woman your Dad met that delivered that first child, your Dad teared up a little and swore on whatever strange star put them in this place that the baby would have a good home full of schematics, books, and food. I hope your Dad taught you how to be smart and self-sufficient and gave you a model for your behavior. I hope your Dad is the kind of Dad you wanted to make laugh and when you made him laugh it was the greatest thing in the world. And I hope your Dad is still alive and pounding away at a computer somewhere or is puttering in the garage or is pulling up early tomatoes. And if wasn’t that great, so what? You have a chance to make up for it. About fifty percent of us get a chance to be a Dad and we can take it or we can leave it and nothing and everything changes when we make the decision to go through with what our fathers and our fathers before them went through, namely the decision that these hands are too important to let wither and should instead be used to lift babies out of cribs and tune shortwave radios for a young daughter fascinated by geography and to pull weeds and make things that were small and unimportant grow and become important. That’s our choice. Sometimes it makes more sense not to revisit the bad, mean places and sometimes it makes sense not to have kids, but sometimes it does. So here’s to Dads who, literally, built our world up around us. They built the Internet for us. They built our laptops and phones and their ideas helped form our world. They drew the schematics and with the right schematics we can fix anything. We may not always see eye to eye, but Dads are always ready to point into the distance and say “That’s where you’re going. I can give you help, but it’s your job to get there in one piece. There is a cloud over there, but every step you take will reveal just a bit more of the road ahead. You will build the world just as I did. Good luck.” Here’s to Dads. Thanks.
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When it comes to video distribution on the Internet, there are few solutions better than YouTube. The company is the No. 1 place to search for and find the video content that viewers want to watch, and for creators it provides a size and scale of audience it can offer videos to. That said, a growing number of YouTube creators and multichannel networks are beginning to grumble about the revenue share that the site has with its partners and their inability to monetize their huge audience of viewers on the site. And, increasingly, they’re looking for off-YouTube solutions to better distribute and monetize their videos. The problem is that distributing video yourself is costly, whereas distribution on YouTube is free. That’s one reason that so many creators got started on the platform in the first place. With the shrinking cost of cameras and editing equipment, as well as the ability to upload and distribute their content for free, YouTube had an incredibly low barrier of entry for its creators. As a result, the platform attracted a huge number of talented creators who have, in turn, attracted millions of fans. For those who weren’t part of the traditional TV or movie ecosystem, that created an unprecedented opportunity to get paid to do what they love — make videos and talk to fans. For many first-time YouTube partners, the additional income was likely a nice bonus for a hobby that they never expected to get paid for. But things have changed over the years. Those same creators now have big audiences and have become their own big brands. The problem is that they aren’t getting compensated very well for all that. At least not as well as they’d like. As the YouTube ecosystem has grown up, it’s gotten a lot more professional. With more professional video equipment, more professional editing equipment, more highly skilled creators. Huge networks have popped up — like Machinima, Maker, and Fullscreen — to help creators improve their content and reach. Some provide tools to boost views and reach new audiences, some help with production, some help improve monetization. But it’s become increasingly clear that these businesses will have to find other ways of making money — YouTube can’t be their only solution. That’s in part because YouTube takes nearly half of all ad revenues from partners. Not just that, but the typical YouTube ads have relatively low CPMs — all of which means that revenues aren’t as high as they would like and margins end up being constrained. The problem is that there’s no other solution for easily reaching the size and scale of audience that YouTube offers. For all the talk of some networks creating a YouTube alternative, it will be difficult for them to move the audience over. Not just that, but they won’t benefit from all the network effects and video search advantages that they get from being on YouTube. With that in mind, a growing number of YouTube partners are looking for other monetization options. Some are building apps for mobile phones, tablets, and connected TV devices. The idea is that they’ll be able to better these apps through ads, when compared to the revenue share that comes from YouTube’s website and mobile applications. They can also own the user experience and have a more engaged connection to their biggest fans. That is, they’re not looking for a replacement for YouTube, but a way to augment their YouTube audience and monetization through other channels. Partners like VEVO, for instance, have been putting a lot of effort behind owned and operated apps for various devices. And more will likely follow. It might be pricey to build out their own apps, but at the end of the day, these networks will benefit from additional distribution outlets. It’s not to become independent of YouTube, but to become less dependent on it. Photo Credit: Rego – d4u.hu via Compfight cc
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Apple is building a big, visually stunning store in the Stanford shopping center. A few hundred yards from the construction site sits a small, modest Apple location. Last spring, Microsoft opened a flagship spot right next to the small Apple store with a free Maroon 5 concert. Whether for pure dollars and cents or for appearances (maybe both), Apple has been very aggressive in Palo Alto in the past couple of years. The company had a very nice store on University Avenue in downtown Palo Alto; in October 2012, they moved down the street to an even bigger, more prominent location. Now, this new store in the Stanford shopping center is supposed to become one of the company’s flagship stores. We’re told that the company tests its retail products at the Stanford Shopping Center and University Avenue locations; when the company began offering self checkout, the engineers who worked on the project were in those stores testing the new systems. This new flagship location offers enormous space for testing new retail products, and makes the nearby Microsoft store an afterthought at best. Ifo Apple Store reports that the ”store design was completed in 2011 by Apple’s long-time architectural firm Bohlin Cywinski Jackson. It was approved by Steve Jobs about six months before Tim Cook assumed the position of CEO in August of that year.” The design for the store features a visually floating roof and gives passerby’s wide angles to see the storefront; a large stone wall will reportedly separate the front of the store from the back (Image via Palo Alto Online). The Palo Alto Online reports that construction is happening seven days a week, usually beginning at 7 a.m. on the 12,000 square feet store. The Palo Alto Online also reported that while initial estimates had the store opening in November 2012, delays may be due to “the sensitive glass design of the building.” Employees at the University Avenue Apple store told TechCrunch that they don’t know when the Stanford shopping center store will open; employees said that some of them were only given two weeks notice in October before they moved down the street to the new University Ave. location. I checked out the construction myself, and the store is impressive. While it looks months away from an opening, it’s a massive space and the glass facade will be a striking architectural accomplishment that makes the store stand out even with impressive neighbors. Less than two minutes after I started taking pictures of the construction, a security guard told me to stop, as taking pictures of any buildings or logos is ”against their policy.” Never change, Palo Alto. Check out more photos of the construction below: While most of the construction is hidden behind a large fence, you can see the massive glass panels and early work on the roof in these photos. Here you can see the scope of the complex, with the glass section in front. Images via Mary Orlin.
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Yesterday, a CNET story that alleged that the NSA disclosed during a secret Capital Hill briefing that its analysts can listen to domestic phone calls “simply based on an analyst deciding that,” got a lot of play in the tech and political blogosphere. Today, however, the Office of the Director of National Intelligence (ODNI) released a statement that denounces this story as “incorrect.” The CNET story was based on a comment by Rep. Jerrold Nadler who, according to the reporter, was told by the NSA that ” the contents of a phone call could be accessed ‘simply based on an analyst deciding that.’” If true, the idea that an analyst’s hunch was sufficient to listen to domestic phone conversations would have been quite a bombshell. According to ODNI, “the statement that a single analyst can eavesdrop on domestic communications without proper legal authorization is incorrect and was not briefed to Congress.” ODNI states that members of Congress were only briefed about the implementations of Section 702 of the Foreign Intelligence Surveillance Act (FISA), which ” targets foreigners located overseas for a valid foreign intelligence purpose.” As ODNI stated before, this regulation can’t be used to target Americans. As many pundits have noted, however, the scope of these programs makes it likely that domestic calls and other communications will get caught up in the dragnet, too. The government also just needs a 51% confidence that the target of the surveillance is not American or a legal citizen. Previously, the U.S.’s Director of National Intelligence James R. Clapper, also argued that the recent revelations around the NSA’s PRISM program contained “numerous inaccuracies” and that PRISM couldn’t be used to mine data and ““intentionally target any U.S. citizen, or any other U.S. person.” Since publishing the original story, CNET changed the headline of its post from  ”NSA admits listening to U.S. phone calls without warrants” to “NSA spying flap extends to contents of U.S. phone calls” and attributed Rep. Nadler as the source of the main quote. The main gist of the story has remained the same.
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Editor’s note: Tadhg Kelly is a veteran game designer, writer of leading game design blog What Games Are and creative director of Jawfish Games. You can follow him on Twitter here. Between all the press conferences at E3 and the follow-up interviews, there’s been a lot of gaming news to chew on this week. Announcements of consoles and games all came at a terrific pace, along with a lot of he-said/she-said. There was an amusing gaffe made by one platform chief, essentially saying “let them eat cake” to those who didn’t jive with his next-gen vision. There was a very off-color joke in a press conference. There was a dreadful reaction on Twitter to a question posed by Anita Sarkeesian about a lack of female protagonists in upcoming titles. And a stunt gone slightly wrong when one microconsole maker tried to set up an un-conference in the parking lot outside the main event. For me, however, the signature moment was a cheer that happened during the Sony press conference. Sony, once kings turned to laughing stocks. Sony, the penitent platform holder who spent half a decade mending fences and yet still got very little respect. Now Sony, champion of used games, lending games and region-free games. Sony, hero of indies and diversity. Sony, the console maker who didn’t make too big of a deal around extra features. Sony, a full $100 cheaper than its rival. And the crowd roared. Change Nothing! While the cheer was certainly a delicious moment, its broader context is significant. It wasn’t an Apple-esque cheer for some new invention, device or bold new product line. It was a cheer for the status quo, for a lack of innovation or disruption. Gamers whooped and hollered because Sony said that it was going to try to keep their world exactly as they already know it, discs and all. Gamers are an expectant group on the whole. They are highly tribal in their loyalties, and consistently respond to both visual aplomb and brands. They buy into franchises rather than single titles, which means once their loyalty is earned it usually stays earned for long periods of time. With the right trailers and tone, the publisher that seizes the moment can ride it all the way to 100m unit sales over a decade if it gets it right. Many gamers don’t like some kinds of change. The console war saga is one that they’ve known for a long time, and they are comfortable with. It feels as though the back-and-forth of gaming generations is eternal, and how things should be. It seems evolutionary, right, and disruptions that threaten its core dynamic are viewed very dimly. It’s always been consoles and the PC, that’s where “real games” are. “Real gamers” don’t like iPads. “Real gamers” don’t like Facebook. “Real gamers” consider figures like Sarkeesian as pushing agendas that will ruin games. “Real gamers” consider games as more than a medium: they are a culture. And that would mostly be fine (not the sexism part) if it weren’t for two issues: (1) The escalating cost of making games driven by gamer expectations, and (2) the size of the gamer population. The Same Old Problem There are simply not enough “real gamers” to make the console market function well, and there haven’t been for a long time,  but “real gamers” don’t really get that. They think that “real games” are bigger than movies, and always growing, but the reality is that the market for console games has only grown incrementally over the last decade. All the explosive growth and the most interesting stories have come from “not-real” markets like mobile, social and casual games. For a long time now it’s been smartphones and Wiis that really pushed the medium forward. Core consoles, on the other hand, seem stuck. While the Wii managed to sell to lots of people outside the gamer fold, the core consoles managed about 75 million to 80 million sales each over a seven-year period. Accounting for dual ownership (people who bought both systems) and replacements, the overall core market’s size is probably about 140 million gamers, much the same as it was in the PlayStation 2 era. Of those, maybe half are active enough to buy three to five games per year, and of that half, maybe a third are active enough to buy one or more games per month. That means the real market for console games is maybe 70 million (split across two systems). Remembering what I said about gamers buying into franchises, less active gamers tend to make a lot of repeat purchases. They buy into the super-AAA games over multiple years (Grand Theft Auto, Call of Duty, FIFA, Madden, Mario, Zelda, The Sims, Diablo, Pokemon, The Elder Scrolls, Final Fantasy, The Need for Speed, Halo, etc.) and not touch newer would-be franchises unless more active gamers keep telling them to. This means the market for mere AAA games is smaller, closer to 20 million to 25 million players. And below AAA used to what we’d call mid-tier games, but they’re mostly dead now. Why? Mid-tier games just stopped making sense. At a $1 million typical cost level of original PlayStation games, publishers could field lots of games and rely on a few hits paying for all the others. This meant that many games were mid-tier, a few became AAA and the idea of a super-AAA category didn’t really exist. However with the sixth generation (PlayStation 2, the original Xbox) development costs multiplied by a factor of four, and with the seventh generation (PlayStation 3, Xbox 360) they did so again. Publishers could no longer afford to play the field and had to be very choosy in what they funded, and yet many of their games didn’t pan out. The market did not grow along with the costs, and so the mid-tier game died. So did many publishers. With the next generation, the same is already starting to happen for AAA games, only the stakes look even higher. Costs will rise once more, but the market is still much the same as it was. We live in an age when a console game can sell 3.4 million copies and still fail to make a financial impact for its publisher. That’s a team of 700-1,000 developers slaving away on a 15 hour experience that people pay $50 to own. And still, at best, it’s breaking even. As costs continue to rise does that mean that the sales target for all big-budget console games become 5 or 6 million copies? Yep. Enjoy The Exuberance Sony may feel reborn, and along with its rebirth comes a sense of rejuvenation in the games industry. It may seem as though the forces threatening “real games” have been pushed back, and that these are happy times. Publishers will commission new games, developers smart enough to have gotten an early start gain enormous buzz from the press and inflated sales, and everybody hopes to build a marketing story. Yet this exuberance is irrational, a temporary respite from the longer problems that the console industry faces. For all the excitement surrounding the eighth generation, not enough has changed about how it operates, and its core market’s unwillingness to be disrupted means that it continues to battle its own stasis. It means that successful publishers are likely to see a big shakeout in the next couple of years. Companies like Ubisoft, Take Two and even mighty Electronic Arts are going to feel extreme pressure to succeed at every instance of going to market. Soon the only viable market for console games will only be super-AAA, and they know it. E3 may have proved a very exciting week, but the quiet news about iPhones getting game controllers is probably more significant. While the “real gamer” can comfort himself in feeling that games have not been ruined by outside forces, and that because games are bigger than movies that means everything will be fine, the reality is that change is coming to games whether he likes it or not. The only question that remains for the companies involved is which side of that change they want to be on.
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This coming Friday night, I’ll be at the API Days conference in San Francisco to talk for a few minutes about my perspectives of the API economy. I am not a developer — just an observer — so my views are not deeply technical. That just means I have to ask more questions and talk to more people about APIs and what they represent. But then I have to simmer it down, collect my thoughts, and then ask some more questions. Here are two themes I am picking up on from all these conversations. Speed: APIs are making things faster. They connect apps. Software is eating the world. APIs connect the software so it can eat the world faster. Distribution is a driver of speed. The more distributed the API network, the better it can scale and the faster it can work to connect apps and create a mesh that is increasingly more effective than content-delivery networks. An API distributed from a central point can slow things down considerably if the load increases on the server. API management companies are pushing APIs to the edge in order to manage the billions of calls that they get daily from service providers that connect the apps into websites, mobile devices, cars — you name it. Data-intensive APIs are doing something else. They are slowing the network. To alleviate the issue, service providers are looking at the I/O, trying to find ways to make the data connect faster to the APIs that, in turn, connect the apps so someone can post a picture or get a text message about an update from a blog. It’s this need for speed that cloud services are built upon. Scale out the infrastructure and app developers will use it to get better performance and overall quality improvements. What’s still emerging are the advancements of the networks themselves. Again, that’s where software enters the picture and the further need for APIs. The infrastructure needs to be programmed. How that’s done is the big question. Automation: Once one part of a system gets automated, the rest of it soon follows. APIs are the glue that makes the automation possible. People want to connect their apps. It’s why services like Zapier and IFTTT have gained such popularity. People want to connect apps to get work done and reshape their reality. Chris Dancy uses IFTTT and Zapier to connect apps that feed into Google Calendar, Evernote and Excel. He uses these services to quantify his life. Through automation, Dancy can program himself and the things around him. He can connect his dog into the network and track its movement in the house. In this new reality, everything becomes a node. You, me, the lamp post across the street all can have sensors and APIs to connect with other people and things. If this is the case, then the API economy is more about how this new network makes for different forms of commerce that maximize these connected, automated systems. The questions: What are these new forms of commerce? What are the infrastructure and systems needed for this new reality? These are two themes in particular I look forward to discussing. There’s a third but it’s an open-ended one that may be better off ruminating about in the hallways or over a beer. And that’s how this new idea about data and APIs is better understood by more than 1 percent of the people out there. It’s not just the geeks who should be able to live in the future but everyone else, too.
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“No other University in the world has so profoundly shaped our modern age,” New York City Mayor Michael Bloomberg said today in his commencement speech at Stanford University. Bloomberg’s speech was relevant to both the tech and Stanford communities, and often self serving, as he touched on entrepreneurship, immigration reform, and marriage equality. Bloomberg said Stanford has helped everyone in the country move forward, and likened Leland Stanford’s pioneering spirit to present-day entrepreneurs moving to Silicon Valley and New York City. “Stanford is known for its bold entrepreneurial spirit,” a characteristic shared by Bloomberg, said Stanford President John Hennessy. As Hennessy introduced Bloomberg, the crowd lightheartedly booed Bloomberg’s Harvard MBA. Hennessy praised many of Bloomberg’s accomplishments as mayor, but declined to mention the NYC tech campus, which Stanford withdrew its bid from. “We had hoped that Stanford itself might help lead our tech boom in New York City. That didn’t work out–no hard feelings–but I think in the end, it will,” Bloomberg said. Bloomberg talked up the NYC tech scene and urged grads to work there. “I believe that more and more Stanford graduates will find themselves moving to Silicon Alley, not only because we’re the hottest new tech scene in the country, but also because there’s more to do on a Friday night than go to the Pizza Hut in Sunnyvale,” he said. “And you may even be able to find a date with a girl whose name is not Siri. Stanford graduates thrive in New York City–because both places thrive on innovation and entrepreneurialism.” The Mayor moved on to discussing entrepreneurship, both from a broad perspective and from his personal experiences. “Technological disruption drives innovation. And the more disruption there is, the better markets perform and the harder it is for monopolies to survive,” Bloomberg said. His comments are interesting in the wake of many high profile battles between startups like Airbnb and Uber and New York City regulators. “No one called us a startup or a tech company. They just called me crazy,” Bloomberg said about the founding of Bloomberg LLP. “Work hard, take risks, follow your passion, embrace innovation,” he urged graduates. “The secret of success isn’t really a secret. It’s just that many people look for a shortcut…the American dream has no shortcuts and no endpoint. It is the freedom you have to chart your own journey.” The Mayor then discussed his work with the Partnership for a New American Economy, FWD.us, and the tech community in pushing for immigration reform. “If those in Washington had any sense at all, they would be begging you to stay here in the U.S. But instead, our immigration laws may force some of you to leave in the months and years ahead,” he said “It is the most backward economic policy you could possibly come up with,” he said to his loudest round of applause. “Every STEM student graduating today should have a green card stapled to their diploma.” “I hope you will make your voices heard,” he said, telling the crowd to call their elected representatives about immigration reform. Bloomberg peppered his speech with Stanford references and also spoke about marriage equality and the civil rights movement. You can read Bloomberg’s full prepared remarks here, and you can watch the full commencement ceremony below. Hennessy introduces Bloomberg right before the one hour mark if you want to skip ahead. Pic via Steve Case.
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The Internet has plenty of dark corners, but one of the darkest is surely the growing number of sites that traffic in child pornography. Google, which has no interest in surfacing any of these sites and images, has long worked with numerous non-profit organizations and law enforcement agencies to help protect children online and keep these sites out of its index. The company has, however, recently been criticized by U.K. Prime Minister David Cameron and others for not doing enough to fight child pornography online. Today, Google pledged $5 million to fight child pornography. It will distribute this money to a number of organizations in the U.S., Canada, Europe, Australia and Latin America. Among the organizations that will receive these funds are groups like the U.S. National Center for Missing and Exploited Children (NCMEC) and the U.K.’s Internet Watch Foundation. Google has also set up a $2 million Child Protection Technology Fund to “encourage the development of ever more effective tools.” Since 2008, Google has been tagging the child abuse images it detected in its index and those that were reported to organisations like the NCMEC to ensure that it could also identify any copy of these files. In today’s announcement, Google revealed that it has recently started to add this information to a cross-industry database that it shares with law enforcement agencies and charities. This, Google believes, will allow these organizations to “better collaborate on detecting and removing these images.” Later this week, representatives from Google, Yahoo, Microsoft, Twitter, Facebook and a number of telecom firms will also meet with the U.K. Culture Secretary to discuss this issue. It’s worth noting, that Google is obviously not the only search company that is working to combat child pornography online. Microsoft has a similar imitative and the company also tags images of child abuse it finds using its PhotoDNA technology. Facebook started licensing PhotoDNA from Microsoft in 2011. The company has also been working with a number of law enforcement agencies to develop the Child Exploitation Tracking System.
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Editor’s Note: Semil Shah is a contributor to TechCrunch. You can follow him on Twitter at @semil. In 2013, we have seen a reincarnation of “man vs. machine,” except this time, the machines aren’t algorithms — the machine is government. Within a few months, various levels of government across the United States have made headlines with respect to new technologies, products, and services. Unmanned aerial drones, which have a touchy relationship with citizens worldwide already, present complicated scenarios. The Texas state government, for instance, recently banned drones for most private use; the state of North Carolina is considering a ban on direct sales of Tesla vehicles; Airbnb was deemed illegal in New York state by a judge; ride-sharing startups like Uber, Lyft, and Sidecar face constant threats and hurdles as they expand outside of the Bay Area; and of course, there’s Bitcoin, where Mt. Gox suffered a recent Fed crackdown as the most active exchange for the popular crypto-currency. The ways things are going, 3-D printers will be banned because some fanatic will hack software that lets him print a 3-D gun. The common thread weaving through this trend is the pace of technology is empowering individuals to actively participate in fundamentally new markets and economies. Even just a few years ago, it wasn’t as easy to buy a fully-electric luxury car and not send part of your income to the local gas station; it wasn’t as easy to earn over twice one’s salary by ditching grocery bagging in favor of providing livery services; it wasn’t as easy to convert cash into liquid digital currencies; it wasn’t as easy to rent out your apartment, or your spare bedroom, or your couch to earn a little extra scratch; and it wasn’t easy to physically print out items at home or send items to others via unmanned aircraft. This shift comes at a critical time for America. In a sluggish economy slowly recovering from the largest wound since the Great Depression and adjusting to a fundamental, structural change (aka, those jobs aren’t coming back), the country is in desperate need of innovation. I say “desperate” because even with successful innovation, our economy isn’t on an enviable pace for growth. Mega-forces like widening income inequality, crushing debt burdens, and the politically-toxic mismatch between our immigration policy and inability to properly educate children for the jobs needed today combine to form a potent mix of stagnation. In lay terms, if someone is laid off from their job bagging groceries because of online grocery delivery or automated checkout machines, will government also prohibit them from using their car to give a “Lyft” to others for money, or renting out the spare room in their apartment on Airbnb to offset their fixed mortgage rate, or storing some of their savings in Bitcoin after losing most of their 401k savings in the 2008 economic collapse? It remains to be seen how far governments will go. Laws are made to protect people from harm, but they’re also made by taking into account the interests of special interests who spend billions to lobby the halls of Congress. Innovation like the types cited here directly threaten a range of powerful, incumbent, cash-rich industries who view lobbying costs as a minor line-item expense, the cost of doing business in America. The other side of this coin is that, right now, government regulation that overreaches to the point of suppressing an individual’s ability to earn a living wage is the political equivalent of playing with fire. It’s early, but consumer demand is pointing in a direction where the democratization of access to technologies like electric vehicles, 3-D printers, alternative currencies, and peer-to-peer lending puts more power into peoples’ hands than government can realistically control. Aggregate consumer demand is distrustful of large institutions, is willing to pay for goods crafted specifically for them, is open to turning their assets into wealth-generating vehicles, and so much more. It’s hard to see how government will try to control this. Alas, it will. There is too much to lose. Perhaps this is why many of the startups listed above (and their investors) have begun to form relationships with local and national politicians, have actively participated in panels nationwide with public officials and commissioners, have hired former politicians and policy analysts to help them anticipate these collisions and actively participate in the lawmaking itself to keep the interests of these startups in mind. The interests of startups like these are the new “special interests” — in fact, they’re “our special interests” — and they protect much more than the companies doing the legwork — they can protect the future income, livelihood, and social security of the former grocery bagger, and in a country founded on principles of humility and hard work, it would be a shame — perhaps even evil, given the criminally economic circumstances of the last two decades — to not empower consumers and leave consumers unprotected. I’m optimistic startups will be part of the conversation that stitches these new laws and regulations together, and I fundamentally believe it is startups like these and all of us consumers, individually and collectively, that will spark the next waves of innovation, with government enabling it, not restricting it. Let’s hope so. Photo Credit: Frederic Bisson / Flickr Creative Commons
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The week’s news has been a fear-mongering marathon between civil libertarians who are convinced we’re on the road to becoming North Korea, and security hawks who are building bunkers for the inevitable post-cyberattack hell scape. Unfortunately, because the most important facts about the National Security Agency’s surveillance programs are top secret, the entire debate has consisted of fear-driven hypotheticals. We can’t change that fact. But! We can make NSA disaster scenarios easier to compare by detailing the relative harms of privacy invasion vs. terrorist threats in a handy guide on their probability and scope. In ascending order of paranoia, I compare privacy vs. security trade-offs, and conclude with a section that makes sense of why some people fear surveillance more than terrorists. Paranoia Level: Reads A Newspaper - Defense Tax Bill Vs. Fear Staycations Cost Comparison: $85 Billion Vs. $75 Billion We know for sure that both defense and fear of terrorists is burning a hole in America’s pocketbook. Terrorist-driven aversion to flying and tourism has resulted in an estimated $85 billion in lost revenue, according to Eli Berman, an associate professor of economics at University of California, San Diego. In a bit of delightful parity, the combined cost of the U.S. intelligence apparatus is $75 billion, including $1.7 billion for the NSA’s massive new 1-million-square-foot Utah campus, which houses all the servers it needs to retain America’s vast collection of porn, Justin Bieber tweets and cat videos. Paranoia Level: Has Purell on a keychain - Stealing Company Secrets Vs. Self-Censorship Cost: Innovation Vs. Open Dialogue “Surveillance inclines us to the mainstream and the boring,” wrote Washington University law professor Neil Richards, who argues that the watch-tower effect of omnipresent government spying throttles open dialogue. Personally, I do find myself avoiding the word “terrorist” in emails because I have a vague sense I’ll get flagged by some government agency. On the security side, some are reasonably worried about theft of company secrets. We know that Chinese hackers are fans of corporate espionage; in one instance, stolen data from Coca-Cola preceded their failed $2.4 billion acquisition of the China Huiyuan Juice Group. According to security firm Mandiant, the Chinese top-level hacking unit, was “busy rummaging through their computers in an apparent effort to learn more about Coca-Cola’s negotiation strategy.” It’s just as possible that the Russian and Middle Eastern terror cells being tracked by the NSA are also stealing corporate secrets, which could cause more widespread piracy and throttling of innovation. Paranoia Level: Glenn Beck fan - Whistleblower Blackmail vs. Stopping Small Scale Attack Cost: Hundres of lives and hundreds of millions of dollars vs. Hundres of lives and hundreds of millions of dollars For the most part, the NSA only targets terrorist suspects — the rest of the data collects cobwebs on a faceless server. But civil liberty critics worry that nefarious middle managers at the NSA could blackmail whistleblowers or policymakers that threaten their agenda. Fox News’s Bill O’Reilly worried: “Did you hear about the IRS scandal? Did you hear about the IRS taking personal information and feeding it out to left-wing websites?… You’re telling me that can’t happen here? It absolutely can happen! So, for example, some conservative senator calls Trixie at the Hot Licks Massage Parlor, guess who knows it? And guess who can put it out any time they want?” To get a handle on how bad this kind of blackmail could be, the greatest email scandal ever uncovered outed Army General David Patreaus after the FBI found saucy messages between him and a mistress. Arguably the largest whistleblower was Pentagon Papers leaker Daniel Ellsberg. Both Patreaus and Ellsberg had major impacts on two foreign wars — Petraeus executed the successful Iraqi Surge and Ellsberg accelerated public pressure to pull out from Vietnam. Taken together, it’s reasonable to assume that without their contributions, hundreds of more soldiers might have been killed and hundreds of millions of dollars more would have been wasted. On the other hand, NSA hawks claim that Internet and phone snooping foiled “dozens” of terrorist attacks, including Najibullah Zazi’s failed plot to bomb the New York subway. All told, that’s probably hundreds of lives and hundreds of millions of dollars in infrustructure repair saved. Paranoia Level: Tinfoil — Orwellian Tyranny vs. Nuclear War Costs: A life not worth living vs. actually not living If you hold survivalist training in your end-of-days bunker, chances are this next category feels like home. The libertarian op-eds are rife with insinuations that America is on the fast track to a perpetual 1984-style tyranny — or what they call Tuesday in North Korea. “This isn’t an argument about how tyranny is inevitable. It is an attempt to grab America by the shoulders, give it a good shake, and say: Yes, it could happen here, with enough historical amnesia, carelessness, and bad luck,” warned the very sharp and otherwise level-headed resident libertarian at The Atlantic, Conor Friedersdorf, in a (popular) post titled, “All the Infrastructure a Tyrant Would Need, Courtesy of Bush and Obama.” If you think government monitoring Instagrams of quinoa waffles at Manhattan brunches is a one-way ticket to Orwellian dystopia, then the cost of the NSA’s spying program is the end of self-government as we know it. On the other hand, if you’d like to see the TSA conduct more cavity searches, you probably think a police state is the only way to stop a real-life Jack Bauer plotline from happening. 4th-Amendment fanclub president Dick Cheney predicted a “high probability” of a nuclear or biological attack that kills “hundreds of thousands of Americans” unless programs like the NSA keep constant watch over Americans. But we think Cheney’s being modest: if we did suffer a nuclear attack, we’d have to retaliate against someone, and that could spark an armed conflict between the entire Middle East and their Asian supporters. So as long as we’re wearing a tinfoil hat, let’s just go ahead and admit that we’re talking about all-out thermonuclear war. The Psychology Of Which Scenario You Think Is Plausible Ultimately, skepticism is a visceral reaction: there’s no purely fact-based way of thinking about the future. Without sufficient information, we reasonably fall back on our assumptions about the way the world operates. For instance, we know that free-market enthusiasts are more fearful of government regulation than climate change. While there isn’t any good evidence about why some people fear the NSA more than others, Yale’s Cultural Cognition lab has my favorite political typology for predicting what kinds of programs we support. They divide political worldviews into four categories: Authoritarian (think Dick Cheney and his tradition-loving social conservatives) Individualists (libertarians) Egalitarians (social justice fans and card-carrying members of the ACLU) Communitarians (many have suggested Obama is a Communitarian, an ideology that stresses active citizenship, decentralization, and collective good) If you have individualist or egalitarian tendencies, chances are the NSA freaks you out. This helps explain why the traditional rivals, Glenn Beck (Individualist) and Michael Moore (Equalitarian), have found rare common ground in opposition to government surveillance. If you tend to be more collectivist, either because you have a compulsive need for stability (Authoritarian), or you think everyone has an obligation to contribute to the public good (Communitarian), chances are that you don’t fear invasions of privacy (Disclosure: I have very strong Communitarian tendencies). To be sure, we have no other choice but to go with our political instincts. The debate over the NSA is entirely hypothetical; the public has no evidence on how surveillance has been abused or leveraged to stop terrorists. So what’s the lesson? Be respectful and open-minded. Without evidence, we’re all equally irrational. [Images: Flickr/thematthewknot/Carolyn Tiry/Kelly Teague]
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Toronto-based startup Sciencescape came about because of a problem that was significant enough to lure co-founder Sam Molyneux away from a bourgeoning career as a cancer researcher, and into a new venture that wants to tackle the bigger picture issue of fixing the entire system of academic, medical and scientific research. It’s a system that’s incredibly outdated, the Sciencescape team believes, and one that’s ripe for change. Sciencescape is trying to tackle the massive uptick in scientific research, which has exploded since the advent of the computer, in order to make it once again manageable for researchers, students and academics working on furthering their disciplines and making real breakthroughs. The startup wants to become the “plumbing” for academic and medical research, by making sense of the massive influx of data from new studies being published every day by the huge number of peer-reviewed journals out there. The total volume of papers published each year has reached a staggering 22 billion according to a recent count, Sciencescape says, and the dollar value of the business of academic research is in the $45 billion annual range. There are tools designed to help researchers sift through all that volume already, including Pubnet.org, but these are pretty universally regarded as insufficient by the people who use them. There are still so many chances to miss crucial bits of information, or entire tracks of research that re-cover ground. Academics place an emphasis on breaking new ground, Molyneux says, and students and researchers are constantly running the risk of reinventing the wheel or missing landmark papers because of sheer volume. To get around that, Sciencescape wants to apply intelligent sorting algorithms to incoming new publications, in order to build intelligent feeds that researchers can subscribe to, around subject matter areas, specific researchers, genes, disorders and more. The Sciencescape engine uses natural language processing exclusively to funnel content in real-time, and is starting out with biomedical fields of study. But Molyneux says that they’re going to work quickly to expand to other fields, with specifics like law on the roadmap for upcoming additions. The system would make it easy to not only collect key research, but also visual it via graphs and charts that can show you exactly when key breakthroughs in the field have occurred, and also provides sharing options for broadcasting to other like-minded researchers via standard social network channels. Sciencescape is emerging at a very good time in terms of drawing interest from investors and a community beyond just the academic silo; others with similar aims like ResearchGate are raising big rounds ($35 million) or achieving big exists (Mendeley to Elsevier). Sciencescape has already secured initial funding of $1.1 million, and hopes to move quickly to expand its business.
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With summer coming and surf season in full swing, I thought I’d take a closer look at the Casio EMA100-1AV Edifice watch with tide graph and moon-phase data. Casio is best known for its G-Shock line of beefy (and some would say ugly) plastic sports watches, so this steel-cased model is a departure for the brand. Casio announced the watch in April and it is on sale now for $250. So what’s special about the EMA100? First, it is surprisingly staid and classic for a “water watch.” The face is quite dark and the two LED registers — one at 6 o’clock and one at 2 o’clock — are reflective and nearly invisible in low light. Even the blue LED backlight is better at lighting up the luminous hands than the actual registers. The Edifice line uses polished metals to great effect, giving what would be a normal, albeit rugged, quartz piece a bit of class. The watch has a number of basic features, including stopwatch, timer and alarm. It also has a built-in thermometer that can usually take an acceptable ambient temperature reading (although it will be thrown off if it’s worn on the wrist.) It also has support for 29 time zones and 48 cities, which makes it a nice travel companion. Most important for the water-bourne among us are the tide indicators that show the time to next high tide as well as a high/low tide indicator at 11 o’clock. There is also a moon-phase graph at four o’clock. The built-in calendar is accurate to the year 2099 and the battery lasts three years. I rarely write about watches here unless I think the timepiece is particularly noteworthy or unusual. I think this piece is both. The Edifice line is Casio’s reaction to Seiko’s classier Sportura line of metal and rubber sports watches and so it is aimed at a different, more refined market. The Edifice is made of steel and is water-resistant to 200 meters, making it acceptable wear for both the office and the beach. The heavy rubber band is quite long, so it will fit a bigger wrist, and the 46mm case, while a bit small for my taste, is boldly styled with a unidirectional bezel and heavy-looking “bolts” in place of the 12, 3, 6, and 9 pips. Even the lack of LED visibility is an asset because it makes the watch look far sleeker than it is. Rather than looking like you’re wearing a helicopter cockpit on your wrist, this Casio leaves a bit to the imagination. I’ve seen plenty of multi-sensor watches that can tell you your altitude, geographical position, and blood sugar readings (not really). However, it’s refreshing to see a classically styled sports watch focus specifically on a niche — in this case the surfing crowd – with a watch that is both water-resistant and doesn’t look like a plastic hockey puck. At $250 I’m more than willing to recommend this watch to folks who need to know the tide charts and, more important, want to get a little ocean time in between meetings.
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Editor’s Note: Nir Eyal writes about the intersection of psychology, technology, and business for Dashboard.io and on his blog NirAndFar.com. Follow @dashboard_io and @nireyal. Ethan Stock lived the Silicon Valley dream. He had recently sold his company to eBay and emanated the tanned skin and relaxed composure you’d expect of someone who just cashed a big corporate check. But as we sat across from one another in a Palo Alto coffee shop, I was surprised by what he said next. “Mediocrity is worse than failure, you know?” For seven years before the acquisition, Stock served as the founding CEO of Zvents, an online guide for local events. Though he was successful by anyone’s standards, I could tell he was a guy who, like me, had learned some hard lessons. “Zvents grew incredibly well,” Stock told me. “We were the largest events site of its kind, providing local listing in hundreds of markets and attracting over 14 million monthly unique visitors.” Zvents had done what so many tech companies dream of doing, they cracked the network effect and built a business that increased in value with each new user. The more event organizers posted to the site, the more useful the site became to people looking for things to do. Both parties loved the site and Stock’s company was in the middle, connecting visitors to events they otherwise wouldn’t find. “But I learned the network effect isn’t everything. In fact, it became a liability.” Stock’s words confused me. How could being in such an enviable position of creating a valuable marketplace be a bad thing? “Getting paid was a bitch,” Stock said, and he began to unravel how certain marketplace businesses like Zvents can succeed themselves to death. The Expectation of Completeness Marketplace businesses exist to connect two or more parties, typically the buyers and the sellers. Investors love these businesses because they tend to grow quickly and spawn winner-take-all companies. A long line of successful Silicon Valley startups have found success providing a place for people to connect and transact. Examples of these kinds of companies include industry titans like eBay and LinkedIn but also include some of today’s web darlings like Uber and Airbnb. “Marketplace businesses are great,” Stock told me. “But there is a fatal flaw in some businesses that can hogtie their ability to make money — the expectation of completeness.” Stock explained how Zvents had planned to charge event organizers to list on their site. “Once we reached critical mass and it was clear we were becoming the market leader, we expected event organisers would start paying.” Unfortunately, reality fell short of expectations. Like many marketplace businesses, Zvents was catering to users who expected to find a comprehensive listing of all local happenings. To keep users coming back, Zvents had to ensure it was displaying everyone’s events — an incomplete list would send visitors looking elsewhere. “When we asked event organisers to pay up, they said ‘what for?’,” Stock said. But threatening to remove a listing was not possible, Zvents needed them all to keep site visitors happy. So Stock’s team offered event organizers better ways to reach users like sponsored placements, which displayed the listing more prominently on the site. But the attempt to finally get paid largely fell flat. “We certainly created value for them.” Stock said. “We were sending people to their events. We just couldn’t capture very much of that value. I guess it’s the old saying, ‘why buy the cow, when you can get the milk for free?’” Just Like Google “Google is similar if you think about it.” Stock told me. The comment surprised me given the tremendous success of the search giant juxtaposed with the Zvents story. “They also create much more value than they capture.” He was right. When searching on Google, users also have an expectation of completeness. They come to the site to find all relevant results, every time. If Google decided to only display listings from paying advertisers, we’d all switch to Bing. When considering the collective value of all the clicks on un-sponsored links, the company does give away the vast majority of the value it creates. Indeed, Google appears to be “giving away the milk for free.” The difference is that Google’s market is not limited to local happenings as was the case for Zvents. Google’s market is much, much bigger. In fact, it’s everything. By organizing “the world’s information,” Google skims a proportionally tiny amount of value from a tremendously huge marketplace. The absolute number of people who buy a sponsored placement is large enough to keep the company humming, even though it only monetizes a tiny proportion of the value created. Implications The Zvents story should give pause to marketplace businesses going after niches. The expectation of completeness, and the resulting inability to monetize, may help explain the challenges faced by companies like Foursquare, RedBeacon, and many industry-specific job listing sites. One way around the problem of completeness is to facilitate the transaction itself. Companies like oDesk, Etsy and Uber, ensure they are in the middle of the money by processing the flow of cash. It’s much easier to justify taking a cut when you hold the gold, particularly when doing so adds convenience and security to the transaction. Without the ability to collect a share of each transaction, marketplaces serving users who expect completeness face a difficult challenge. Two options remain: either cater to a very large market, a la Google, or monetize a large share of the value created. The network effect alone just isn’t good enough. TL:DR Network effects are great but they don’t ensure a viable business model. Though they may prove successful from a growth and engagement perspective, certain marketplaces can be very difficult to monetize. Marketplaces where either the buyer or seller expects to choose from an exhaustive listing – so-called “complete” marketplaces – typically give-up far more value than they are able to capture. Unless they facilitate the transaction itself, these businesses often find themselves in a bind. Complete marketplaces must either cater to a very large market, à la Google, or position themselves to monetize a large share of the value they create. Photo Credit: shutterstock
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So, this is weird. Earlier today, if you visited Square’s hiring page on Jobvite, there were two unusual job listings, one for “Chirply — Potential Acquisition” and another for “SeatMe — Potential Acquisition.” If those were accurate statements, well, that’s a pretty strange way to announce a pair of pending deals. But before you start sending out those congratulatory tweets and emails, I should note that a source with knowledge of the matter told me that Square is not pursuing an acquisition of those companies at this time. (A company spokesperson declined to comment.) So how did their names end up as “potential acquisitions” on a Jobvite page? Well, probably the same way they would have shown up if there really were talks — someone, somewhere in the company, screwed up. Regardless of the reason, that screwup has been corrected — after I reached out to Square, the listings disappeared. (You can see them in the screenshot below.) As for what those startups do, Chirply is a crowdsourced card design site (at least, that’s what it did when I wrote about it two years ago — the current website is one of those cryptic beta pages.) And SeatMe is a reservation startup trying to take on OpenTable. (I emailed both companies for comment and will update if I hear back.) It doesn’t seem totally out there to believe Square might be vaguely interested in these companies, particularly as talent acquisitions. But that’s a long way from having serious talks. Thanks to Amin Issa for the tip.
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Editor’s note: Jonah Berger is a marketing professor at the Wharton School and author of the New York Times bestseller Contagious: Why Things Catch On. Follow him on Twitter @j1berger. Why do some companies, products and services get more word of mouth than others? It’s not luck. There’s a science behind it. Social media gurus always preach that no one talks about boring products or boring ideas. So you would think that more interesting products and brands get talked about more. Surprisingly, novel things get brought up more than mundane ones. Startups live and die by word of mouth. Whether it’s a new website, a revolutionary recruiting service, or B2B play, consumer awareness is always low at the beginning. No one realizes you exist, so you have to get the word out. But most new ventures don’t have a big advertising budget. They have to grow organically: Get existing customers or fans bringing in new ones — one at a time. Why, then, do some companies, products and ideas get talked about more readily than others? People often think getting word of mouth is like capturing lightning in a bottle. You have to get lucky. The market has to be just right. Or you need the right combination of three or four indescribable qualities that combine in some inexplicable way to create magic. That’s a great theory. Except it’s completely wrong. People often think getting word of mouth is like capturing lightning in a bottle. You have to get lucky. There’s a science behind word of mouth. It’s not random and it’s not luck why people talk about some things rather than others. Just like behavioral economists have studied why people make certain choices, or statisticians have pulled out insights about human behavior from “Big Data,” researchers have been hard at work analyzing the human behavior behind our decisions to talk and share. In one recent investigation, for example, my colleague and I looked at word-of-mouth data on almost 10,000 products and brands from Coca-Cola and Walmart to small startups. Everything from technology companies to services, from B2B to consumer package goods. In another project, we analyzed the virality of almost 7,000 pieces of online content. Everything from politics and international news to funny pieces, sports, and style. But the focus of these studies wasn’t just documenting which products get talked about more, or what types of online content go viral. Rather, it was about understanding the motivations behind those outcomes: the underlying human behavior that drives some things to get talked about more than others and some things to go viral; how different emotions (e.g. sadness versus anger) shape what people share; how communicating online versus offline impacts whether people talk about what is top-of-mind; the psychology of talk; the science of social transmission. Take Triggers. Disney is more interesting than Cheerios. It’s a really engaging emotional experience. But the problem is that people aren’t triggered to think about it very often. Sure, people talk a lot about the brand right after they go to one of the theme parks, but unless they’re reminded to think about that experience in the weeks and months that follow, they don’t keep bringing it up. Cheerios is less interesting, but people eat breakfast once a day, 365 days a year. Even if they don’t buy Cheerios, they still see it once a week when they wheel their grocery cart through the cereal aisle. This makes Cheerios more top of mind more often, increasing the chances it gets mentioned. A product or idea might be really interesting, but if people aren’t triggered to think about it, they’ll never bring it up. Top-of-mind means tip-of-tongue. Triggers are only one of the key word of mouth drivers my colleagues and I uncovered in our research. Again and again, I’ve seen the same six principles driving what people talk about and share. These six principles can be arranged in an acronym (STEPPS: Social Currency, Triggers, Emotion, Public, Practical Value, and Stories). Social Currency. Just like the car we drive and the clothes we wear, the things we say affect how people see us. So the more something makes someone look good, the more likely they’ll be to pass it on. Triggers. If something is top-of-mind it will be tip-of-the-tongue. Just like peanut butter reminds us of jelly, the more we’re triggered to think about a product or idea, the more we’ll talk about it Emotion. when we care, we share. Whether positive (excitement or humor) or negative (anger or anxiety), high arousal emotions drive us to share. Public. People tend to imitate others. But as the phrase “monkey see, monkey do” attests, the easier it is to see what someone is doing, the easier it is to imitate. Public observability drives imitation (e.g. iPod’s white headphones). Practical Value. People don’t just want to look good, they also want to help others. So more useful equals more shared. Think articles about 10 ways to raise capital or five key negotiating tips. Stories. No one wants to seem like a walking advertisement, but they will talk about something if it’s part of a broader narrative. So build a “Trojan horse” story, a message that carries your brand along for the ride. These six principles comprise a formula for getting more word of mouth. They’re a recipe for crafting contagious content and for getting more people talking about any product or idea. Will following this formula guarantee a viral hit? No. But it will increase the batting average. No one hits a home run every time, but by understanding the science of hitting, people can raise their average by hitting more singles, doubles and even home runs. The same is true with word of mouth. By understanding the science behind why people talk and share, companies and organizations can get more word of mouth for their products and ideas and help those products and ideas catch on along the way. [Image via Shutterstock]
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