Archive for April, 2006

Fear and greed drive the market

Friday, April 21st, 2006

I was flying back to San Diego from New York yesterday, and it occured to me that fear and greed drive the market…for binspace.

Why are people so eager to get on the plane just so they can sit there and be annoyed by the general getting-on-the-plane activity going on around them? The whole plane leaves at the same time, so it’s not like you get there any faster by getting on the plane first. Also, I don’t think anyone would argue that it is more comfortable to be sitting in an airplane seat as opposed to sitting on a barstool at the airport lounge.

Just like the stock market, it comes down to fear and greed: People are driven by their fear of having no bin space at all, which means having to gate check their carry-on baggage and the ensuing hassle that it represents, not the least likely of which is that your luggage simply doesn’t arrive at all. They are also inversely driven by their greed to have as much bin space as possible to ensure a hassle-free travel experience.

Both of these forces drive early boarding. When you are early, you have bin space options. When you are late, you may have some, you may have none, but it is certain that you will have fewer than if you are early. I find it interesting that seemingly opposing forces can drive the exact same behavior.

The Portfolimno was impacted by fear and greed this week as well…

Not PLAYing nicely

And so I watched with interest yesterday as PortalPlayer’s stock lost around half of its value, dragging the value of the Portfolimno down several points along with it. Apple apparently isn’t going to be using PortalPlayer’s system-on-a-chip in some upcoming versions of the iPod.

The PLAY investors driven by fear are exiting early, as well they should: An inordinate percentage of PortalPlayer’s revenue is driven by iPod sales, and not having that predictable revenue will hurt. But how much will it hurt? Will it mean revenue will decrease commensurate with the stock plunge? Not probably, at least not in the near term. Specifically, the apparent impact is limited to their getting designed out of future versions of the iPod Nano, which accounts for roughly 60% of PortalPlayer’s sales. The most believable speculation is that the iPod’s design and marketing sells the iPod more than the system-on-a-chip inside of it, the future version of which is probably overbuilt (and therefore too costly) for what Apple wants to achieve. Might the same be true of other iPod products? Possibly, and that fear is enough to drive many investors out.

Remember that the reason I added PLAY to the portfolimno had nothing to do with iPod sales. I added PLAY because of the likelihood that they will provide a solution for a wireless media device. Then they announced they were doing exactly that. And now I will wait until the next CES to see what they come up with. As far as PLAY goes, I am still driven by greed over fear: If they are a going concern, the industry will even out, the iPod will lose its stature as the gadget du jour and they will recover from the hit they took yesterday. It may take time, and worse things can still happen, but I am holding my long position in PLAY.

PLAY is now the anchor of the Portfolimno, replacing SNDK, which was showing signs of life then just tanked over 8 points on their forecast of lower component pricing plus some now-included equity-based compensation expenses that skewed results. Analysts were mixed, but investors voted with their feet.

I bought more INSP
The Portfolimno had a bit of cash still sitting around from the OPWV sale, so I put that into INSP ahead of the earnings call next week, which I hope will be positive. The mobile search product is awesome, and is a great way to merchandise content, which should drive more value back to InfoSpace. After getting reoriented last year, this company is definitely on the right track. The T-Mobile search product is rumored to be doing very well, increasing content sales measurably, which should in turn benefit InfoSpace. I hope to hear a little bit about this on the earnings call next week.

Here is a current snapshot of the companies in the Portfolimno since inception on January 5th, 2006, up 6.87% for the year.

VNT +44.79
CHL +21.36
NVT +21.11
QCOM +16.55
RIMM +14.08
INSP +12.55
AMX +11.99
S +9.27
NWS +7.97
IACI +4.19
VRSN +2.38
AT +1.07
SNDK -22.47
PLAY -57.27

Notice I recently added VRSN because they are apparently aggressively buying their way into the space and I believe scale counts for something. I have been wanting to do a post comparing OPWV, INSP and VRSN but haven’t had time for the depth of research and analysis I would like to do. Hopefully I will be able to get around to it soon.

Rated R

Thursday, April 20th, 2006

Has the FCC ever overstepped its authority? Four TV networks think so, according to this article in the LA Times.

Here is an excerpt:
“’The FCC overstepped its authority in an attempt to regulate content protected by the 1st Amendment, acted arbitrarily and failed to provide broadcasters with a clear and consistent standard for determining what content the government intends to penalize,’ the statement said.”

If a broadcaster is going to risk a fine from the FCC for indecency, it seems reasonable that a clear definition of “indecency” would be the minimum that they should require the FCC to provide. Apparently, there is some question as to whether the FCC is totally clear on this point.

Regardless of where you stand on the issue of indecency or how you define it, you should at least be in favor of defending the 1st amendment, which, in James Madison’s 45 words, is a framework for personal freedom and the cornerstone of our definition of a free society.

I believe that it is the duty of such a free society, if it is to call itself free, to test and verify the boundaries of its government’s authority over society as defined by the rules by which we all agree to be governed.

As it relates to the wireless industry, my opinion is that we look more like the cable industry. Network operators in this country are operating subscriber-based private networks, not public airwaves, and this should delimit the authority of the FCC in this area. I therefore favor self-regulation in this area.

And so I was just reading with interest the Cingular Wireless Parental Control Guidelines, generally based on the CTIA standards, which they sent to all their developers and partners. I think this is good, and I am happy to see the CTIA and individual carriers like Cingular proactively address the issue of indecency so that parents can make informed decisions about the content to which they decide to expose their children.

But there is a trickle-down effect that concerns me: If there is the least bit of ambiguity in how the FCC defines “indecency” at the top of the pyramid, a great many entities at the middle and bottom of the pyramid will be greatly impacted. Further, I question the ability of the FCC to legislate decency when the very notion of it has wide margins of grey at its edges. To illustrate:

Do you know what “skeet” means?

The American Heritage Dictionary of English Language 4th Edition says it is a noun: “A form of trapshooting in which clay targets are thrown from traps to simulate birds in flight and are shot at from different stations.”

www.urbandictionary.com has a very different definition popularized by urban culture. So is this a “bad” word?

Apparently context makes all the difference. “Skeet” isn’t on any of the restricted word lists that I have seen.

There are other instances where context makes the difference between an acceptable use of a word and Tipper Gore putting a sticker on it:

You can “Prick your finger,” but not the other way around. You can also put your finger in a dike, or cock your gun.

Even adding a non-offensive word to a non-offensive sentence can be problematic:

If you say “Dick Cheney shot my face,” that’s ok.
If you say “Dick Cheney shot on my face,” that’s not ok. (Unless you’re into that sort of thing.)

None of the words in these sentences are offensive and the preceding sentence would make it through any automated filtering mechanism. Typically a “stop word” list will contain the George Carlin dirty words that we all know plus a good number of (sometimes humorous) derivitives. That is all fine and good.

But how do you apply a universal rule of decency to all content and implement controls to ensure adherence to the rule?

Let me say now that I am personally in favor of parental controls. As a media populist, I believe that all content should be readily available to anyone who wants to consume it. Adding clearly presented information about the nature of the content so that the consumer can decide whether he or she wants to consume it is a fine way to inform consumers to help them make decisions.

I believe every parent should have the ability to express their parenting preferences through the choices they make regarding the media that their children consume. Some parents may feel confident that their children are mature enough to make appropriate choices on their own. Others may feel that a more active role in what their children consume is more appropriate. In any case, the key is information. Parents can benefit from standardized information about content because it means the most paranoid among us do not have to see every movie, listen to every song and watch every TV show before our children do in order to determine whether they can watch it or not based on our own “parental sense” of what is acceptable.

If all content can be put into buckets and a user can filter access to a particular bucket of content (say, R-rated content) by setting a preference on the TV, radio, computer or their mobile phone, then 99% of the cases of offensive content will be addressed.

Here is a big problem:
There is no uniformly standardized information about content.

Let us take, for example, one of my favorite subjects of ratings history: A Clockwork Orange.

Did you know that the ground-breaking 1971 Stanley Kubrick film A Clockwork Orange was rated X?

X?? Isn’t that rating reserved for hardcore porn? Sort of. The rating “X” essentially got co-opted by the adult film industry and became synonymous with that genre. It was not a rating copyrighted by the MPAA, and so the MPAA later created the copyrighted “NC-17” rating to replace it.

A Clockwork Orange, nominated for an Academy Award for Best Picture, was rated X.
Compare to Beach Blanket Bingo. (Which I have never seen.) Do these films belong in the same rating category? Some might argue yes, some no. Mine is not to argue either way, but just to question whether the categories in any rating system are descriptive enough. Let’s examine…

The current MPAA rating system maintains the following copyrighted ratings:
G
PG
PG-13
R
NC-17

Interestingly, A Clockwork Orange has also been rated C, O and R. The United States Catholic Conference’s Office for Film and Broadcasting maintained a rating system at the time that included a “C” rating, for “Condemned,” as in “no Catholic may see this.” The “C” rating was later dropped and replaced after 1982 with the “O” rating for “Morally Objectionable.” Kubrick cut 30 seconds from the film to receive an “R” rating from the MPAA in 1973.

The United States Catholic Conference’s Office for Film and Broadcasting maintains the following ratings:
A-I
A-II
A-III
L
O

Some other churches have rating systems of their own, but I didn’t take the time to search for them.

If there were a game based on A Clockwork Orange, it would likely receive an ESRB rating of “AO” meaning “Adults Only” for “prolonged scenes of intense violence and/or graphic sexual content and nudity.” (Not to mention Blood and Gore, Intense Violence, Strong Language, Strong Sexual Content and Use of Drugs, if that’s what they were selling at the Korova Milk Bar.)

The ESRB currently maintains the following ratings:
EC
E
E10+
T
M
AO
RP

If A Clockwork Orange were a coin-operated video game, it would contain a parental advisory on a red sticker, because all coin operated video games now have Parental Advisory Disclosure Messages on a sticker in the following colors, apparently indicating the level of alarm a parent should feel:
Red
Yellow
Green

If they showed A Clockwork Orange on television, it would likely receive the rating of TV-MA, for Mature Audiences only. Here are the copyrighted television ratings:

TV-Y
TV-Y7-FV
TV-G
TV-PG
TV-14
TV-MA

(Since 2000, all televisions of 13” screens or larger contain a V-Chip that enables viewers to filter content based on these ratings.)

The soundtrack to A Clockwork Orange would not receive a Parental Advisory sticker on it, but the RIAA maintains its own rating system indicating whether song lyrics are “Explicit” or not.

I like the CTIA’s simple approach

The CTIA’s content rating system is easy to understand:
Cellular Accessible
Cellular Restricted

On top of this, individual carriers will probably promote their own marketing-ready interpretations of these guidelines. Cingular is very proactive in this area. It looks like Cingular may go with “Cingular Safe,” which is their working name at this point. I personally like it, as I think it sends the right message to parents. They want to know if content is “Safe” for their children or not.

The CTIA guidelines essentially put all repurposed content that already has a rating into each of the two buckets. So, PG content would go into the “Accessible” bucket, and R content would go into the “Restricted” bucket. This is simple and effective. Good. Good good good for all content that already exists, has already been rated elsewhere and only needs to be mapped to the additional rating system. But what about all the content that gets created and distributed via mobile devices every minute of every day?

Here, finally, is my point:
How do we effectively implement a rating system on communication?

Mobile “communication” is no longer defined simply as a station-to-station voice call. Communication in general is now comprised of text, photos, audio and video, and it is not limited to interaction between two people. You can take a picture with your camera phone and post it on your blog for a million people to see.

And what about the example of A Clockwork Orange mobisodes? There are clips of that movie that are completely inoffensive. Should every 1-minute slice of that movie, if that is how it is going to be distributed in the mobile connected future, be given the same rating? Who is going to watch every movie, minute by minute and assign a rating for each piece of content?

Of course there are review tools that can be deployed, and we built such a tool for Rabble. This picture with the caption “Man with big cock” showed up in our content monitoring tool recently because we flag the word “cock” with no relevance given to context.

(It’s ok to click – it’s not what you are thinking.)

An automated tool is only so effective because it cannot determine context. So we add human review to enforce our content policies. So far it works very well. But is this the right way to handle the regulation of all user-generated content in the future?

There is no way a centralized reviewing entity can effectively address all user-generated content in the world because content production is distributed. By comparison, it is easy to administer ratings for whole movies for traditional distribution – they only have to look at maybe 1000 pieces of content per year. Most blogging and social networking sites generate that much content in one minute.

There is a massive vacuum for an effective rating system for user-generated content. The answer is a distributed rating mechanism. I know of one company that has a very elegant solution about to be rolled out: User-generated ratings. You self-rate your content. If you lie about the rating, your standing as a good citizen gets affected negatively. The community, along with objective moderators, determine rating validity by voting on it. The majority rules. Prolific and truthful raters elevate their standing. Then every consumer of content has filtering tools that allow them only to see the level of content to which they want to be exposed. This can happen on the individual content level, the channel level, user level or categorically. The rating system contains buckets that map similarly enough to the MPAA or ESRB that it is easy for all to understand.

Our next platform release has a ratings widget for just such a purpose. It can be repurposed and/or combined for a variety of uses. At one end of the spectrum, there is the frivolous but fun “hot or not” type of rating. At the other end is content filtering that can then map to a rating standard for content filtering.

I know it seems simple, and I know some companies like Amazon.com and eBay have been doing a version of community-based rating and review for years in different contexts, but in the user-generated content space, we are about to see an explosion of activity in this area.

The FCC performs a valuable function by establishing a generally acceptable standard of decency. While the FCC can also make some guesses as to the specific definitions of decency at the blurry edges of content and communication, proactive companies will likely help the effort along by evolving content standards and practices along with the changing production and distribution mechanisms. Look for this to be one of the hottest topics in this space through the rest of the year.

CTIA was fun

Friday, April 7th, 2006

I was going to write a detailed trip report, but I am going to a wedding this weekend and really won’t have time, and by the time next week gets around you will have already moved on to something else and won’t care what I have to say about CTIA.

As far as Intercasting Corp goes, we had a very successful trip, none of the details of which I can tell you about. Sorry, but you’ll appreciate it all later I think. I do have some random observations, though:

Samsung is very serious about kicking some ass

And Samsung’s new handsets are cooler than any other manufacturer’s new handsets, and their UI is finally as good as, and in some cases better than, Nokia’s Series 60. I have an A920 that Sprint gave me and I will make a detailed post about it separately sometime soon. If it weren’t such a pain in the ass to buy their ADRs I would add them to the Portfolimno.

I was channeling Wesley Snipes

Call it the luck of the Irish: I won EVERY time I played roulette. My strategy is not so much to play Roulette as it is to randomly walk by and put $100 on black, win, then leave. Derrick and I started doing this every time we walked by a roulette table and we both won every time. We only bet on black, we only bet $100 each, and we only bet once and then walked away. We were having a drink with our friend Matt and told him about it, then when he was returning from the restroom, he also played roulette according to the prescribed strategy and won. I won $1200 and Derrick won like $500.

Fun new company: Blogstar.
Their strategy apparently has much to do with Juliette Lewis and her band. She was in Barcelona at their party, she was in Vegas at their party. If she doesn’t show up in San Francisco in September, I will be disappointed. I love Blogstar’s concept: Celebrity bloggers that you subscribe to for a fee. I would definitely pay a buck to see whatever Paris Hilton is doing with her Sidekick right now. My only question is whether you can really get celebrities to blog on demand and/or whether the profit incentive is strong enough for someone who makes millions of dollars a year. Let’s wish them luck, though. Their’s is one of the more interesting approaches to “small media” in the mobile space. Really pretty cool.

Funny new company: Radiate.
They were telling people at parties that they are in “stealth mode” but this week we found a public user on Bloglines named “etana” who subscribes to my blog and Derrick’s blog. Etana created a folder called “Flipt competitors” which contained the following:

Facebook
Myspace
Dodgeball
iContac.com
imahima
Intercasting & Rabble
Mobiluck
Rave Wireless
Streethive
Webdate Mobile
Checkmates or Yahoo
Areyouhere.net
doien.blogspot.com

They forgot uLocate.

Right below that folder was a folder called “Flipt carriers” that contained a link to one MVNO that I decided not to mention here for the following reasons:
- I felt bad for this person at Radiate who either doesn’t understand how the internets work or just made a mistake.
- As of today, user etana appears to have figured out the mistake and is no longer public.
- I frankly don’t want to steal their thunder. These are a couple of Stanford dropouts who are probably having a lot of fun, running fast, feeling optimistic, etc., and it just seemed kind of dickish to reveal their customer for them before they get to do it themselves.

Radiate, let this be a lesson to you: If you are going to be a “really secret startup” like your site says, don’t create public folders on Bloglines that describe your intended competitors and your unlaunched partners.

I admire the hubris of whomever at Radiate views Facebook and MySpace as competitors before they even launch anything. But I guess go big or go home, right? Their stated list of competitors combined with some casual asking around suggests they are similar in ambition to WaveMarket: A location-based friend finder. (btw – no trademark has been filed yet on “Flipt” so I am going to file on Monday morning at 9am PST, so get all your shit together this weekend and beat me to it.)

I must admit I am happy to see more companies entering the LMNO space in general. Let’s wish Radiate luck.

VCs were swarming CTIA
Let me take this opportunity to offer a word of caution to investors in the mobile space: Location is not an application. It may be a feature of an application, but it is not an application. I know several investors who are saying lately that they are looking for something particularly “mobile relevant” in which to invest. Small companies with the term “location-based” seem to make perfect sense, since a mobile phone is, after all, inherently a location-based device. (We were specific about calling our company “location-aware” and not “location-based” for some very good reasons.)

But be careful about your assumptions: Consider the possibility that a map interface is not the best way to represent location-based information on a 2-inch screen. Consider the possibility that something like Dodgeball, while nifty, actually takes more effort than just sending your friends an SMS. Consider the possibility that a user-generated POI is not more valuable to most consumers than an editorialized POI. And remember that consumer appeal is sometimes indirect and a good majority of companies that think they are selling “entertainment” are actually selling “personalization” and the applications that look on the surface as though they are “time saving” are actually “time wasting.”

Do you think that because people won’t buy music on the internet they won’t buy ringtones on their mobile phones? Do you believe that because IM is free on the web that people won’t pay for it on their mobile phones? Do you think that an ad-supported model is the only way MySpace can be successful in the mobile space? Then you shouldn’t invest in the mobile space.

Flattering Imitation from uLocate

Tuesday, April 4th, 2006

I just got a funny email from a reader:

uLocate bankrupt of ideas

“WHERE enables a new kind of self-expression that informs, entertains and connects people through the media they create,” said Walt Doyle, President and CEO of uLocate Communications.

http://ulocate.com/3-21-06.php

When did he say that? When he was reading the Rabble web site?

He is speaking today at a CTIA pre-show why don’t you catch up with him

I have never heard of this company, but it looks like they have been in business for a little while doing some kind of location-based mapping something or other, and they are apparently now trying another business model.

Compare Walt Doyle’s description of his new service (which is a website you send pictures to and looks sort of like what our friends at Buzznet have already built) to the Intercasting Corp website description of Rabble:

Walt Doyle said on 3/21/06:
“WHERE enables a new kind of self-expression that informs, entertains and connects people through the media they create.”

The Intercasting website said on 5/7/04:
“Rabble enables a new kind of self-expression that informs, entertains and connects people through the media they create.”

I am guessing Walt’s PR guy is going to have to explain why his CEO’s quote is an exact ripoff of our copyrighted product description. Jon, look for our cease and desist in the mail. ;-)
Before you label uLocate an also-ran, consider this: I think they are simply realizing that the way we describe Rabble is in fact the simplest way to describe the opportunity that they are just now recognizing.

I think this is positive for the LMNO space because I believe all ships rise with the tide. uLocate may turn out to be an also-ran, or they may end up winning the race. It is impossible to tell at this point, but I welcome the addition of a company out in the industry evangelizing the opportunity, and I have to say I wish them luck.

When we started Intercasting Corp, we did so from scratch focused on the mobile social networking space. We didn’t have a piece of technology that we were trying to leverage, we didn’t evolve from some other kind of business and we didn’t have the ambition of being all things to all people in the mobile space. Our vision was as it remains today: Laser-focused on the opportunity that lies at the intersection of mobility, media and communication.

But that opportunity is not captured in phrases like “social networking” or “social media” or “MoSoSo” because they don’t adequately define the essence of the user experience, namely that the glue that binds people together is the media they create, and that in the mobile environment that media has a location component to it that makes it potentially more useful.

So we came up with an acronym to express that opportunity: LMNO. We think the mobile media opportunity belongs to Location-aware Media Networking Operators, or LMNOs. An LMNO in our view “enables a new kind of self-expression that informs, entertains and connects people through the media they create.”

In 2004, before the well-deserved MySpace hype, and certainly before they had any ambitions in the mobile space, trying to describe what we do and how big the opportunity is was a difficult task, but we knew they would eventually come. I don’t think throwing another acronym into the mix helped much either, but we stayed the course because of our conviction that this was the right area in which to build a solid platform that could be leveraged by the myriad companies that would eventually find themselves profiting at the intersection of mobility, media and communication. Now that we are having success, I think it is easier to see the value of the opportunity, and I am glad that we started as early as we did to build a solid platform to enable partners in this area.

So come on now Walt - in for a penny in for a pound. If you are going to rip off our copyrighted material, all I ask is that you start also calling your company an LMNO if that’s what you want to be. I didn’t coin the term for it to be proprietary to our company in any way. I did it because the space needed definition. The LMNO opportunity is so huge there is no way one company can own it all. Just today, Intercasting Corp was mentioned in a Wall Street Journal article about mobile social networking along with Facebook and MySpace. (And also Air-G, a company we have a ton of respect for that I would call an LMNO.) My point is that a host of players, some large, some small, some brands, some platforms, some products, some services - are all swirling around the same massive opportunity and I think some real value is about to be unlocked in a serious way for consumers, carriers, brands and a bunch of companies that make it to the table in time to enable the opportunity.

UPDATE: On 4/4/06, Jon, their PR guy, called me to apologize. That was pretty upstanding of him. He set up a call next week with Walt, their CEO, so I will see what they are about.

Tip for your meetings at CTIA

Tuesday, April 4th, 2006

Off to CTIA - no time for long-winded blogging this week, but I will have a trip report of some sort next week. If you are going to the show and want to see Rabble, stop by the Kyocera booth and ask someone to show it to you - it should be on a few handsets there.

So here’s a funny thing I just figured out and thought you might benefit from.

Say you want to have a meeting at CTIA:
Someone said to you, “Let’s just meet somewhere at the show.”
You said, “Sure, why don’t we just call each other and then we’ll find a quiet place to talk. How many people from your side are coming?”
“There will be five of us.”
“Oh. Ok, we’ll work something out.”

But you won’t work something out. If you have been to the Las Vegas convention center, you know that there is nowhere to sit, and there is certainly nowhere quiet. So the seven of you will end up standing somewhere in the middle of everything and try to have a conversation and it will be lame.

A better alternative is to walk next door to the Las Vegas Hilton and make a reservation at one of the restaurants. The only problem is that the restaurants that take reservations are not open until 6pm, and the lunch places do not accept reservations. Bummer, because you don’t want to wait around and maybe not get a table at all, which would be as bad as standing around at the show.

What to do?

Well, it turns out that the Las Vegas Hilton operates a franchise inside of their hotel that has its own restaurants and booking policies. I am, of course, talking about the Star Trek: The Experience franchise.

Yes, you too can battle Borg and Klingon on two exciting attractions. But you can also dine at Quark’s Bar And Restaurant where “uniformed servers will take your orders on tricorders and Klingons and Ferengi are available for delicacy recommendations. On the menu: chicken wings in a Vulcan hot sauce, Klingon Kabob, Thalian Chocolate Mousse and, naturally, Glop on a Stick.”

And they take reservations for lunch.

So, every day this week you will find me having lunch with prospective partners and clients at Quark’s, having Glop on a Stick, and discussing mobile community and social networking.

I know it’s ridiculous, but it’s the best alternative to sitting on the floor in the main hall like you’re in grade school playing jacks, getting your blue shirt and khakis all wrinkled.