*michael parekh on IT*

ON FOLDERSHARE GOING FREE AFTER MICROSOFT ACQUISITION

BIGGER AND BETTER

One of the best new web services I've used this year is the file synchronization "magic" from Foldershare, a Texas-based start-up.  It was one of my top "Thriller" picks in a recent post (see number 5).

Their service has been one of my single most used new applications on the web this year.  They provide a peer-to-peer folder sharing and synchronization service that works across different types of computers and networks.  As a result, I can have files and folders synchronized across two networks of computers (both Windows and Macs), across two coasts.

The company had a short life as an independent company, having been bought by Microsoft a few days ago.

Many on the web were concerned that the company would drop it's support of Macs and focus only on Windows...that so far has not happened.

Foldershare will presumably become a part of Microsoft Live and Windows Online set of offerings over time.

In the meantime, as they say in the Geico commercials, it looks like I'm going to save a bit of money as a "Pro" Foldershare subscriber.  An email I just received from the company says:

"As part of the acquisition, we are announcing the discontinuation of the FolderShare subscription services. You will be receiving a refund for your subscription at a pro-rated amount.

Changes will go into effect early November; FolderShare subscribers will be refunded the pro-rated subscription fee in the week of Nov 7th. Please allow 60 days for the refund to appear on your credit card statement."

"This means you will now have the following capabilities at no charge -
* Multiple simultaneous uploads/downloads for performance
* Encryption of file transmissions for enhanced security
* Remote access to your files via Web so you have access to your data when you need it
* Synced folders so you can continue using FolderShare services to keep your documents, photos, home videos in sync across your devices"

Kind of like how online photo company Picasa went from paid to free after being acquired by Google. 

It's nice for users when Web 2.0 startups gets "exits" (via GigaOm) from the big three "GYM" or the Big Seven Internet companies ("GYM via Om Malik" ).

At the end of another post on Microsoft, I'd mentioned that Microsoft may now be facing it's own "Perfect Storm" rather than just an Internet Tsunami or Tidal Wave as Bill Gates wrote in the now famous memo in December 1995.

Moves like acquiring Foldershare, as small as it is, are the type of course corrections needed at a time when the mainstream debate is pretty binary on whether software should be on the PC or in the Internet cloud, i.e., software as a standalone product, or an ad/subscription supported service.

Foldershare, with it's peer-to-peer (P2P) architecture points another possible way, leveraging lots of PCs/mobile clients AND the Internet cloud.  It has potentially big implications for a lot of core Microsoft products, especially Office.

All that remains to be seen though.

In the meantime, check out Foldershare if you have more than one computer, especially in different places.  Recommended.

ON GOING FROM THE BIG "GYM" THREE TO THE BIG SEVEN

PICK SOME LETTERS OUT OF THE BAG

OK, so Om Malik wants to abstain from the Big Three Internet companies for a week, a la Seinfeld in the famous "Master of my Domain" episode.  He says:

"...lets admit it, whether we hate them, or we love them, we do love to talk about them. Them being Google, Yahoo and Microsoft aka GYM. What would happen if the blogosphere decided that we would not talk about the Big Three for a whole week? Instead we shifted our focus on the little guys, interesting technologies, and some other important stuff. Can the blogs exist without talking about the GYM?"

To which Dave Winer offers his own game:

"Richard MacManus talks about The Big 3, and there is a trend to think about three companies -- Google, Microsoft and Yahoo -- as the leaders in online.

But I don't think that really works, because well, there are three more that are probably just as powerful as the others, but in different ways. Who are are they? Why don't we make this a game. For 15 points each, which three companies are also leading?"

So of course he's adding three out of four biggies that I think could be added to GYM:

1. AOL:  You could go with either A or T (Time Warner for a little while anyway) as the letter to add to GYM.
2. eBay:  So we get an E, lower case as it is.
3. Amazon:  Another vowel, yeaA!
4. Apple:  regular readers know I've certainly talked about them as a biggie...so another A.

That gives us seven letters...which gives me the idea to propose my own game:  SCRABBLE.
Out of either:

1. GYMAAAE or
2. GYMAATE,

What's the longest word you can make?

I'll start off with a word that probably represents how some brand-spanking new Web 2.0 start-ups might think of our list of SEVEN Web 1.0 biggies:

GAMEY

Any other words that come to mind?  You can use either of the two "bags" of tiles above.

ON USING CELLPHONE DATA FOR TRAFFIC FLOW SERVICES AND CARRIER BOTTLENECKS

LET THE DATA FLOW

Recently, I came upon Flightaware (via Brianstorms), a service that provides  a real-time, dynamic map of the air traffic across the US.  The images were so cool and mesmerizing.  In fact, watching this animated loop of the air traffic flows over a 24 hours period was mesmerizing, especially since there was no underlying map at all...the traffic flow itself defined the contours of the continental US, Alaska and Hawaii.

You can even sort the aircraft in the flows in a number of different ways, including by aircraft type:  Boeing, Airbus, etc.

Cool, I thought, and useful for aviation professionals, but not of great practical use to mainstream consumers.

The New York Times today has a great story about how several technology companies are assembling similar traffic pattern maps from the switched on cell phones of hundreds of thousands of folks on the roads.  As the articles states:

"Several state transportation agencies, including those in Maryland and Virginia, are starting to test technology that allows them to monitor traffic by tracking cellphone signals and mapping them against road grids.

The technology underlines how readily cellphones can become tracking devices for private companies, law enforcement and government agencies - a development that deeply troubles privacy advocates.

These new traffic systems can monitor several hundred thousand cellphones at once. The phones need only be turned on, not necessarily be in use. And advanced software now makes it possible to discern whether a signal is coming from, say, a moving car or a pedestrian.

State officials say that the systems will monitor large clusters of phones, not individual ones, and that the benefits could be substantial. By providing a constantly updated picture of traffic flow across thousands of miles of highways, they maintain, cellphone tracking can help transportation agencies spot congestion and divert drivers with radio alerts or updated electronic road signs."

Now this is a service I would pay for either directly or with my attention.

It's an application as visually cool as Flightaware, with practical benefits for millions of individuals and business.   Besides the real-time traffic planning benefits it offers, it can also be a great boon in a host of ways one can barely imagine.

Can you imagine these traffic flows overlayed on a Google or a Yahoo! map of an area you needed to be at this evening for a dinner meeting, compared to how the traffic looked like there as an average of recent history?

Obviously, the privacy concerns need to be addressed and the system secured for use of monitoring aggregated data only and not individual phones tied to specific identities.

Overall, a much cooler way to use mobile phones than using them to turn Japanese teens into chimpazees (via memeorandum).

One of the flies in the ointment for these traffic services is surprise, surprise, the wireless carriers.  As the article explains:

"...there were critical hurdles. Chief among them, Mr. Tarnoff said, is getting the cellular carriers, which have been distracted with mergers and customer service problems, to collect and share the cellphone data...

Indeed, Cingular, which provides the data for the test in Baltimore, plans to stop making data available for traffic monitoring, according to a person briefed on the company's plans.

The person said Cingular was busy working on other projects and did not have the time and resources to devote to the efforts. Verizon  Wireless,  is considering providing this kind of data, according to a person briefed on that company's plans."

Now this is a new type of bottleneck I hadn't envisioned in my recent post on infrastructure "Bypass Bottlenecks".  In fact it's ironic that the same Cingular with it's "it's my pipes" CEO Edward Whitacre, is dragging its feet here on the wireless side as well.

As loathe I am in advocating government sponsorship, in this area, national cellular data aggregation, especially if mandated and regulated as say, an FCC sponsored initiative, might be something to consider. 

It may potentially yield as many unexpected and innovative services as the government's network of GPS satellites has proven to be for both businesses and consumers worldwide.

Instead of regulating the airwaves and spectrum, for which there is less need for government involvment due to technology innovation, the government might be helpful in coordinating the use of data for commercial, marketplace benefits.

Hopefully these speed bumps are overcome over time either through private market efforts and/or a combination of public and private initiatives.  The NYTimes article again shows anecdotally how rich the potential array of services can be for mainstream markets once the data is allowed to flow.

ON GOOGLE BEING YAHOO! 2.0 AND THE ROAD TO PORTAL 2.0

ON THE SHOULDERS OF COMPETITORS

One of the most popular discussions today on tech.memeorandum is around Yahoo!'s Jeremy Zawodny's (aka Yahoo!'s "Scoble") post titled "Google is Building Yahoo! 2.0".  As Om Malik pithily summarizes it,

"Jeremy Zawodny riffing on a comparative matrix built by Tristan Louis says, Google is Building Yahoo 2.0...

"The point is that there are three competitors in this space - Yahoo, Google, and Microsoft. All they are doing is crazily copy each other and offer the same offerings.

These might be inspired by the other two, some start-up, or just simply a home grown idea. Nevertheless, unlike Yahoo and Microsoft, Google has no legacy to hold on to, and they can be crazy enough to throw everything at the wall, and hope something clicks. GMail is a good example. Froogle is not."

There's no question that Google is desperately trying to build a Yahoo! 2.0, feature by portal feature...this includes as Tristan elegantly summarizes in his post above, all the components of an online service. 

If one were being truly candid, Yahoo! today is AOL 2.0, and AOL in it's 2.0 days was CompuServe 2.0 (for those with long memories, Prodigy was in there somewhere as well, a bastard child of IBM and Sears, trying to be a Minitel 2.0, which was France's Internet 2.0 before there was an Internet).  And Microsoft throughout was a distant, stumbling, faded copy of each of these, starting with AOL 2.0, constantly changing it's target to copy.

In other words, all these services have built upon each other using the latest technological innovations of the day and that will continue into the indefinite future.

But all of them are still just Online Services 2.0, and still Portal 1.0.  A user of any of the online services from the eighties would instantly recognize and find familiar anything on today's Yahoo! or Google, or tomorrow's Microsoft Live, albeit with a little more whiz-bang.

The question is how do they change their game in a true Web 2.0 way.  And that is NOT just about using the current hip technologies like Web 2.0 and tags and the like.

It's potentially about taking some necessary and inevitable risks with their users. 

Let me explain.

In a post a few days ago titled "On Google World Domination and Public/Private Boundaries in a Web 2.0 World" that the portals themselves are seeing the need to open up their services to third parties through APIs, something Scoble and others have been encouraging in recent posts.

But there is a real problem as the big portal companies go into the Web 2.0 world, and it's a possibly intractable one. 

Yahoo!, Google, Microsoft MSN/Live, AOL, (along with Amazon, eBay and Apple for a sub-set of the portal services) need to come to terms with the reality that most of their users WILL ALWAYS NEED TO have accounts at their competitors because they'll NEED TO CONNECT WITH PEOPLE AT ALL of those services.

In a Web 2.0 world, where by definition these services are about connecting with people across these services, these services are still competing on the traditional model of winner takes all. 

The underlying assumption by each player is that if one service can offer the latest and best X.0 version of each of the services in question that they'll have that customer's TOTAL online business for the indefinite feature.

The reality is that as a user, I'm forced to have accounts at ALL of the services because in an oligopolistic world of online services, most of the people I need to connect with could be using any of the services on any of the portals.

Obviously in terms of email this works fine.  I can send and receive email with anyone across any of these systems and other email systems.

But in terms of almost every other service in Tristan's grid, I am forced to have as many accounts at EACH of the services within EACH portal as I need to maximize my
connectivity.

This is most obvious of course in instant messaging where each portal is still an island in itself.  The recent announcement by Microsoft and Yahoo! to make their services interoperable is a step in the right direction but will still not happen until next year, and it still leaves out the other systems that matter (AOL) etc.

And I know there are third-party services like Trillian and others that allow interoperability of IM systems but for the most part they are NOT there yet for mainstream audiences.

In the new Web 2.0 world, the list of isolated islands are providing sometimes show-stopping points of friction:

1. Separate blogging services at each portal, some within protected walls as at Yahoo! and AOL
2. Separate photo services.
3. Separate personalized news services.
4. Separate email accounts.  Here a pet peeve is the inability to access multiple Yahoo! and/or Google Gmail accounts within a single interface.  Even the old AOL made a user go through hoops to log in and out of accounts to access the other email accounts a user was allowed to maintain under a primary account.
5. Separate shopping accounts of course.

And so on.

No one online service is going to "own" a customer, something that used to be possible in some sectors of the off-line world (he's a "Ford" man for life, etc.)

In a Web 2.0 world, there is going to be an increasing amount of fragmentation of services that users will want and the multiple services at which they'll need to have accounts at (free or otherwise), to get them. 

These won't just be from the big portals but also dozens if not hundreds of new startups that'll continue to grow, evolve and consolidate.

Think about it as a microchunking of online services.  That's dozens, and possibly hundreds of user names and passwords, and log-ins and log-outs a day for every single user.

And it gets especially complicated when needing to access all these services not just via a PC, but cell phones, PDAs and any number of wired and wireless gadgets coming down the pike.

That's a LOT of friction where increasingly the scarcest and priciest commodity is user attention.  That attention is a function of a very limited 24-day that each user has, and there's no amount of Internet innovation or network effects that's going to expand that.

It's a tough problem and possibly NOT solvable by any of the portals regardless of how cool their latest whatever is.

It may require a third party to help centralize things...kind of a Trillian for everything.  But then that Uber-Trillian dare never go into the official Portal business, as they would then compete with the folks whose cooperation they need to inter-connect everything.

But that seems to be the beginnings of a Web 2.0 portal, where to "own" the customer, they may need to let the customer go...

...wherever they need to go, while making their use of ALL these services more efficient, less time-consuming and manageable.

It may not be a centralized portal at all, but a peer-to-peer client that connects all the various services I use across all the portals, big and small.

We're potentially talking about a shifting of the center of gravity of an online service:  from a centralized place for online services to a centralized place for each user's online services, including ALL of their services at the old centralized "portals".

Whatever the architecture, the current structure of online services is increasingly creaking at the seams.  Some truly out of the box thinking AND EXECUTION is going to be needed for the real Portal 2.0 of Web 2.0.

ON MICROSOFT BILL GATES/RAY OZZIE MEMOS IGNORING APPLE

WATCH THE BLIND SPOT

Much of the web chatter today is focused on the leaked memos at Microsoft that Bill Gates and Chief Technology Officer Ray Ozzie recently sent to the whole organization regarding the second Internet disruptive "services wave" (full text of Gates and Ozzie memos can be found here and here respectively, via Dave Winer).

Both are interesting reads and summarize fairly comprehensively the array of changes and competitors that Microsoft is facing over the next few years, including of course Google and Yahoo!

What's more interesting for me though is who is missing:  Apple.

Ray Ozzie's memo mentions Apple twice, in the following contexts. 

First in the context of Apple's role in mainstreaming the Graphical User Interface, as seen from an utterly Microsoft perspective:

"In 1990, there was actually a question about whether the graphical user interface had merit.  Apple amongst others valiantly tried to convince the market of the GUI’s broad benefits, but the non-GUI Lotus 1-2-3 and WordPerfect had significant momentum.

But Microsoft recognized the GUI’s trans-formative potential, and committed the organization to pursuit of the dream – through investment in applications, platform and tools – based on a belief that the GUI would dramatically expand and democratize computing."

Second, Apple is mentioned in the context of its phenomenal iPod/iTunes success:

"The same is true of Apple, which has done an enviable job integrating hardware, software and services into a seamless experience with dotMac, iPod and iTunes, but seems less focused on enabling developers to build substantial products and businesses."

That's it.  No more of Apple as a threat to the core Windows OS franchise, and with a 95% plus share of the global OS market, that's probably understandable.  After all Apple is still under 5% of the PC market, and even Firefox broke through the 7% penetration (8.65% now) level in browsers to make it interesting for Microsoft to notice and re-introduce the concept of a standalone browser again.

But Apple could potentially change the game on the PC side.  Back in August, in a post titled "On Google Peaking and Apple Ascending", I presented two hypothetical scenarios that Apple may use with its upcoming switch to Intel chips for Macs:

"...here is what Apple could do when they finally launch new Macs on Intel-based PCs.  It involves two steps, both taken simultaneously.

1.  They could offer a Mac desktop and/or laptop that has TWO hard drives in it.  One has the latest and greatest Mac OS on it.  And the second has Windows XP/Windows Vista on it, which of course, the customer pays for.

This makes it VERY easy for the user then to boot up into EITHER operating system, and have both Windows and Mac applications (and their own related files), on the same machine.  They'd just be on two different drives on the same machine.

The customer then gets a machine directly from Apple that supports BOTH operating systems, provides the best of both worlds in terms of application software, AND...

has special Apple-enhanced, cool software that makes working with both operating systems seamless and easy.  In effect, it encourages the customer to "SWITCH" operating systems AFTER buying and using the PC, rather than forcing them to commit to one or the other operating system today.

Very simple...Apple thus becomes a Windows reseller, which benefits Microsoft in the near-term.

But longer-term, it gets customers to try a Mac while buying a Windows PC...a no-lose proposition.

2.  At the same time, Apple could announce a twist on Robert's idea above.  In two years, iPods with a 100GB or more in storage space will be an affordable reality. 

The company could offer a "Mac iPod", loaded with the latest Intel based Mac operating system, which the customer DOES pay for.

But this iPod has a special USB adapter, AND an on-board processor/CPU, much like I've discussed in my "computer-on-a-stick" posts before here and here.

The user can plug this into any existing Windows PC, whether it has Microsoft Windows XP or the new Windows Vista software, and in effect have a dual-boot computer that turns into a Mac.  Of course, Apple would bundle all its cutting edge application software that it already delivers with every Mac.

It would be the new "Mac Micro-Mini"!  And it could be priced under $700, possibly less."

So my interest was piqued when I saw this headline and article in Architosh, a trade publication focused on the Mac:

"Apple patent shows company possibly preparing for OS War:

...a reliable source had told Architosh prior to the highly anticipated Apple WWDC event earlier that Steve Jobs would make an announcement that would be ultimately about expanding Macintosh market share".

The piece goes on to say,

"The big news yesterday was the discovery of an Apple patent that allows the computer maker to protect the installation of Mac OS X.   In this case, really limit it to just Apple-produced hardware. 

However, the patent describes a process whereby users would be able to load on of three operating systems as their primary OS and then load a secondary operating system as their secondary OS."

The whole piece is an interesting read, but it is still informed speculation.

Regardless of how it's done, the fact remains that Apple is poised to employ a variety of strategies this time around that could result in increased market share on consumer desktops and laptops against the Windows world, for the first time in years.

And it should have potentially made it into one of the Microsoft Memos as a threat to watch.

Bill Gates in the opening paragraph of his memo states:

"Ten years ago this December, I wrote a memo entitled The Internet Tidal Wave which described how the internet was going to forever change the landscape of computing. Our products could either prepare for the magnitude of what was to come or risk being swept away."

On a personal note, as the first mainstream "Internet Analyst" on Wall Street, I had used the "coming Internet Tsunami" as a key metaphor in the first research report on the Internet and Online Services in a report entitled "Byways to Highways" in February of 1995 (the road reference being to the long transition from narrow-band consumer access to broadband over a decade and the then over-popular "Information Super-Highway" meme).

The Tsunami or Tidal Wave metaphor needs to now be supplemented with another metaphor for Microsoft.  And that would potentially be the "Perfect Storm" (a subject for future posts).

Apple is just one of the changing and significant weather conditions fueling this storm.

ON CBS AND NBC GOING A LA CARTE WITH CABLE/SATELLITE COS.

CRACK IN THE DAM

Looks like the "Content Bottlenecks" I touched on yesterday (CBS and NBC for now) are cutting a deal with their "Infrastructure Bottleneck" counterparts. 

The deal is to distribute their primo shows on demand for $0.99 a pop to the Cable and Satellite companies (read Comcast and DirectTV for now).   Here's the Wall Street Journal story  and an excerpt:

"Together, the deals mark a profound change of heart for the broadcast television industry, which from its earliest days has built its schedule around the evening hours known as prime time. Executives have long resisted efforts by cable operators to offer so-called on-demand viewing of popular TV shows, worrying that it could cannibalize their existing businesses by eroding their ability to sell advertising for programs and reap lucrative profit by selling reruns.

But technology is forcing their hand. The Internet has encouraged widespread piracy of media content. Traditional prime-time viewing, in which viewers schedule their evening hours around showcase programs, is under siege from technologies like digital-video recorders, or DVRs, which allow users to save shows and watch them at their convenience -- and without commercials."

Reminds one of the old George Bernard Shaw story:

"George Bernard Shaw once found himself at a dinner party, seated beside an attractive woman. "Madam," he asked, "would you go to bed with me for a thousand pounds?" The woman blushed and rather indignantly shook her head.

"For ten thousand pounds?" he asked. "No. I would not." "Then how about fifty thousand pounds?" he contined.

The colossal sum gave the woman pause, and after further reflection, she coyly replied: "Perhaps." "And if I were to offer you five pounds?" Shaw asked.

"Mr. Shaw!" the woman exclaimed. "What do you take me for!" "We have already established what you are," Shaw calmly replied. "Now we are merely haggling over the price."

We finally have the beginnings of an a la carte pricing scheme, thanks to the initial efforts of Apple for it's video iPod.  The pricing  is far  from perfect, and the actual implementation is complex for mainstream consumers at first blush.  But it's a beginning.

It's a whole new ball game from here.

ON YAHOO/TIVO, GOOGLE/WIRELESS MAPS AND BYPASS STRATEGIES

GO THROUGH THEM OR AROUND THEM?

(UPDATE BELOW)

What do these four, seemingly unrelated tech-related headlines today have in common?:

1. Yahoo! does a deal with Tivo (via NY Times) to offer Yahoo! content and services to Tivo users.
2. Google rolls out software for cell phones to access its mapping and other services.
3. Yahoo! rolls out mobile services in partnership with SBC/Cingular and Nokia.
4. SBC spokesman tries to spin and retract (via Washington Post), his CEO's earlier comments in a BusinessWeek interview regarding web service providers like Yahoo!, Google, Vonage, etc.:  "Why should they be allowed to use my pipes?"

What is the common thread here?  They all represent anecdotal examples of what I call the "Big Bypass Battles" on the infrastructure side.  That's in contrast to the "Big Bypass Battles on the content side (media companies, music companies, etc.), a subject for a future post.

They are about the consumer tech industry, lead by companies like Google, Yahoo!, Microsoft, Apple and AOL trying to provide services and content to hundreds of millions both in the US and abroad increasingly ACROSS not just PCs, but TVs, cellphones, PDAs, and other devices and venues.  I'll call these guys "The Good Guys" for the remainder of this post.

But they're confronted with what I would call the "Big Bypass Bottlenecks".  These of course are the "Bad Guys" in this post.

In each case though, these are oligopolistic AND verticalized industries that are trying to act as gateways to these same customers, and trying to extract tolls along the way.  Their biggest fear is that they're relegated to being just "dumb pipe" and/or "dumb box (as in cable box)" providers.

As a result, there are at least three mega bypass battles to be fought over the near  future with these "bottlenecks".  They are:

1. Traditional Telephony Providers:  Both long-distance and local phone service, involving the big oligopolistic carriers we all know and have to live with:  Verizon, SBC, etc.
2. Traditional Wireless Carriers:  At least in the US, most of them are subsidiaries of the big telcos listed above, including of course Verizon Wireless, Cingular (SBC), T-Mobile (Deutsche Telekom).  Sprint/Nextel are relatively independent and a tad more competitive in the MVNO market (see this post for details).
3. Cable companies:  You know these guys...just look at your monthly cable bill,, and this post here (Comcast, Cox, Time Warner, etc.)

Now just being oligopolistic is not necessarily a bad thing, as long as it's horizontally oligopolistic.  That's a mouthful, so let me explain. 

The Search/Portal market is an oligopoly in the US, with the leading companies Yahoo!, Google, AOL and Microsoft having the majority of the market share.  But they're primarily services and software companies and don't provide underlying services like Access (with the exception of AOL and Microsoft's decaying narrow-band access businesses of course).

They of course compete aggressively with each other, including start-ups, but don't need to invest in and, as a result "protect" the business models of other horizontal oligopoly layers that provide their underlying infrastructure.

So, empowering these companies are an oligopolistic layer of hardware companies like Dell, Lenovo, Toshiba, Gateway etc. that provide the PCs. 

Then there the oligopolistic layers of component providers for the PCs:  the semiconductor chips (Intel, AMD and others), the graphics chips (NVidia, ATi, etc.), the hard drives (Seagate, Toshiba, etc.), to name a few.

Underlying them is another oligopolistic layer of companies that provide the networking infrastructure like Cisco, and so on. 

But no one company controls the entire vertical stack.  They used to in the old days pre-PC days before 1979 (remember "Big Blue" IBM, DEC, etc.)

As a result, innovative start-ups have the potential to enter any of these layers and provide better services than the oligopolistic incumbents in that horizontal layer, but still have the ability to have their product and service take advantage of the other horizontal layers.

For example, a new search engine company could still come from nowhere and out-Google Google, leveraging all the infrastructure that Google currently leverages.

In contrast, the industries blocking the horizontal players today in the "Big Bypass Battles" are both  oligopolistic  AND verticalized.  Which generally means higher prices, less choice and selection and more inefficient markets for the end consumers. 

And NO inter-operation amongst the networks, other than of course for high-cost "roaming charges".

To understand the mentality and arrogance of the typical "Bottleneck" company, consider this extraordinary quote from an interview by BusinessWeek with SBC/AT&T/Cingular CEO Edward Whitacre this week:

"How concerned are you about Internet upstarts like Google (GOOG), MSN, Vonage, and others?

How do you think they're going to get to customers? Through a broadband pipe.

Cable companies have them. We have them.

Now what they would like to do is use my pipes free, but I ain't going to let them do that because we have spent this capital and we have to have a return on it.

So there's going to have to be some mechanism for these people who use these pipes to pay for the portion they're using. Why should they be allowed to use my pipes?

The Internet can't be free in that sense, because we and the cable companies have made an investment and for a Google or Yahoo! (YHOO ) or Vonage or anybody to expect to use these pipes [for] free is nuts!"

His spokesman had to try and backtrack from the furor caused by this statement later (via the Washington Post):

"SBC spokesman Michael Balmoris said Whitacre was not talking about charging companies for letting customers access their Web sites. Rather, he said, Whitacre was referring to access Internet companies may want to the "managed and secure" portions of the fiber-optic network SBC is building largely to deliver video to customer homes."

Tom Evslin by the way has a good post on all of this if you'd like to read more.

The Good Guys are "Good", both from a consumer perspective and from an economic point of view.  More horizontal competition means a lot of goodness for the economy in the form of more private and public investment in new companies, more jobs, more growth, more global competitiveness. 

Most of the Good Guys have long been aware of these Bypass Bottlenecks, and for the most part have tried to employ what I would term a "Co-Pass" strategy.  By that I mean a cooperative bypass strategy that involved cooperating with the bottlenecks today, learn more about providing these services, get consumers used to them and hopefully dependent on them, then ultimately use their greater leverage with the consumers to negotiate better distribution terms and/or entirely bypass the bottlenecks are technology makes other alternatives hopefully possible.

That's what Microsoft, AOL, and Yahoo! have done to date both through Web 1.0 and now into Web 2.0.  This is why Yahoo! this week announced a "Co-Pass" deal to roll out wireless services with SBC/Cingular and Nokia, hoping to essentially "Divide and Conquer".

One advantage of the Co-Pass strategy is to reduce the amount of upfront infrastructure investment required, thus keeping one's margins high.  That's a good thing if you're a high valuation public company.

But as I've mentioned in earlier posts (here and here), this time around the consumer companies are going to have to be more aggressive on stepping up on the infrastructure side.

The one consumer internet company that seems to be eschewing the "Co-Pass" strategy for now, is Google.  Whether it's potentially rolling out its own Wi-Fi internet access service a while ago, to rolling out its maps on mobile phones today, Google seems to be focused on the ByPass strategy.  As Om Malik observes in a pointed post today,

"In sharp contrast to Yahoo, Google is going to launch a piece of software that can be downloaded over-the-air on most phones that support Java. The software will be a Google Local application, which will allow users to conduct searches for local services and see them on a map. I do find it interesting the divergent strategies of the two fierce competitors. Yahoo is in bed with the carriers, while Google is betting on neutral networks."

The one thing the Good Guys can do that they haven't until now is to publicly and aggressively back industry initiatives of their own that both PUBLICIZE these bottlenecks  for mainstream consumers AND INNOVATE around them, through open technology initiatives.

For example, instead of Yahoo!, AOL working with Tivo to bypass the cable company's stranglehold on TV viewers, they, along with the rest of the "Good Guys" work with and promote third party technology companies via standards consortia that encourage the faster development and propagation of devices that help bypass the cable box. 

It's happening slowly in the background, but it could potentially be accelerated, albeit at the cost of alienating some of the Bottleneck partners.

The Yahoo!/Tivo deal announced today, as exciting as it seems on the surface, is potentially usable only for a third of Tivo's 3.6 million user base.  The rest are controlled by DirectTV, which acting as a bottleneck, has decided to disallow the Yahoo! interactive features to work via their network.  And of course this deal does nothing for reaching the tens of millions of cable subscriber customers of the major cable companies.

On the other hand Yahoo!, Google, Microsoft and the other consumer internet companies, are  aggressively investing in commercial and user generated video content being made available via the PC. 

So they all need faster and cheaper ways to get those feeds to the TVs in mainstream consumer homes, preferably without each one having to negotiate separate agreements with each of the main cable and telco players.  That would naturally take years longer than it should.

The "Co-pass" strategies were fine for the Good Guys a few years ago.  For example, they enabled Yahoo! to gain millions of subscribing customers via joint ISP marketing deals with the phone companies.

But that was in the Web 1.0 days, when the amount of content itself was not growing at exponential rates....and most of it was commercial and locked away under lock and key, driven by piracy fears.

It's different this time around with:

1. the explosion of user generated content and the sharing/re-sharing that's going on with Web 2.0 technologies.
2. Also different this time is the explosion in paid-search advertisers looking for more and more places to put paid-search advertising.
3. Not to mention the explosion of high-powered cell phones and PDAs that are going mainstream next year with the power of a high-end PC just a few years ago, including hard drives and digital/video cameras.

So it's going to be more important to be there faster than ever for mainstream consumers and the one-by-one "Co-Bypass" strategies may not be the best thing this time around.  They may need to be complemented with more aggressive Bypass strategies.

Fasten your seat-belts everyone...sharp curves ahead.

UPDATES:
10.18.05  Robert Cringely has a great post on how Google potentially can out-bypass the telecom/cable industries titled "Google-Mart"...RECOMMENDED.  Also, my thoughts on the post here)

ON MICROCHUNKING ECOMMERCE THE WEB 2.0 WAY

LET'S SHOP TOGETHER

Speaking of microchunking work and content (see post yesterday), how about microchunking commerce on the web?

A starting point to see what this MAY look like eventually is Cribcandy.com, a "social", visual, browser for stuff on the web.  It's based on the very visual, "social shopping" company Wists' tagging technology, which potentially is almost as easy to understand at first blush for mainstream audiences as Flickr was for photos.

If you're browsing on the web and see a coffee table you like, save it as a public/private visual bookmark on Wists.  Specifically, Wist scans the page you're "wisting" for all the images and asks which one you want to tag.  Select it, and it's visually bookmarked.  You can keep it private or decide to share it publicly.  Put in a descriptor tag and you're done. 

My wife and I spent almost an hour browsing through Cribcandy yesterday looking at home furnishings.  Click on the "livingroom tag" and you get several pages of pictures livingroom furnishings other people thought were cool.  And in a lot more cases than you'd expect, they were. 

And it's microchunked down to say, "side-tables", which is currently a major sub-quest for my wife (not necessarily the one pictured here...but couldn't you just SEE this in the hallways at Yahoo!, Google or eBay?).

We're potentially on our way to spending a chunk of change on a variety of ecommerce sites that we'd never heard of and probably wouldn't have found on our own, but for the efforts of like-minded potential shoppers.  That's "peer shopping", in my book and very Web 2.0. 

And not once during the whole hour did she even know she was using a bleeding edge tagging service, nor did she bleedin' care.  And she definitely didn't have to take a "Dummies" course in tagging, which remains hard for the mainstream in general.

From her perspective it was like sharing torn off catalog pages with a whole bunch of people.  All of us know the experience of tearing off catalog pages and putting it in a folder for an upcoming holiday and/or event.  Cribcandy is a way to do just that with online catalog and shopping sites.  And it's a great start.

The offline catalog industry is an $80 plus billion industry, just in the US alone.  Imagine if in addition to mainstream users tagging products they like, EVERY item in all those off-line catalogs was available in microchunk form on the web, put out there for various prices by manufacturers and vendors with the same ferocity and tenacity as advertisers large and small today put out adwords on Google and its peers...Catalogs 2.0!

Of course a lot of details need to be worked out and a fair amount of technology and infrastructure needs to be deployed.  But BE SURE to follow the four-step program VC Fred Wilson recommends for content (microchunk it, free it, syndicate it and monetize it).

Certainly initiatives like the rumored Google Base are potentially steps in this direction (see earlier post).  But it's not out of the bounds of possibility.  It's all about empowering commerce at the edges (aka peers), with consumers, manufacturers and vendors, and letting the commerce happen.

Almost like consumers first and vendors next throwing up beanie babies and a whole bunch more up for sale on a centralized web site back in the mid-nineties.  Only distributed this time around.

And there's no reason so called "Web 1.0" ecommerce leaders like eBay and Amazon couldn't play.  (Amazon after all came up with Amazon Mechanical Turk for microchunking work just last week).

Now that would be something...ecommerce 2.0, available on web enabled devices everywhere.

ON NEW YORK WESTCHESTER COUNTY LEGISLATING WIFI SECURITY

SHAKE YOUR HEAD NOW

From News.com comes this story that opens as follows:

"According to a new proposal being considered by a suburb of New York City, any business or home office with an open wireless connection but no separate server to fend off Internet attacks would be violating the law.

Politicians in Westchester County are urging adoption of the law--which appears to be the first such legislation in the U.S.--because without it, "somebody parked in the street or sitting in a neighboring building could hack into the network and steal your most confidential data," County Executive Andy Spano said in a statement."

The full press release from the County can be seen here.

It comes with the obligatory, expense-adding paperwork for businesses large and small, for after they've "secured" their wireless networks, they're required to

"...file a note of compliance with the county."

I'd love to see the genesis of this bright idea of a bill.

There's no question that WiFi networks need to be secure, whether it's for personal or business use.  But there are countless ways our networks can be more secure, most being addressed by the marketplace. 

Legislating the purchase of additional equipment/software as a requirement for all potential nodes on a network is a far less efficient way to go about it than working with the relatively few network equipment manufacturers and internet service providers nationwide to come with effective solutions. 

Most options to secure WiFi equipment today require more geeky knowledge than they should, especially for mainstream consumers, and require expensive outside technical help.  These deficiencies are being addressed by the WiFi industry marketplace, with next generation products being easier to secure by default.

Pursuing this at a local county level seems like whistling in the wind and a bit quixotic at best.

What will they go after next, open, unsecured Bluetooth devices?

ON AMAZON'S MECHANICAL TURK: DEFINING WORK 2.0

WORK 2.0:  MICROCHUNKING WORK 1.0

Who'd have thunk?  That potentially the next best use of the Internet since Google (via Bill Gross's GoTo.com/Overture efforts) could come from, not a bright-eyed, bushy-tailed, "web two'ed" start-up at 285 Hamilton Ave. in Palo Alto (via Om Malik), but from a scrappy web services team at "Web 1.0" Amazon.com?

At the admittedly very real risk of getting ahead of myself, this week's announcement of Amazon's Mechanical Turk (called AMT for the remainder of this post)  may mark the beginning of a whole new Internet gold rush, not seen since the Search 2.0 gold rush since Google's IPO.  AMT could be the shot that inspires the launch of a whole new stream of start-ups the world over, especially since this is about re-configuring outsourcing as we know it.

What is AMT?  As the announcement dryly and geekily describes it,

Amazon Mechanical Turk provides a web services API for computers to integrate Artificial Artificial Intelligence directly into their processing by making requests of humans.

Developers use the Amazon Mechanical Turk web services API to submit tasks to the Amazon Mechanical Turk web site, approve completed tasks, and incorporate the answers into their software applications.

To the application, the transaction looks very much like any remote procedure call - the application sends the request, and the service returns the results. In reality, a network of humans fuels this Artificial Artificial Intelligence by coming to the web site, searching for and completing tasks, and receiving payment for their work.

Here's what a typical work request looks like, for Amazon's A9 search engine.

TechCrunch explains AMT in simpler terms:

The “machine” is a web service that Amazon is calling “artificial artificial intelligence.” If you need a process completed that only humans can do given current technology (judgment calls, text drafting or editing, etc.), you can simply make a request to the service to complete the process. The machine will then complete the task with volunteers, and return the results to your software.

Volunteers are paid different amounts for each task, and money earned is deposited into their Amazon accounts. Amazon keeps a 10% margin on what the requester pays.

At first glance, one might go, huh?  What's the big deal about this?  You advertise for a task you want done on the internet, and get folks to respond to your job offer. 

For those of you around for the last Web 1.0 party, it might even sound similar to what a bright-eyed start-up backed by the Benchmark Boys of eBay, Respond.com was all about.  It's still around by the way.

But this is different this time, empowered by the technologies and the philosophy of "peer production" of Web 2.0. 

What gets me most about this idea, is that it can be applied not just for inexpensive software outsourcing as envisioned by AMT, but as a barter marketplace of services for service and/or content. 

In fact it's a whole new way to think about "payments for peer production", as I've mused about before.

VC Paul Kedrosky provides a good example of this is in a on-the-money post describing the potential precursor to AMT:

"I’m fond of the virtual sweatshop Amazon just launched via Mechanical Turk, but the progenitor of this stuff online is, as is almost always the case in technology, the porn industry. Here’s Cory at BoingBoing from January of 2004:

Someone told me about an ingenious way that spammers were cracking "captchas" -- the distorted graphic words that a human being has to key into a box before Yahoo and Hotmail and similar services will give her a free email account. The idea is to require a human being and so prevent spammers from automatically generating millions of free email accounts.

The ingenious crack is to offer a free porn site which requires that you key in the solution to a captcha -- which has been inlined from Yahoo or Hotmail -- before you can gain access. Free porn sites attract lots of users around the clock, and the spammers were able to generate captcha solutions fast enough to create as many throw-away email accounts as they wanted."

This is a whole new way to "microchunk" work, paraphrasing Umair Haque's great phrase (and work), just as many Web 2.0 companies are focusing on microchunking content (see pithy post on this by VC Fred Wilson today).

Susan Mernit dissects the economics of the current tasks being "microchunked" by Amazon in the AMT example above in this helpful post:

"A typical task right now is for A9 and reads as follows:

"You are presented with the name and address of a business as well as a set of photos taken along the street where the business is supposed to be located. Your task is to identify the best photo of the business that is listed."

For that, you get .03; if you do it 179 times, you get 5.37.
Amazon's estimates work so that if you have spent an hour to fulfil 1170 of these requests, you get $35.00, which means your time is worth $35 an hour if you can fulfill about 1 per second--if it takes you 5 seconds to fulfull each task, your time is only worth $6-7.00.

Amazon says that they take a slice of each transaction and that workers can transfer money to their U.S. personal bank account or to their Amazon.com account."

Microchunking work this way could remake parts of the outsourcing industry as we know it today.  One could see vertical work marketplaces that focus on microchunking tasks across a wide array of industries.  And this approach has potentially oodles of network effects of all types (Umair, any thoughts?).

While this may not be the next Industrial Revolution (maybe), it at the very least is at least as interesting as when Henry Ford took the century old ideas around Assembly Lines and "Googlefied" it into a "win-win-win" strategy for workers, manufacturers and consumers.  (Google of course did this for searchers, search providers and advertisers). 

Here's to the next, big Work Rush.