Chris Blanc: Play and Projects: Blog

Facebook is leading in dot-com bust 2.0.

Dot-com bust 1.0 occurred when people realized none of these neat web sites had any plan for making money.

Dot-com boom 2.0 started with the idea that selling ads would make money if done the Google way, per impression.

The bust will come as people realize that while money is being made, it’s of no benefit to the advertisers.

GM just figured out that its ads on Facebook were not bringing in consumers.

How could that be? Isn’t everyone on Facebook?

They are, but as with all things internet, the majority of activity is from people who have no money or inclination to buy.

That doesn’t mean that every internet user is a bad prospect. Impressions don’t measure individual users, but how many times an ad is displayed on a computer screen somewhere.

The people who use the internet most are the least viable consumers, so if you’re an advertiser, that means most of your impressions go to unpromising prospects.

If you were wondering why Google and Facebook are manic to get to your private data, it’s because this is their only hope of avoiding being debunked. They need to figure out what you’re actually willing to buy and get those ads to you, while ignoring those who have no advertising potential.

The market will eventually figure this out about Facebook as well. It’s like a free video game in public: the people who spend the most time playing it will be the broke students, unemployed, retired and otherwise non-spending consumers.

Google and others will undoubtedly be throwing more effort into getting a presence on your phone. If they can track your GPS and correlate with actual locations, they can figure out what you spend money on. The problem is that there’s no advertising money in convincing you to buy products you already buy on a regular basis.

This could bring back the decentralized internet. For the past ten years, sites like Wikipedia and Facebook have been the trend. These sites concentrate varied traffic into a single point and then offer it a mini-internet through that site.

In the future, niche may well rule. Instead of one Facebook, there may be thousands or millions, each with its own niche. They may be more complicated but at least they know their audience, and will sort people based on their interests, not their existing habits.

People have asked me if I know of any conceivable practical use for Twitter. This “microblogging” platform lets you publish 140-character updates to a group of friends and the internet at large.

Like you, I’ve probably made fun of the entire idea of microblogging as completely unrelated to anything but what the blogger is eating at the moment. And at first, it was like that: people tweeted (that’s Twitter-speak for “publish”) odes to cheeseburgers, curry and pizza.

However, like all technologies, microblogging has matured. It’s no longer for humans. Instead, it’s a way to automate up-to-the-minute news with a quick description and url.

If you look at any fairly active Twitter stream now, you’ll see that’s the case. I love metaphors, so here’s my metaphor for Twitter as it’s going to be in its second stage: a teletype machine.

There’s a convergence between Digg, Twitter and Facebook that allowes the publishing of “updates” that in their second stage are of a functional nature.

First stage was people chattering away like teenagers in illicit notes passed around math class; second stage is the industrial version. It will function in two ways:

a) Promotion of items found on the internet
b) Real-time updates of alerts, deals, offers, etc

If you look on the top right of this page, you’ll see icons for RSS and Twitter. If you haven’t seen it, this kind of option is stealthily invading sites that offer real-time information across the net; it means their Twitter updates, or “tweets,” or produced by their web software any time new information is posted.

RSS and Twitter are convergences upon the same idea: finding a way to centralize all of our information. Gone is the mid-1990s blather about the portal site. The new portal is the browser, probably a mobile one, and people are looking for a way to get a dashboard or control panel for information from all of the people, businesses and organizations with which they’ve involved.

It’s likely that at this point, over half of Twitter’s users are on mobile devices like phones or PDAs. I’m hearing Facebook has experienced the same thing, so that people meeting in bars simply exchange Facebook profiles instead of scribbled phone numbers. Then they can update each other, letting opportunities for contact form passively.

It’s like a teletype machine in an old-school news office: every thirty seconds or so, it prints out a one-liner of the news. It’s how different offices across the world stay in touch, not a diary.

The office is now a more flexible definition however. Individuals are like small firms; many are also small firms that contract labor. Here’s a vision of how these mobile tweeting technologies are going to fit into our lives:

A young woman steps up to the counter at an auto dealership. Her car needs an oil change; the person behind the counter informs her that there will be a 24-minute wait. She smiles, thanks him (ideally), and sits down on a nearby couch — and whips out her phone.

She then proceeds to conduct all of the business of her life outside of her job: ordering goods on the internet, staying in touch with friends, even paying her phone bill. Even more, when she’s done with that, she’ll try to stay on top of what others she knows are doing, usually through their blogs/tweets and so on.

In the late 1990s, web designers anticipated a day when smart automated “agents” would know a user’s preferences and seek out advantageous contracts and purchases for them across the net. Until we trust our artificial intelligence machines more, we’re going to be doing it the old fashioned way: reading the teletype and checking off items we’re interested in, even if we do it on a cell phone/PDA hybrid like a Blackberry or iPhone.

Like most technologies, Twitter has grown up — and we’re going to see tools that address this perceived need grow further. Now that we’ve linked the world and everyone has something to say, the real challenge is quickly filtering wheat from chaff, much like your grandfather may have done reading over the teletype in his office.

You’ve probably heard people saying that history repeats itself. This saying is troubling because events repeat in different forms, so you can’t look for similar appearances. You can however look for similar functions in the information ecosystem.

I’ve now lived through several cycles of the “this newfangled stuff is worthless” and, in my experience, that reaction occurs because when technologies first appear, people have no idea how to apply them. And if there’s anything that excites me about technology, it’s applying it. Making it address real world needs and functions.

Take for example, Twitter. The service allows you to post “tweets,” or 140-character one-line updates, to your online friends. The old joke was that most tweets were from people in restaurants. “Now at In-N-Out. The cheeseburger with bacon is a better option. Someone swiped my fries.”

That was the early adopters trying to find a reason to hold on to this neat new service. It’s more of a service than a new technology, but we still treat it as a new technology because interface design is what shapes technologies into products, and each product must be adopted just like any new tech.

First, people found out that while prices for texting a group of people on your cell phone are low in Europe, they’re high in the USA, so Americans — many of whom carry smart phones or PDAs — favor Twitter. But that was just an intermediate step to the real use of Twitter.

Remember how I said history repeats itself? That means we can use past patterns as metaphors to describe current ones. Kind of how we might describe an automobile as a chariot or a big military defeat as a Waterloo.

Here’s my metaphor for Twitter as it’s going to be in its second stage: a teletype machine.

In the old days, newspaper offices, government buildings and large corporations all had teletype machines. These enabled them to get updates from all over the world before they had been processed through the newspapers and radio.

Of course, these were terse updates — under 140 characters or less in most cases — because the teletype was a group-directed extension of an earlier technology, the telegram. Mechanically, it was barely different at all; however, since it allowed news to be broadcast instead of directed at one person, it changed society. The pace of the teletype defined how fast insiders were moving on the news, and the rest of society adapted to keep up.

Back to Twitter: it’s the modern teletype. From what I can see, most of the content on Twitter is generated by automated scripts. Your blog can automatically update others using Twitter. If you have a content management system, a bulletin board, mailing list or news service, the same is true.

Like a teletype, the Twitter page spits out these updates as they occur, so if you “follow” the Twitter accounts of all concerns in your life, you’ll be very well-informed and up to the minute, thanks to these automated postings.

Here’s one I’m using — the CDC’s H1N1 “Swine Flu” page. This box from the upper-right corner of that page gives you numerous options for staying informed without coming back to the page — which, given the amount of information the average person must manage, is an unlikely outcome.

It’s likely that at this point, over half of Twitter’s users are on mobile devices like phones or PDAs, and they tune in to see what the world around them is doing. They also catch these updates while they’re out being good consumers and buying products, which makes Twitter a good medium for making a pitch.

People are using Twitter for their businesses to offer real-time news, and updates like coupons or deal offers to draw in customers. They know that the savvy Twitter user isn’t posting restaurant updates — they’re subscribing to the best news feed you can get outside of a press nexus.

History repeats itself in other ways as well. I could point out how downloading MP3s has become like the new radio, or how the internet itself has become the new television, but you know these things already. Now just add Twitter to the heap.

As someone who always thought the web was one of the coolest technological amalgamations we as a species have produced, I have been wary for years of a collision between worlds. The virtual world has its own rules; the economic world has its own rules, too, but they’re closer to being part of nature.

In other words, we can represent nature by economics, but probably not by virtual world ideas. The virtual world is too cleanly cut off from the physical world, and too clearly tied up with what users think and want to believe. Because everything in this world is virtual, there’s no scarcity to force one solution to be better than another.

Now, at fifteen plus years into this little experiment, we’re seeing the worlds collide — and the physical world model is winning. Despite all the panic over the supposed demise of newspapers, the business models of old media are steadily gaining ground each business cycle.

• Advertising. In the past, I’ve written about how the people clicking are not the consumers advertisers desire. For many years, web advertising has been a free-for-all, with most ads being complete spam unrelated to what a user is seeing. The ads that do work seem to be the ones that pick up on what a person is seeking and offer a solution, but I don’t have data for that yet. What we do have is the news that users of Microsoft’s search engine Bing are more likely to click on ads. Bing and Google are two opposite strategies: Google cultivates its audience from the virtual world, where Bing gathers its audience from the “real world” more readily reached with TV and magazine advertising. Google is the new strategy of giving away expensive software services (like search) so that people buy ads; the Microsoft strategy is to use ads to get people to use services so that they can then sell them other software services.
• The virtual world model of free software is in trouble. At a time when Linux use is rising, but not as much as people thinking, other free/open source (FOSS) software makers are finding they’re facing competition — from corporations using the open source model of distribution even if not open-sourcing. Microsoft has released some code under an open source license; Google is distributing its browser, Chrome, as if it were open source software. This adds up to a problem for open source software, since most open source software packages are basically clones of existing software. Do you want Microsoft Office, or the free clone alternative, Open Office? Do you want a commercial UNIX or the free version, Linux? The main competition with open source software is piracy. If I can get Open Office for free, and Microsoft Office for free by pirating it, does the piracy being illegal affect me so much I wouldn’t rather have the better product? Look for more software houses to look the other way as piracy occurs, because having a larger installed user base is probably more important than getting people to pay large sums for software. Here we see the old model of hiring the best designers and coders and making top quality software coming out ahead.
• Net capping. The problem with the net is that people get attracted to the $50 monthly cost for broadband, and assume everything else is free. Music should be free. Software should be free. All web sites should be free, and newspapers should not charge for their online versions. Companies are finding that all this free doesn’t add up to profit, and that without profit, quality of services declines — but people are happy with Wikipedia, Google, free software, and pirating anything else. I have frequently suggested, in conversation, that newspapers make the first three paragraphs of any article available to the general public, but the full thing available to search engines, and then use either (a) micropayments or (b) membership in a monthly “information fee” group, with the percentage of a user’s clicks on each site determining how much of the payment goes to that site. People balk at $300 software, but they also balk at $20 software. The costs of running a computer are too high because the computer is now an everyday appliance like a refrigerator. People want to spend maybe $100 a month on it; $50 will go to broadband, where does the other $50? I suggest that operating system vendors open their own version of an “App Store” and sell third-party apps, possibly under a layaway-cum-subscription free that sells software cheaply, but as a bonus, gets these users registered. Software prices are going to fall except for businesses who license the stuff so they can get support; the industry will face this sooner or later, but either way, the future belongs to those who can make many bills/obligations become a single, one-stop source for software. This, again, is the old model; instead of a multiplicity of sources through which we must wade, trusting our wits, there’s a single answer — like a SEARS in the 1970s — which converts the computer from something we work on to an appliance we do work with.

As this year closes, watch for these market forces to converge. The age of the computer as calculating machine died in 1982; the age of the computer as an isolated device died in 1995; now, the idea of the virtual world as separate from physical world business models and natural world metaphors is about to die.