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Archive for February, 2012

Article by Tony Fish. Member of Gerbsman Partners Board of Intellectual Capital

In my book titled  “Mobile Web 2.0” (published in 2006) Ajit (co-author) and I identified that mobileweb2.0 holds that the mean and mechanism by which I was uniquely identified by and could be associated with, which was a number; no longer holds true.

The key aspect of this is that in the old world I was found, contacted utilising and was identified by numbers, this may have been a phone number or a passport number. In the new world I will be found and identified by tags, centred on who I am as identified by my name.  Further; it will not just be me, companies are identified by brands but we have to-date contacted or connected to them by numbers, now companies, using their brands and product names will be uniquely identified by these names.  Is there a real difference, in the consumers eyes; yes!, In deep technical aspects, probably not, since there will still be a mechanism for resolving names and numbers, but the value of resolving numbers (directories) and its controlling influence has passed.

What does all this mean for me as an individual ?

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I am a tag not a number.  In the very old days I had one number, in fact it was not mine either, if was the shared Fish Family home phone number.  People could, if the so wished, call up directory enquiries or look up in the phone book this number. Eventually having only one number passed an in the modern age I have several numbers (mobile, Skypein, office, DDI, home, home office, to name a few)  If someone wants these numbers, they would need my business card, may be linked to Linkedin or Plaxo or could go to each of the service providers directory services and eventually get my numbers.

However, why did you want the numbers, why have I got some many numbers.  Because I can be reached in a variety of means, depending on where I am and the cost of telephony I wish to suffer.  In essence however, all you wanted to do was to “speak” with me.  Actually, all you wanted was to connect with Tony Fish or Ajit Joaker who wrote about mobileweb2.0 in London in June 06.

However, there is another way.  Instead of worrying about using the telcom operators directory search, not knowing which operator I am with, how about using a web search engine to connect.  Imagine, you type in my name, the search engine now responds with not a pile of numbers, but offers you a choice of what you would like to do.   Do you want to call, message, lowest call route (LCR), VoIP call. You click yes. The search engine has now become the telco, not by offering infrastructure but by offering the directory resolving feature, and I am now a name not a number.  So why tags?

Lets assume that as you read this, download the slides, look for the update of the book, you store this new data on your computer and you tag the information with something useful.  Suppose you tag it with Ajit or Tony.  Suppose, as I have tagged the same information on my computer with Ajit and Tony and Mobileweb2.0 etc etc.  Suppose also that I have tagged my contact details with my name.  Now a tag based search engine could resolve the search, and hence draw out the connection opportunities, and can even then set up the connection.  If would be possible that I have set preference for my location, and therefore you could be offered to meet me in the Starbucks on Berkeley Street, W1 opposite my office as I am in there at the moment!

What becomes evident is that none of this depends on knowing a number or how connection happens and it is certainly not fixed mobile convergence! There is someone who may perform the task, but nobody needs know.

Surly this all breaks down when you have many people with the same name! The simplicity of the tags is that everyone will uniquely tag is different ways, each of these will build unique identifies for people with the same name.

Now how does this extend to the corporate.  Corporate discovered many years ago that Vanity numbers worked.  This being 0800 Flowers etc.  There was no need to remember the phone number, you could type in the name on an alpha numeric key pad.  This developed into short codes on the mobile and is likely to introduce a whole new mobile vanity number opportunity.

It is possible that you will dial COKE, BMW or TAXI, FLOWERS and be connected.  A corporate will be able to remove the cost of reprinting different number for customer services or for competitions by geography.  Instead all one number.  But better, this number will be available from fixed, mobile and PC based origination devices.  Calls will automatically be least cost routed saving customer and supplier cash.

Mobile will be the first to drive these changes, and will be the driver.  It will be the there at the point of inspiration to capture ideas, but also there when you need to connect and find, without the requirements to have it all stored locally.

Read more here.

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Article from GigaOm.

Don’t get mad at me for not finding seven stories for you to read this weekend. I have been busy with some other stuff and as a result I have not been able to spend as much time reading as I normally do. Regardless, here is an abbreviated recommendation list. Hope you enjoy them.

Read more here.

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Re-Inventing Education for the 21st Century

The Internet is staring down the College Cartel. And the Internet will win. College costs cannot continue to rise at three times the rate of inflation, as they have for the last thirty-five years.

My friend Jack Biddle, co-founder of VC firm Novak Biddle, and an early pioneer in online education companies (Blackboard, 2Tor, Fidelis and others) puts it this way:

“Since WW II, GDP has grown at 3% per year but health care and education have and continue to grow at 7%. They are now on a path to reach 50% of GDP. For that to continue, it means that EVERYTHING else that people consume has to shrink by 4% per year. That is simply not going to happen. Herb Stein’s law says that that which is unsustainable, shall stop, and this is unsustainable.”

The Internet has brought efficiency and cost-reduction to so many industries over the last fifteen years: retailing, financial services, advertising, music, news, movies, books, and gaming. The $1 Trillion Education market is next.

Education hasn’t changed much since the days of Plato and the first Academy which he founded in 387 BC in Athens – where the wise teacher filled the brains of his students with his wisdom and knowledge. With 16 million students at 2,400 US Colleges today, that same “wise teacher” paradigm is used in hundreds of thousands of college classrooms and lecture halls each and every day.

Yet the world has changed. Today, across the Internet, more knowledge exists online about any given topic than does in the mind of any one professor at any one school. With access to the Internet, students collectively are wiser than their professors. Companies like Koofers, which helps students prepare for tests in virtual study halls, whether on the same campus taking the same course, or at completely different schools but taking the same course type (Introduction to Economics) are harnessing this collective wisdom.

Salman Khan, who started posting YouTube videos for his family, to help them better understand math being taught in school, is turning education upside down. The Khan Academy suggests that learning should be done online, and classroom time reserved for teachers to help students better understand material they have learned, but perhaps not yet mastered.

2Tor is helping brand-name universities extend their programs online, to reach students around the world. Those online students graduate with the same degrees as their counterparts who attend brick and mortar classes.

The revolution is upon us.

I see four rich veins for entrepreneurs to mine in the higher education space. A lot of wealth will be created here in the next twenty years.

First and foremost is international. The rise of the middle class in India and China alone is creating a college-eligible audience larger than the 16 million college students in the US today. Validating the credentials of these students, helping to match them with US Colleges, preparing them for college from a language or culture standpoint, and educating many of them online represents an industry perhaps as large as the entire US education market today. A new $1 Trillion market.

Second is brand extension by the top US Universities. For most, admission into college is not hard. Only 2% of US Universities are ultra-selective, accepting fewer than 25% of their applicants. These 53 out of 2,041 Universities have brands that are recognized worldwide. It might be more difficult to expand branded undergraduate offerings online, because of the breadth of the curriculum and the socialization needs of the students at that age. But brand expansion, online, for graduate programs can be a very big business. 2Tor is attacking this space dead on.

Third is what I call an “On-Campus Virtual College.” I believe that students go to college for three primary reasons. First is the social experience of college. Making friends for life, having fun, going to parties, and learning how to live and act independently from your parents. Second is to get an education and a degree that is valuable to employers in their field of choice. Third is to find a job upon graduation. Academics only comes to play in the second instance. The other two are much more pragmatic. And nothing says that the three functions can’t be split.

I foresee a day where students will go off to a campus with classrooms, teaching assistants, dorms, sports teams and cafeterias – but with no professors. Students will go to class together and watch a lecture from the best teaching professors in the world. Teaching assistants or adjunct professors will guide the students through the material. But they will learn, online, from the best teachers, unlike today, where at many schools, professors teach because they have to – and conduct research because they want to. By separating the cost of the social experience + the career planning and placement from the cost of teaching, we can fundamentally change the cost of education. This is an ideal setting for the 84% of students who attend schools that accept 50% or more of their applicants.

Fourth is transfer students. A little known secret is that 1 in 3 students transfer at some point during their college life. They graduate from a different college than they enrolled in right out of high school. This process is inefficient today and will benefit from innovations entrepreneurs will pursue. Innovations I foresee include taking the top 10% of community college students, honors candidates, putting them in an online program from a 4-year school, and preparing them to transfer to one of many 4-year schools after learning online for two years. Another idea: Creating a transfer marketplace for college students looking to upgrade the brand name on their diploma. After all, employers care about the school from which you graduated – not the one you initially went to out of high school. Top colleges would love more applicants, with a year or two of college under their belts, with a record of academic achievement from second tier schools. Helping to make that market is a big opportunity.

At New Atlantic Ventures, we are big believers in how the Internet will transform higher education. We have backed two companies in this space so far (Koofers and Wiggio,) are about to close an investment in a third company, and are looking for more!

Follow me on Twitter @jcbackus

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Article from GigaOm.

“Akamai said it purchased Canadian web site optimization company Blaze Wednesday, ahead of its financial results call. In acquiring Blaze, content-delivery network leader Akamai offers an excellent example of how the web is changing as we access it from more devices and as the nature of the web sites we visit changes. This small deal illustrates some big changes in the web.

Blaze, which was formed in 2010, offers a service that helps web sites load faster by optimizing the scripts running on the site. It also recommends clients add a content delivery network and complements the software and CDN mix with consulting services for folks that want to go further. The optimization happens on the backend on Blaze’s servers, so the consumer’s front end experience was faster and fitted to the device he was on at the time. Other companies in this space include Aptimize.

In buying Blaze, Akamai is acknowledging that web sites today are accessed in more places, something anyone who’s been in a Starbucks lately can tell you, but also that the sites themselves are different. They use richer media and offer links back to more applications. Things like sharing something on Twitter or liking it on Facebook via a simple button add seconds to load times and complexity to the overall site. Complicated CSS scripts and lagging ad networks don’t help either.

Blaze was a natural fit for Akamai in many ways as Akamai tries to take its CDN beyond the old days of static content delivery to delivering optimized advertising, helping bring content to mobile devices, and otherwise adapt to the application-heavy and real-time nature of the web. Where web sites were once comprised of fairly simple code optimized for one or two browsers, they’re now a mash up of many applications from different places being viewed on as many as 10 different browsers and platforms. Akamai is just trying to keep up.”

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Article from SFGate.

“Three years from now, the data equivalent of every movie ever made will cross Internet networks every five minutes, according to Cisco Systems predictions. How to manage all that information is what will be driving technology mergers and acquisitions in 2012.

In a bid to transform that torrent into profits, a cash-rich industry is poised to surpass 2011’s almost $200 billion volume of announced mergers and acquisitions. Companies such as Cisco and IBM are searching for deals that will boost their capacity to provide new storage, analytics and security services to enterprise customers.

Big data, mobile and cloud technologies will lead to “bold investments and fateful decisions,” market research firm IDC said in a recent report. The volume of digital information may balloon from 2.7 zettabytes this year – the equivalent of filling 2.7 billion of Apple’s priciest iMacs to capacity – to 8 zettabytes by 2015, according to IDC.

“The speed at which technology innovation moves is such that you can’t miss a step,” said Jon Woodruff, the San Francisco co-head of technology investment banking at Goldman Sachs, the industry’s top adviser on deals last year. “Every tool has to be used for speed and nimbleness sake, and M&A is one of those significant tools.”

Abundant cash and investor pressure to jump-start sales growth will also propel deal-making. Cash levels have expanded 21 percent in the past year to $513 billion, based on holdings of the 35 companies that comprise the Morgan Stanley Technology Index.

Large companies will be leading the charge. Hewlett-Packard, Google and Microsoft led a 36 percent gain in technology deals last year, outpacing a 4.1 percent advance for all M&A worldwide.

In one of the biggest deals last year, HP agreed to buy Autonomy Corp. for $10.3 billion in a bid to build its software business and scale back on its PC manufacturing. Though viewed negatively by some investors, the move will enable Hewlett-Packard to offer database search services and other cloud-related services for business. CEO Meg Whitman said in November that the company doesn’t plan “large M&A” this year, though it may seek small software deals.

Cisco, which has made about 150 acquisitions in its history and has $44.4 billion in cash on the balance sheet, said in November that it will “continue to be aggressive in acquiring technologies.”

Bigger volume

“This year’s technology deal volume could be bigger than last year’s and 2007’s,” said Chet Bozdog, global head of technology investment banking at Bank of America.

Industry takeovers in 2007 reached $264.4 billion, the biggest year since 2000’s record high of $585.2 billion.

“Convergence between hardware, software and services will continue to add products to the same sales chains,” said Bozdog, who is based in Palo Alto.

Cloud computing, which allows companies to access information over the Internet from external data centers, and the shift from desktops to mobile devices, will continue to be “huge multiyear trends,” said Drago Rajkovic, head of technology mergers and acquisitions at JPMorgan Chase.

As part of this trend, SAP, the largest maker of business-management software, agreed to buy SuccessFactors for $3.4 billion in December to create a “cloud powerhouse,” co-CEO Bill McDermott said at the time.

Gaining patents

Google announced in August it would buy Motorola Mobility Holdings for $12.5 billion in its largest acquisition, gaining mobile patents and expanding in hardware. Microsoft purchased Skype Technologies for $8.5 billion in October, the biggest Internet takeover in more than a decade, in an effort to catch Google in online advertising and Apple in mobile software.

While Google and Microsoft paid in cash for their deals, the purchases didn’t put a dent in their funds. Microsoft’s cash and equivalents jumped 41 percent from a year earlier to $51.7 billion, based on its latest filing, while Google increased cash by 28 percent to $45.4 billion.

Apple, which has no debt and the most cash among technology companies at $97.6 billion, said Jan. 24 that it is discussing ways to spend its funds and would consider acquisitions.

“There’s more cash in technology than in any other sector and the low level of debt makes it very easy for companies in the industry to buy growth,” said JPMorgan’s Rajkovic, who is based in San Francisco.

Affordable targets

“As cash piles have increased, some potential targets have become more affordable. Shares of F5 Networks, whose software helps companies manage Internet traffic, lost 18 percent of their value in 2011 even as sales grew 31 percent. Riverbed Technology, a provider of equipment to boost networks’ speed, lost 33 percent while its revenue increased 32 percent. Shares of Acme Packet, a maker of devices that help networks transmit phone calls and video, dropped 42 percent last year while sales jumped 33 percent.

“You will see more M&A than last year, with some very strategic technology companies involved as valuations have become more reasonable,” said Larry Sonsini, who co-founded Wilson, Sonsini, Goodrich & Rosati, the law firm that brought Apple public in 1980.”

Read more here.

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Article from GigaOm.

For many years, Oracle and HP co-existed quite happily. They collaborated on the first Exadata in 2008, for example. Former HP CEOs Carly Fiorina, then Mark Hurd, keynoted at Oracle OpenWorld. HP appeared to have supplanted Sun Microsystems as Oracle’s hardware BFF for a while. Everything was copacetic.

Now the two companies are arch-rivals and are engaged in an increasingly bitter, seemingly personal battle, the latest skirmish of which saw a California Superior Court judge throw out a fraud claim Oracle lodged against HP. He also opened up court documents that don’t show either company in a particularly good light.

How did it all go so bad?

First, Oracle bought Sun for $7.4 billion in a deal completed in January 2010. That meant Oracle, for the first time was in the hardware business and its servers would compete with HP servers. That sealed the fate of the relationship going forward.

The public bad feeling erupted in August 2010 when HP canned Hurd as CEO, then hired former Oracle president Ray Lane (pictured above right) as chairman and Leo Apotheker, former CEO of SAP, as CEO. SAP is a huge rival to Oracle in enterprise apps and Lane left Oracle after a bumping heads with Oracle chairman Larry Ellison (pictured at right.) Things have just deteriorated ever since.

Here are some highlights (low lights) of the slap fight.

In a letter to the New York Times in August 2010, Ellison said HP’s firing of Hurd:

The H.P. board just made the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago … That decision nearly destroyed Apple and would have if Steve hadn’t come back and saved them.”

HP’s server and storage chief Dave Donatelli blasted Oracle for discontinuing Itanium development at the HP partner conference in March 2010. Donatelli asked the couple thousand HP resellers in attendance to lobby Oracle to reverse it’s Itanium decision.
This is a shameless attempt to force customers to spend a lot of money to move to a platform over time that gives customers no benefits  … Oracle made this decision to slow Sun SPARC market losses.

Ray Lane calls out Hurd in his letter to The New York Times in October, 2010.

The bottom line is: Mr. Hurd violated the trust of the Board by repeatedly lying to them in the course of an investigation into his conduct. He violated numerous elements of HP’s Standards of Business Conduct and he demonstrated a serious lack of integrity and judgment
ut now in California District Court is just the latest in a  deterioration of a previously beneficial relationship between the two tech giants.

After Apotheker announced HP plans to buy Autonomy — another enterprise software company for $11.7 billion in August, Oracle couldn’t contain itself.

In a statement on September 28, 2011, Oracle said Autonomy had shopped itself to Oracle first and Oracle turned it down. When Autonomy CEO Mike Lynch denied that, Oracle said: “Either Mr. Lynch has a very poor memory or he’s lying.”

When there was further denial, Oracle put out another statement entitled “Another whopper from Autonomy CEO Mike Lynch” and helpfully published the PowerPoint slides it said he and banker Frank Quattrone brought to the meeting.  The presentation is here and here.

According to the statement:

Ably assisting Mike Lynch’s attempt to sell Autonomy to Oracle was Silicon Valley’s most famous shopper/seller of companies, the legendary investment banker Frank Quattrone.  After the sales pitch was over, Oracle refused to make an offer because Autonomy’s current market value of $6 billion was way too high.

The next chapter in this saga may be a trial on HP’s remaining claims against Oracle which should kick off in April, but stay tuned: anything can happen and usually does.”

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Article from NYTimes.

“With a huge initial public offering on the runway, Facebook has shown that it pays to have friends. New investors will now have to decide what they are willing to pay to be friends.

The giant social network said in a filing on Wednesday that it was seeking to raise up to $5 billion through its I.P.O. Many close to the company say that Facebook is aiming for a debut that would value it between $75 billion and $100 billion.

At the top end of the range, Facebook would be far bigger than many established American companies, including Amazon, Caterpillar, Kraft Foods, Goldman Sachs and Ford Motor. Only 26 companies in the Standard & Poor’s index of 500 stocks have a market value north of $100 billion.

Already, Facebook is a formidable moneymaker. The company, which mainly sells advertising and virtual goods, recorded revenue of $3.71 billion in 2011, an 88 percent increase from the previous year. According to its filing, Facebook posted a profit of $1 billion last year.

“Facebook will have more traffic than anyone else, and they’ll have more data than anyone else,” said Kevin Landis, the portfolio manager of Firsthand Technology Value Fund, which owns shares in the privately held company. “So, unless they are impervious to learning how to monetize that data, they should be the most valuable property on the Internet, eventually.”

A lofty valuation for Facebook would evoke the grandiose ambitions of the previous Internet boom in the late 1990s. Back then, dozens of unproven companies went public at sky-high valuations but later imploded.

Investors are eyeing the current generation of Internet companies with a healthy dose of skepticism. Zynga, the online gaming company, and Groupon, the daily deals site, have both struggled to stay above their I.P.O. prices since going public late last year.

“We’ve seen thousands of investors get burned before,” said Andrew Stoltmann, a securities lawyer in Chicago. “It’s a high risk game.”

The potential payoff is also huge.

Consider Google. After its first day of trading in 2004, the search engine giant had at a market value of $27.6 billion. Since then, the stock has jumped by about 580 percent, making Google worth nearly $190 billion today.

Facebook is still a small fraction of the size of rival Google. But many analysts believe Facebook’s fortunes will rapidly multiply as advertisers direct increasingly more capital to the Web’s social hive.

Mark Zuckerberg, founder and chief executive of Facebook.

Mark Zuckerberg, a founder of Facebook and its chief executive, even sounded like his Google counterparts in the beginning. In the filing, Mr. Zuckerberg trumpeted the company’s mission to “give everyone a voice and to help transform society for the future” — not unlike Google’s plan: “don’t be evil.”

Investors are often willing to pay up for faster growth. At a market value of $100 billion, Facebook would trade at 100 times last year’s earnings. That would make the stock significantly more expensive than Google, which is currently selling at 19.6 times profits.

Newly public companies with strong growth prospects often garner high multiples. At the end of 2004, the year of its I.P.O., Google was trading at 132 times its earnings.

But investors have less expensive options for fast-growing technology companies. Apple made nearly $1 billion a week in its latest quarter, roughly the same amount Facebook earned in all of 2011. At a recent price of $456, Apple is trading for roughly 16.5 times last year’s profits.

Investors now have to try to ignore the I.P.O. hype and soberly sift through the first batch of Facebook’s financial statements to gauge the company’s potential.

Online advertising is a prime indicator. At Facebook, display ads and the like accounted for $3.15 billion of revenue in 2011, roughly 85 percent of the total. With 845 million monthly active users, advertisers now feel that Facebook has to be part of any campaign they do.

“When you have an audience that large, it’s hard not to make a lot of money from it,” said Andrew Frank, an analyst at Gartner, an industry research firm.

For all the promise of Facebook, the company is still trying to figure out how to properly extract and leverage data, while keeping its system intact and not interfering with users’ experiences. On a per-user basis, Facebook makes a small sum, roughly $1 in profit.

The relationship with Zynga will be especially important. The online game company represented 12 percent of Facebook revenue last year, according to the filing. However, estimated daily active users of Zynga games on Facebook fell in the fourth quarter, from the third quarter, the brokerage firm Sterne Agee said in a recent research note — a trend that could weigh on the social networking company.

Facebook also faces intense competition for advertising dollars, something it acknowledges in the “risk factors” section of its I.P.O. filing. While advertisers will likely choose to be on both Facebook and Google, they will inevitably compare results they get from both. Some analysts think Google may have the edge in such a competition.

Google users tend to be looking for something specific. This makes it easier for advertisers to direct their ads at potential customers, analysts say. “Visually, Facebook ads are eye-catching, but in terms of accuracy of targeting, they are not even close to Google’s ads,” said Nate Elliott, an analyst at Forrester Research. “A lot of the companies we talk to are finding it very hard to succeed on Facebook.”

However, the high level of interaction on Facebook could prove valuable to advertisers. “At Facebook, you are looking at people’s interests, and what they are sharing,” said Gerry Graf, chief creative officer at Barton F. Graf 9000, an advertising agency in New York that has used Facebook for clients. If Facebook becomes a place where people recommend, share and buy a large share of their music and movies, such a business could generate large amounts of advertising revenue, as well as any user fees.

“Facebook has become the biggest distribution platform on the Web,” said Daniel Ek, the founder of Spotify, a service that accepts only Facebook users.”

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