Tech Town, NC

For some reason there is a meme going around that Google is a “natural monopoly,” but no one has made a convincing case on why that is. Henry Blodget compares them to Microsoft’s natural monopoly in operating systems, but never supports this claim. He simply states that they “should continue to appraoch…” Microsoft’s share of 90% in operating systems. But are Google and the search business a natural monopoly? No, they aren’t.

Search is different from operating systems in many ways. Programmers have thrived in the windows environment and neglected Macs because of the benefits of scale (this is less true now, but I’m thinking historically here). Program for windows first and you reach billions of users. Program for mac first, and you miss 90% of your market. Google’s leverage is nothing like that. Design a website for Google, and Yahoo will still find it. Design it for Live Search, and Google will find it. There is no lock in.

However, there are certainly advantages of scale that Google HAS exploited. Their buisness is about search results, yes, but it’s also about servers. Do SERP’s change much when more people are using them? Not really. But the fact that Google adds servers like crazy and seems to have the best cloud computing engineers in the world means they are quicker in almost every way than their search competitors. That’s what scale brings you.

The problem, though, is that the data google uses to build its superior indexes with is almost all public information, i.e. links. Anyone can analyze link data if they have the computing power, and google can’t protect that. It’s not a weakness for google, since they’re better than everyone at indexing, but it is a vulnerability. They are taking steps to address that, though, gathering data from all sorts of proprietary channels, such as gmail, igoogle, and google accounts in general. But they may not even lead in that department, with Yahoo Mail and Hotmail boasting much larger user bases. Not to mention the treasure troves of data that News Corp is compiling in MySpace, or the data that Microsoft may snatch via a Facebook acquisition.

None of this is to say that Google is in trouble, but they’re not in a position that would allow them to release a “Google Vista” either.

Adam Ostrow gives credit where credit is due by lauding a couple big steals in the world of web 2.0 acquisitions: MySpace and Flickr. When Mr. Murdoch bought MySpace for $580 million in 2005 many thought he had lost his mind. In retrospect, that was chump change.

Microsoft has ponied up about half of that amount ($240 million) for a mere 2% stake in facebook. Now, that could mean that Microsoft is just very, very serious about winning the web 2.0 war (I’m sure they are) but it also highlights the fact that they’re very late to the game. If they had Rupert Murdoch on their M&A team, we might now be talking about how Google was the one who needed to play catch up.

Flickr is a more quiet success story since it was initially purchased for just $35 million, but it’s grown steadily into an anchor of the web. It’s 40 million or so users have built a lively community and some of them are even paying customers. All that pegs Flickr’s value somewhere north of $1 billion, possibly up to $4 billion.

These acquisitions have 3 important things in common:
1) The acquiree was supported by an enthusiastic community
2) The acquirer stayed mostly hands-off and let the property continue to grow
3) The acquirer got in ahead of the curve

Who fits that mold? A few companies come to mind - LinkedIn, Yelp, Twitter, and Digg most prominently. So what should Microsoft do? Keep their eyes out for a bargain, and let their new pet grow.

There is ample talk about what lies ahead for Microsoft and Yahoo, with some people even putting their money on another advance by Mr. Ballmer. With a $50 billion offer recently shelved it’s a valid question sot ask - How will Microsoft now employ that money to get some sort of return on it?

Rick Smith over at Local Tech Wire and MG Siegler of VentureBeat offer up some suggestions for the evil empire to swallow next. Among them are the favorite, AOL/Platform A, Digg, Facebook, and even Twitter. Intriguing thoughts all, but of those only AOL can approach the scale that Microsoft is (wisely) seeking.

Eric Shonfeld of TechCrunch speculates that the lack of movement in Time Warner’s stock price today indicates that Microsoft hasn’t made any moves toward AOL, and contrasts that with the healthy rebound of YHOO today. However, he may be forgetting that Time Warner is more than just AOL, so the stock is probably a bit stickier than Yahoo’s since Yahoo’s stock is completely tied up in, well, Yahoo. Also important is that TWX has actually bounced about 3.4% since the Microsoft-Yahoo deal broke down. That movement may not be as drastic as Yahoo’s, but for a large, sticky stock, it is notable.

Finally, Sramana Mitra of Alt Search Engines has a more creative take on potential targets, claiming that for a “mere” $6 billion Microsoft could stock up on some productive Web 2.0 ammunition.

Implicit in that question is the assumption that Microsoft needs to buy something, if only to fight off boredom. But do they?

Yes, they do. The Yahoo deal is gone, but not the motivation. Google is still encroaching on Microsoft in the apps department, and is obviously dominating the search business. If Microsoft can’t give Google as much trouble in their backyard as Google gives them, they’ll be in serious trouble.

Twitter, an absolute obsession, nay, a way of life for some, is not even on the radar for many people outside Silicon Valley. The root of this lies in the fact that Silicon Valley is the first to know about new technology, either by word of mouth or by targeting of PR and marketing toward that region. The targeting is, of course, merited due to the early adopter culture and all that VC money looking for a home. So once you get past the obvious fixation on all things new and shiny, what allows certain companies and applications to make the leap, and others to stay grounded? And is Twitter going to make the leap or stay at home?

Since there is already a mountain of Twitter speculation out there, I’ll be realistic and say I don’t really know, but I do think being outside the Valley gives me a better perspective on this. I have a clearer view of what obstacles Twitter will have to overcome to penetrate RTP, North Carolina, and any other area outside of Silicon Valley (and, ok they’ve got Manhattan already too). In a few minutes of gazing at Twittervision, I didn’t see a single tweet from NC. It was dominated by CA, NY, and Japan. So what is taking us so long?

As many people have noted about twitter, it’s not very much fun if you’re all alone. What my brief twittervision experiment showed me is that I would be pretty lonely if I relied just on my local tweets (However, being part of the tech world, I have plenty of feeds to follow with relevant news). So, since most people in the Tar Heel state don’t follow web 2.0, most people will not find what they need on twitter.

But, wait, what about personal tweeting? Ah, now we come to the razor’s edge upon which twitter’s future teeters. In the Valley, everyone picked up twitter to try it, then realized they could promote their companies and keep up with news. With the twitter-sphere thus instantly populated, socializing could take place. Until “average” people have a reason to pick up twitter, there won’t be critical mass for social tweeting.

So why is it popular in NY? Aside from the strong tech community there, the media is the next-best home for tweets, because echo chambers love anything that makes them louder. Ergo, hubs of both Main Stream Media, and Amateur Media have found another amp and are plugged in. If a NY food blogger wants to live-microblog a restaurant review to draw traffic to his home page, twitter is there.

The echo chamber effect is particularly attractive to amateur media, which is both more nimble in adopting and testing new technology and more personal in its approach to content. Take the feeds of Robert Scoble and Michael Arrington, for example. Their feeds feature personal pictures as icons, and their tweets blend factual reports, rumors, opinions, rants, and personal anecdotes. Really, a perfect Twitter blend. Compare that to the NY Times feeds, which features a staid “T” logo, and links to articles. That is a typical corporate Twitter use, but you know that the reporters behind those articles are using twitter in their personal time to broadcast their own opinions, rants, and anecdotes.

So what should twitter do to help its chances in the “real world?” It needs to give people any possible excuse to try out the service and keep populating the twitter-sphere. I think they’re on the right track with a robust API and cool services built on top of it - but I also don’t think we’ll stop hearing that million dollar question, “WTF is Twitter?” anytime soon.

Mobile social networking has had more false starts than most “next wave” technologies, with the mild successes of dodgeball, jaiku, twitter, and LimeJuice. But so far they’ve been a mixed bag. Yes, Jaiku was acquried by Google, which is always cool, but did anyone really use it? And yes, Twitter almost qualifies as a runaway success, but more as a blogging alternative than as a social network. So what is different now? Ask Michael Arrington, and he’ll tell you it’s the device, the iPhone in this case.

I recommend reading Mike’s exclusive preview of the app, since he is really the only person in a position to review it. But after you do, consider some of his conclusions, and their implications. He thinks people will waltz into bars confident that their mobile phone will tell them which way to turn for a stimulating conversation, or romantic encounter. The phone will tell you the name and profile of everyone around you, maybe even a few pics they’ve chosen to share (though that seems redundant since they’re standing RIGHT IN FRONT OF YOU). Armed with that knowledge you then…then…take the leap of faith and…engage in conversation. That is where I see a problem. You can lead a geek to water, but you can’t make him socialize.

I know I’m not being fair to geeks here, but I think if this catches on it will encourage exactly the wrong kind of behavior and lead to even more social atrophy. Why? Because it lets your computer hold your hand even longer, so you are even less engaged in the real world. We’re already cut off enough from our surroundings by spending 8-12+ hours at a desk in front of a monitor, along with our mobile phones (especially if they’re iPhones). So extending that safety net of artificial interaction only decreases the time our brains spend each day helping us function like normal human beings. You might call it “cloud thinking,” everything we need to know and say is hosted somewhere other than our brains. Wonderful!

In fact, take a look at the graphic TC used for the article (which I reposted here). Isn’t “Cloud thinking” exactly what it seems to be implying?

Apparently I’m not the only one with this view

This is not breaking news, but one of the Triangle’s most successful tech startups, Motricity, is moving their headquarters at the American Tobacco Campus in Durham for the greener pastures of Bellevue, Washington. Motricity has been both a symbol of the kind of success tech companies can have in the Triangle area, and of the challenges they face when taking VC money and trying to turn a profit.

The N&O has a good look at what precipitated the move and lay-offs here, and also lifts the cover a bit on the tensions that built as Motricity tried to get out of the red. I don’t know much about the expenses of Ryan Wuerch, but from talking to people in the area, I do know that the founders, Jud Bowman, Taylor Brockman, and Wuerch, have been committed to building their company for the long haul. Sometimes that means growing pains. Though we are sad to see that the growing pains mean leaving the Triangle completely, we at TechTownNC are still rooting for the Motricity team, and would still celebrate a successful IPO. After all, sometimes you have to clear old growth to make room for the next great startup.

For more background on the Motricity move have a look at:
http://localmobilesearch.net/?p=471
http://www.newsobserver.com/business/story/980542.html

*Note - if anyone has information on the timing of the lay-offs feel free to contact us, or leave a comment

Marc Andreesson has a truly sunny post today about the outlook for startups in a post YHOO world. Some people are bemoaning the potential loss of a silicon valley stalwart that helped set the playful tone for companies that came after it, especially one that did so much for the advancement of exclamation points in corporate america. Fear not, says Andreesson.

Marc is well-placed to provide some perspective on these machinations, so when he says this could help startups in the long run, he has a reason. It’s true that Yahoo was a big potential acquirer for many startups in the Valley (or elsewhere), but when you look at the numbers you see that they have only snatched up a handful of companies. Yahoo has loomed larger in the imaginations of entrepreneurs than it has in the real world of M & A.

Of particular interest is Marc’s list of other companies that made acquisitions in the tech sphere in 2007. One point he makes here, which I’ve thought for some time, is that the most aggressive shoppers are more likely to be the traditional media companies playing catch up, as opposed to the tech savvy, somewhat cocky Googles of the world.

Fred Wilson nailed this with “You had to see this coming.” Just after Yahoo disappointed everyone with its earnings and the stock dipped a good 8% I thought to myself, “now might be a good time to buy some YHOO.” Turns out I was right, as the stock is now worth about 50% more than that. I, of course, did not follow my own advice, primarily because I have no money with which to purchase said stock. Oh well.

A lot of people looked the Yahoo shares 2 days ago, saw the Market Capitalization around 28 Billion and knew the sharks were circling. Microsoft, the biggest shark out there, made the big offer and is quietly pinching itself at its good luck. The world’s largest internet company (by rough eyeball-count) has to be worth more than 28 B, and now it will have a chance to realize that value. The combination of search share, ad platforms, and general traffic should boost the bottom line of both units. There’s LOTS of work to be done, but I see this as a smart move for both sides.

Meanwhile in Google Land shares are down 230 points from their high…

Here’s an idea - Maybe it’s time to buy some GOOG. Oh, nevermind, I still don’t have any money