the force awakens

Yep, it’s an end-of-the-year technology prediction post …

We’re at a special place in the consumer technology cycle. I’ve seen this movie before. Consumer technology trends are often described as waves, but I like a movie metaphor better, because it captures the notion that I actually saw these events when they were first released in the theater, and that we keep seeing the same plot points, themes and character types. I’ve lived through three really big waves of consumer technology. The third wave – the third movie – is finally coming to an end, which is a relief, because it kinda sucked. I’m really looking forward to the next show.

I’m a fan of the franchise generally, despite the repetitive plots. Each movie starts with the introduction of products that clearly show the possibility of what’s to come, although these are not the products that actually survive the revolution. Those products depend on a crucial underlying technology trend, which is not itself the consumer-facing technology. There is a spectacular platform war that decides the big winners and losers. The story ends, until next time, when the business patterns in the field have matured, and outsized returns for investing in those businesses have therefore disappeared.

The Origin Story: Personal Computers

pirates-of-silicon-valley

Like the first movie in a series, this one defined many of the patterns, tropes and heroic character types of the sequels to come. In a digital desert, a lone gunslinger appeared on the horizon, known only by the mysterious name Altair. The story really picks up when the Commodore PET, the TRS-80, and the Apple II appear on the scene. That trio of bandits opened up the Wild West, only to be dominated by the strongman IBM PC. But IBM only won a hollow victory, as it turned out that they’d unwittingly given the keys to the kingdom to Microsoft, the ambitious vassal that became the overlord. The story of the rise of the PC is the classic foundation of everything that came after in consumer technology.

But it would be a mistake to only pay attention to the foreground. In the backstory, the silicon chip is the key enabling technology that’s powering the other players. Moore’s Law is the inexorable force of progress, and Intel was the master who kept on top of the industry despite laudable challenges by AMD, Motorola, Texas Instruments, and a host of international competitors. This global tale of intrigue and ambition is a worthy accompaniment to the marquee narrative. In fact, the invention of Silicon Valley can be considered the prequel to this series.

The Worthy Sequel: World Wide Web

the-matrix

Many people say The Empire Strikes Back was a better movie than Star Wars. The Godfather was in many ways outclassed by Part II. The explosive success of the World Wide Web was at the very least a worthy sequel to the PC story. A knight in shining armor, Tim Berners-Lee, led a devoted band of heroes on a worthy quest to unite all of the world’s information. Early services like Prodigy and CompuServe leapt on the ensuing opportunity, but latecomer AOL won the day by sending a CD to every mailbox it could find. That was only the first act, as Netscape and Yahoo emerged as the real heroes … until the third act, when eBay and Amazon and Google trampled the field.

It’s usually not worth the effort to make a distinction between the Web and the Internet, but it makes sense to do so here because “World Wide Web” is the story with a beginning and an ending, while the technologies of the Internet are the more enduring enablers of that story. As protocols, the details of TCP/IP, DNS, HTTP and the like are not exactly gripping narrative. But like silicon chips powered the PC revolution, and could be considered the more enduring story, the Internet will live on long after the Web sinks into irrelevance.

The Failed Trilogy: Smartphones

phone-booth

Return Of The Jedi was a very successful movie. And it did have some awesome special effects for the time. But it was all of the same characters, and pretty much the same plot, soiled by dominant commercial motives and treacly pandering to a younger audience. By which I mean, fuck Ewoks. And Godfather Part III? The less said about that, the better.

The story of the last dozen years or so has been the move of personal computing and the Internet to smartphones. There’s some compelling pathos in the storyline of the death of the Web, overrun by mobile apps. But it was mostly dull to watch the Treo and Blackberry reprise the role played in prior movies by the Altair, Prodigy and CompuServe. I’ll admit it was great fan service to see the Apple character repurposed, and maybe there hasn’t been a more colorful personality than Steve Jobs, so that part of the story was pretty entertaining. You could say that the return of Jobs was as momentous as finding out about Luke’s father.

Let’s face it, it just wasn’t that exciting to watch Google and Amazon continue to grow. Facebook is a great new character as a flawed hero, and that whole subplot with Twitter and the rest of social media was a very strong B story. Other new characters like Uber and AirBnB have their minuses and pluses, but I don’t believe they’re going to be big characters in the next movie. (“Uber for X” companies are the goddamn Ewoks.) The overall experience has been like coming in to watch a huge blockbuster mega-sequel: you can really see the dollars up there on the screen, and there’s a certain amount of entertainment value that comes through, but the whole exercise just lacks the originality, joy and passion of the earlier entries.

Not a bad backstory though, and as in the other movies, this one will continue to be meaningful in all future sequels. Cloud computing, software as a service, the evolution to microservices – these things fundamentally changed the way that new businesses start and grow. They reduced the capital costs in starting a new information technology company by orders of magnitudes, letting in many more characters. Unfortunately, most of those new characters are Ewoks.

The Force Awakens

So what’s the next movie going to be about? Will it reinvigorate the franchise? Or will it be a terrible prequel (or worse, prequel trilogy) that we’ll all have to agree to pretend never happened?

I think we don’t know all of the elements, but we do know some of them. Let’s first recap what we saw in the first three installments:tfa-chart

And here’s what I think we know about the chart today:

tfa-chart-f

Main Story: There is a flood of products that don’t have an agreed category name yet – Siri, Google Assistant, Amazon Alexa, Microsoft Cortana, chatbots, chatbots and more chatbots. Some industry terms that are cropping up are intelligent personal assistants, virtual assistants, conversational search. Or chatbots, fer chrissake.

The point is, you will have things in your house (your car, your pocket, etc) that you talk with, and these things will talk back to you in a way that makes sense. You’ll regard your interaction as a conversation rather than button punching or screen swiping. Until people converge on another name for all of these things, I’ll call them “conversational devices” – this captures that you have a productive back-and-forth with a physical object. Yes, you can already do something like this on your smartphone, but those implementations are only a hint of where this will go.

As early as it is, there are plenty of curmudgeons who don’t see the point. Smarter people have said we’ll never need more than five computers, no one wants a computer in their home, the Internet is a fad, the iPhone is going to be a flop. Predictions are hard. But screw it, here’s mine: within 3 years, it will be apparent that the adoption curve of conversational devices is in the same category as PCs, the Web, and smartphones.

Conversational devices will be the story of the next decade in consumer technology. Not that there won’t be other stories, it’s just that this one will be the lens by which we understand the era. I still love virtual reality, but it’s still not time yet. The blockchain isn’t consumer-facing, and  I don’t believe in Bitcoin. Not Internet of Things, not 3D printing, not self-driving cars, not wearable devices (unless they are also conversational devices) – some of these will be big stories, but not the biggest story of the next dozen years.

Backstory: Conversational devices rely on this chain of technologies: Machine Learning -> Natural Language Processing -> Speech Synthesis. These technologies are complex and interrelated, and rather than explain why this is their moment (the foregoing links give that explanation), I’ll just skip to the punchline: People will be able to speak to machines, machines will understand and speak back. Most people already have experience with primitive versions of these technologies, and find those experiences frustrating and unsatisfying. (“Press 9 to go back to the main menu.”) But the rate of improvement here is at an inflection point, and this is about to become undeniably apparent on a mass consumer level.

Platform War: The most successful conversational devices will be on a common platform of delivery. Amazon Echo and Google Home are devices that sit in your home and listen to everything you say, and respond back to help you. Facebook Messenger has bots that will have a conversation with you. Each of these is currently displaying only the limited strengths available in their existing businesses (Amazon:Shopping, Google:Search, Facebook:Brands), but they are all trying to expand to become a delivery platform for third-party conversational devices. Amazon and Facebook already offer developer platforms, Google is focusing on partnerships.

This platform war will have elements of past wars, in hardware vs software, apps vs operating system, open vs closed. That complexity makes it very interesting, but remember, this is theme rather than story. The platform war is the Empire vs the Rebellion, the Mob vs America, it’s the thematic texture that gives the story meaning. You shouldn’t mistake it for the main narrative though. In Mac vs PC, Microsoft won, not Apple or IBM. In open vs closed web, Google won, not Tim Berners-Lee or AOL. Ok, the winners in iOS vs Android were also the platform owners, but that’s yet another reason that movie sucked, maybe it’s the fundamental reason that movie sucked. I hope everyone involved is smart enough not to let that happen again.

Pioneers and Winners: We are far enough into the story that we can guess at pioneers, but we can’t be sure until the extinction event happens: in all previous movies, the early pioneers proved the market, and then died, crushed by an onslaught that included the eventual winners. I’m convinced that this plot point will repeat in the new movie. Look in the chatbot space for potential pioneers – it’s certain than one of these will become historically important. And then it will die.

I’m hoping the platform war victors aren’t also the heroic winners of the main story, as happened in the smartphone movie, because it’s boring and tends to result in Ewoks. Facebook is the pivotal character to watch, as it has a platform opportunity with Messenger, but has huge weaknesses relative to Google, Amazon, Apple and even Microsoft in hardware production and delivery, and hardware will be key to platform ownership. So it will be interesting to watch whether Facebook dives into hardware, or partners with one or more of the other platform players, in the hopes that there’s a bigger opportunity in the main story than the theme.

Well, that’s all I have to say about that. Enjoy the show!

WWGD?

Six months ago, I said that Trump would win the election in part because the rise of new media destroyed the historic function of the media as our Fourth Estate. I was upset that product managers at our most important Internet companies seem to refuse to own the problem that is so clearly theirs.

Now that the chickens have come home to roost in a big orange nest of hair, others are saying that the election was, in a sense, rigged by Facebook. They say fake news has defeated Facebook. Facebook denies responsibility, while people are literally begging them to address the problem.

Product managers at Facebook are surely listening now. If any happen to be listening here, let me say: I’m sorry I called you cowards. I realize that today’s state was hard to foresee, and that the connection to your product even still seems tenuous. I am awed at the great product you’ve built, and I understand that no one knows the data better than you do, and that it is tough to take criticism that comes from sources completely ignorant of your key metrics. It’s not easy to regard something so successful as having deep flaws that are hurting many people. I think it is a very human choice to ignore the criticism, and continue to develop the product on the same principles that you have in the past, with the same goals.

I have faith that you are taking at least some of the criticism to heart. I imagine that you know that you can apply machine learning to identify more truthful content. I am sure that you will experiment with labels that identify fact-checked content, as Google News is doing. Once you reliably separate facts from fiction, I’m sure you’ll do great things with it.

I’m still concerned that facts aren’t enough. I think we’re in a post-fact politics, where people no longer (if they ever did) make their political choices based on facts. I have read many analyses of the election results, many theories about why people voted as they did. There are many fingers pointing blame at the DNC and the Electoral College; at racism, sexism, bigotry; at high finance, globalism, neoliberalism; at wealth inequality, the hollowing out of the middle class, the desperation that comes with loss of privilege. I am not convinced that giving people more correct facts actually will address any of this.

The most incisive theory that I’ve seen about today’s voters says that the divide in our country isn’t about racism or class alone, but about a more comprehensive tribalism, for which facts are irrelevant:

There is definitely some misinformation, some misunderstandings. But we all do that thing of encountering information and interpreting it in a way that supports our own predispositions. Recent studies in political science have shown that it’s actually those of us who think of ourselves as the most politically sophisticated, the most educated, who do it more than others.

So I really resist this characterization of Trump supporters as ignorant.

There’s just more and more of a recognition that politics for people is not — and this is going to sound awful, but — it’s not about facts and policies. It’s so much about identities, people forming ideas about the kind of person they are and the kind of people others are. Who am I for, and who am I against?

Policy is part of that, but policy is not the driver of these judgments. There are assessments of, is this someone like me? Is this someone who gets someone like me?

Under this theory, what is needed isn’t more facts, but more empathy. I have no doubt that Facebook can spread more facts, but I don’t think it will help. The great question for Facebook product managers is, Can this product spread more empathy?

The rest of this might be a little abstruse, but here I’m speaking directly to product managers of Facebook News Feed, who know exactly what I mean. You have an amazing opportunity to apply deep learning to this question. There is a problem that the feedback loop is long, so it will be difficult to retrain the production model to identify the best models for empathetic behavior, but I think you can still try to do something. There is some interesting academic research about short-term empathy training that can provide some food for thought.

I am convinced that you, and only you, have the data to tackle this problem. It is beyond certainty that there are Facebook users that have become more empathetic during the last five years. It is likely that you can develop a model of these users, and from there you can recreate the signals that they experienced, and see if those signals foster empathy in other users. I don’t think I need to lay it out for you, but the process looks something like this:

  1. Interview 1000 5-year Facebook users to identify which ones have gained in empathy over the last five years, which have reduced their empathy, and which are unchanged.
  2. Provide those three user cohorts to your machine learning system to develop three models of user behavior, Empathy Gaining, Empathy Losing, Empathy Neutral.
  3. Use each of those 3 models to identify 1000 more users in each of those categories. Interview those 3000 people, feed their profiles back into the system as training data.
  4. See if the models have improved by again using them to identify 1000 more users in each category.

At this point (or maybe a few more cycles), you will know whether Facebook has a model of Empathy Gaining user behavior. If it turns out that you do have a successful model, of course the next thing to do would be to expose Empathy Losing and Empathy Neutral users to the common elements in the Empathy Gaining cohort that were not in the other two cohorts.

But now at this point you are in a place where the regression cycle is very long. Is it too long? Only you will know. How amazing would it be to find out that there’s a model of short-term empathy training that is only a week or two long? People use Facebook for hours a day, way more than they would ever attend empathy training classes. This seems to me to be an amazing opportunity. Why wouldn’t you try to find out whether there’s something to this theory?

One reason might be a risk to revenue models. Here I’d encourage you too see what Matt Cutts said to Tim O’Reilly about Google’s decision to reduce the prominence of content farms in search results, even though that meant losing revenue:

Google took a big enough revenue hit via some partners that Google actually needed to disclose Panda as a material impact on an earnings call. But I believe it was the right decision to launch Panda, both for the long-term trust of our users and for a better ecosystem for publishers.

I understand this mindset personally because I was there too. At the same time Matt was dealing with Google’s organic search results, I was dealing with bad actors in Google’s ads systems. So I was even more directly in the business of losing revenue – every time we found bad ads, Google lost money. Nevertheless, we had the support of the entire organization in reducing bad ads, because we knew that allowing our system to be a toxic cesspool was bad for business in the long run, even if there were short-term benefits. In fact, we knew that killing bad ads would be great for business in the longer run.

News Feed product managers, I’m not writing this from a position of blaming you. I was in a situation very much like yours and I know it’s hard. I can also tell you, it feels really really good to solve this type of problem. I am convinced that an empathy-fostering Facebook would create enormous business opportunities far exceeding your current path. It is also entirely consistent with the company mission of making the world more open and connected. You can make a great product, advance your company’s mission, and do great good in the world all at the same time. You are so fortunate to be in the position you’re in, and I hope you make the best of it.

real time

At Second Life, we occasionally debated the merits of virtual reality vs augmented reality. In caricature:

Virtual reality was the core dream of SL, same as the core proposition of Snow Crash, the Holodeck, the Matrix – the idea that a computer simulated world could have all of the sensory and intellectual stimulus, all of the emotion and vitality, all of the commerce and society, of the “real” world (quotations necessary because virtual reality would be so real that non-simulated reality has no better claim on the term).

Augmented reality said that the virtual realists dropped too much acid in their youth. A fully simulated environment might be escapist pleasure for the overcommitted few, but computers would show their real power by adding a layer to our existing lives, not creating entirely new ones. Computers would sink themselves into our phones, our clothes, eventually our fingers and eyeballs and brains, not in the service of making another world, but enhancing the world we live in.

If that debate sounded ridiculously theoretical to you, then I hope that was yesterday because today it’s as real as it gets.

Google Glass is the vanguard of augmented reality, and obviously important to the company.* Google’s mission has always been to organize the world’s information – not to create a fantasy world but to organize our world.

Second Life had its heyday after Google established itself as the new tech titan, but before any serious challenger had risen up behind it. We spent a lot of time trying to convince people that SL could be the next big thing … trying to explain that people wanted to have an online identity, instantiations of themselves that would interact with other online personalities, creating tiny bits of content that might not have individual value, but would have enormous value as a whole fabric of an online world where people would go and interact every day …

I was laughed out of a lot of buildings after explaining SL. Who wants to live online? Who wants friends that they see only in a computer? Who wants to spend their leisure hours pecking away at a keyboard and looking at the cascades of dreck that other non-professional users create?

Second Life missed the mark for a lot of reasons, but not because we were wrong about online life. Facebook came along, and gave us all of the virtual life that the Web could really handle – only 2D, status updates instead of atomic 3D content, kitten pictures instead of furries – but Facebook succeeded in creating a virtual world.

And now they’ve acquired Oculus VR. If it wasn’t clear before – and perhaps it wasn’t clear even to them – they have now taken a side in that old debate, the same side that they’ve been on since the beginning. Facebook is going to go more and more towards virtual reality, while Google expands further and further into augmented reality.

 

*I don’t work on Glass, have no special knowledge of the product or strategy, and actually have never even tried it.

why second life failed

This post is about why Second Life failed – but not in the sense of, “here are the reasons why Second Life failed,” but instead, “here is why it is true that Second Life failed.”

Slate published an article titled “Why Second Life Failed” that also, like this post, is not an elucidation of reasons why SL failed – but unlike this post, it is not an authentic attempt to support the proposition that SL indeed failed. It is simply an effort to market a new book by posting an article with a catchy headline. There is an unavoidable paradox in that any marketable headline with the structure “Why [X] Failed” must use for X something that has first achieved at least some significant success, otherwise the title would be too obscure to attract readers. I started a company called Bynamite that folded after less than two years – no one writes articles titled “Why Bynamite Failed” because no one’s ever heard of Bynamite.

This mild paradox isn’t sufficient defense for SL’s ardent users and thoughtful critics. As is often the case with posts about SL’s demise, the comments to the Slate article are full of well-informed, intelligent and passionate conversation that puts the original article to shame. At Terra Nova, Greg Lastowka suggests that SL remains fertile ground for study, with the pointed rejoinder that “Second Life never failed – the media reporting on Second Life failed.”

As a former Linden, I appreciate the desire to insist that Second Life hasn’t failed. I joined Linden Lab in 2005, at a time when we had a few dozen employees and registered users in the tens of thousands. By the time I left four years later, we had around 7 times the number of employees, several hundred times as many users, and almost a hundred times the revenue. It certainly felt like success to me. I left sated with a feeling of accomplishment, and great hope for the future of Second Life.

But I also left feeling depleted. We had stumbled our way from obscurity to something like prominence, but I didn’t know how to take it to the next level. We weren’t making progress despite having bountiful talent, desire and resources. We had a beautiful company, a real culture of beauty and love, genuine emotion for each other and for the world we were helping to build. And it wasn’t working, not well enough and not fast enough and not big enough.

Perhaps there never was a next level. Perhaps it was always the destiny of Second Life to be an innovative niche product for a select group of people, a worthy subject of serious study, a constantly evolving emporium of edge cases. Maybe we should have just hunkered down, and focused on maintaining an elaborate playground for only a select audience of passionate and creative people. We could eke out a fine living, and damn the rest of the world who just didn’t get it.

But I couldn’t damn the rest of the world, because dammit, I’m from that rest of the world. I was never a true Resident of Second Life; I was a visitor, an outsider with the good fortune to see the incredible things that people can do in a truly free environment. I was inspired, amazed and delighted by Second Life – as well as occasionally revolted, offended and demoralized – and the diversity and depth of this experience was a revelation to me, one that I believed that everyone can appreciate.

And I still believe that, which is why I have to accept that Second Life has failed (so far, we must always say so far). The reality is that Second Life is still a niche product, and to deny that I wanted it to be something more would dishonor the heartbreaking glory of our ambition. It’s fair to say that Facebook became our second life, but it’s also shortsighted. Not so long ago, people laughed at the proposition that anyone wanted to maintain a virtual presence online that could form the basis of social interaction. Facebook did put an end to the dismissive chuckles on that topic.

But it’s equally laughable to say that this is where we’ll stop, that the final destination of online interaction consists of wall posts and text messages in two dimensions. I still believe that there’s no sensible way to define an impassible boundary between where we are today and a time when people “live” in a three-dimensional virtual environment. I’m still a true believer, an old true Linden in that way. So I have to admit that Second Life has failed.

So far.

the nature of their game

Pleased to meet you
Hope you guess my name
But what’s puzzling you
Is the nature of my game

Facebook may be overplaying its hand, but do we really understand the game they are playing?

We’re mad at Facebook because we feel like helpless pawns in an environment we need but don’t control.  Even though I’m included in that “we,” I have some sympathy for Facebook because I was once on the other side of a similar divide between the consumer and the company.

At Second Life, we (this time I mean we-the-company) had a seemingly omnipotent grip on the environment our users needed.  In theory, we knew our users intimately, knew who their friends were, knew where they went and what they did.  We owned their means of payment and communication, we set policy for their leisure and commercial activities.   This is a level of control that Facebook dreams of, not in a virtual world but for the entire Web . . . and it’s scary that they actually seem to be on the path to getting there.

Some of our most devoted customers were also our most vocal critics, because they were so deeply invested in the world they helped create – and every change in the service affected their lives deeply.  A few critics assumed that since our every change seemed to hurt some users, it should be easy to build a competitor that would satisfy all users.  But Second Life “killers” and open-source alternatives never gained traction, while Second Life continues to grow long after the hype cycle forgot about virtual worlds.

One lesson in all of this for me was that most critics and competition never really understood our business.  Our operation was so multifaceted and complex that every competitor only focused on the one or two things that they believed were important, and individually or collectively they never assembled a cohesive whole that could challenge our market dominance.

I’m seeing the same thing today with Facebook’s critics.  Competitors who think an open (source or otherwise) alternative to Facebook will bring down the giant simply fail to understand the business they are competing against.  Open identity, open interests and open social graphs are very difficult to grow and support without an overriding service reason to spur adoption and use:  People have an online identity and social graph because of the services they use, not the other way around.

Facebook and the end of the Web

This week Facebook released a barrage of announcements that reveal a stunning level of ambition.  You have to ask, are they really the next Google, but with evil?

I can’t speak to the question of evil, but I do have a mental benchmark for the next Google, and it isn’t simply about being the next giant tech company.  The next Google would have to create an entire sector of economic activity, keeping a dominant position worth many billions of dollars while also creating many billions of dollars of value for other companies.

Before Google, the commercial Web was motley mix of emerging media, with some interesting economic opportunities in portals, ecommerce and auction.  Google created and dominated search advertising, but the utility that search brought to the Web was a major driver in the overall economic growth of all advertising on the Web, including display advertising.  Today the entire commercial Web runs on advertising, and Google helped create many more billions of dollars than it captured for itself.

If Facebook merely becomes the world’s best ad network, they would not be the next Google.  They would simply be the biggest winner in the economy that Google helped create.  They could even suck all the oxygen out of Google’s room and thereby kill Google, but that wouldn’t make them the next Google any more than John Wilkes Booth was the next Abraham Lincoln.

I think Facebook’s ambitions go far beyond advertising.  I’ve got no crystal ball showing the future, but the analogue from the past that seems relevant to me is television.  TV was once a wondrous new technology, giving rise to a new world of entertainment and news media.  Businesses quickly hooked the economic engine of advertising to the media of television, and decades of fantastic growth followed.  It once seemed a given that television would hold a central place in our media lives forever, and that it would always be free.

And then cable TV came along.  You might not remember this personally, but cable TV was initially a terrible affront to consumers.  People had become accustomed to getting a huge amount of media for free, and now these horrible new companies wanted outrageous fees every month for the same kind of media.  This could be very painful for a consumer with devotion to a particular kind of content, for example a sports fan seeing important sporting events disappear into the hole of paid TV.

Could the same thing happen to the Web?  An entire generation has become accustomed to Web media as free media, and assumes that will be true forever.  But cracks in that assumption have appeared recently.  We’re seeing a new wave of paid content efforts on the Web.  More importantly, we’re seeing platform owners make good money from Web-like content, like Amazon with Kindle and Apple with iPhone/iPad.

Amazon and Apple have shown that you can make money from digital content if you own all the important parts of the value chain, from digital content rights to an ecommerce store to a payment service to a physical device.  Facebook could be about to find out whether you really need the last link of that chain.  They might not need control over the physical device, because they have something even better in the social graph and identity management.

Facebook knows who you are and knows who your friends are, and they own that information in a way that no one ever has before.  Add in the right content relationships, a payment system, and a universal interest indicator, and that becomes a complete enough platform to enable more paid content on the Web.  A hidden key may be that their payment system is a prepaid credit system, which allows small transactions that would otherwise have burdensome costs and usability barriers.

That may sound a little abstract, so I’ll offer up this fanciful example:  I go to visit Pandora for music, and Facebook and Pandora immediately know it’s me.  They know what kind of music I like, and they know what kind of music my friends like, so they are able to recommend some really great music for me.  Right there I have already participated in a content transaction:  I have offered my valuable tastes and contact information to Facebook, who handed that info over to Pandora – you have to think that Facebook gets paid for that.

And Pandora was glad to pay, because I really like that music they recommended.  In fact, I liked it so much that now I’m going to sign up for a Pandora subscription.  I’m about to reach for my credit card when I realize, hey, I can pay for this with Facebook credits!  Oh, I see I’m a few credits short.  No problem, I’m going to go this this Facebook game, SheepWorld, and rack up the extra FB credits I need – then back to Pandora to pay.

A bunch of little transactions happened in that scenario, and none of them actually involved me pulling out my wallet.  In fact, it seemed like fun, it didn’t seem like I was paying at all.  I was able to participate in a new economy because I’m a Facebook user, and now I’m getting used to paying for premium content.  And when the New York Times puts up its paywall, I’m not going to care so much because I’ll be paying with Facebook, which separates the media consumption experience from the payment experience.

Sound a little farfetched?  Could be.  But there was a time when I couldn’t imagine paying for TV.  Both free broadcast and paid cable television still bring in a lot of money, but cable is a much better business.  If Facebook enables new revenue opportunities on the Web for content creators, they will enrich themselves and enrich others even more.  I won’t like it, just as I didn’t like it when I started paying for TV.  It would be the end of the Web as we know it.

privacy matters

What is going on with Facebook’s constant gyrations about privacy policy?  Does anyone really care?

A little while ago I suggested that online privacy concerns are best addressed by free market solutions, not governmental regulation.  I’ve discussed the topic with quite a few entrepreneurs, investors and professional marketers, and the overwhelming view in that group is that regular consumers just don’t care about online privacy.  “They” say:

  • privacy is too complicated a topic for consumers to understand
  • no one reads privacy policies
  • consumers can be distracted from privacy concerns with the offer of just about any shiny object

Much of that might be true – but I also took the time to talk to a bunch of “regular” consumers.  And these things are definitely true:

  • consumers know that their privacy is being compromised by many online services
  • consumers do not like being taken for granted
  • consumers will avoid services that abuse their information, and will seek services that use their information properly

These two sets of “truths” are not mutually inconsistent.  To me, they add up to:   Online services can gain a competitive advantage by giving consumers the most sensible default choices along with the right advanced options for privacy – make it simple, but make it right.  I think Facebook believes this, and that’s why they keep tinkering with their policies.  They understand that a lot of their initial attraction was a result of making different privacy assumptions than more open services like FriendFeed and Twitter.  They know that even if no one ever reads their privacy policy, if they make the wrong choices about privacy, they will lose users.  As they saturate their available audience, they have to figure out how to strike the right balance among their different demographic bases, all the while competing with the advantages that more open services have.

These are extremely nuanced choices, but getting them right makes the barrier to competitive threat all the more defensible.  And these are product choices; this is something that many I’ve talked to misunderstand:  people think that this privacy stuff is just legal mumbo jumbo or regulatory mishmash.  That’s plain wrong – laws and regulations are just the cart behind the horse.  In a social product where community is paramount, policy choices are product choices.