The beginning of the end of Playstation 3 delay speculation

Sony has announced that it will roll out Blu-ray movies on May 23 to coincide with the launch of Samsung's Blu-ray disk player.. After seeing the doom and gloom predicted for the Sony Playstation 3 launch by the New York Times over the weekend, it's nice to see some dates on the calendar. And given that most of the delays for the Playstation 3 are laid at the feet of the inclusion of the Blu-ray disk standardization, my money is that the New York Times got their article wrong. Why? Well, if Samsung is launching Blu-ray high-definition disk players with their full feature sets in May, I suspect Sony can probably build a few for its gaming platform too. After all, it created the standard in the first place.


The irony of the story in the Times was that it, like many other publications, noted Microsoft and Intel's backing for Toshiba's HD-DVD format as providing real competition for Blu-ray disks. As we noted last year, Microsoft and Intel currently neither use nor specify HD-DVD drives in their products, and any future use of HD-DVD drives are confined to XBox 360 add-ons (which require that you have an XBox 360, which isn't a big market yet in and of itself) and PC drives under Windows Vista, which won't really have any impact until 2007.


The bottom line: If there's one game Sony knows how to play, it's marketing. Our call on next generation DVDs remains the same as it was last year: Blu-ray is going to win the war because of its huge studio support, and the consortium of consumer electronics companies (not computer firms) support it. If people were hoping Blu-ray was going to hold up the Playstation 3 launch and give Microsoft some breathing room, Sony is on track to dash those hopes this summer.

Technorati Tags: XBox 360, Analysis, Playstation 3, Sony, Marketing, puppy, Microsoft, Games, Intel, Gaming, Opinion

A completely different take on network neutrality

The Net Neutrality PR war is heating up again as Congress considers whether it should preserve the this "dumb pipe" foundation of the Internet or allow it to be swept away by a more carrier-lucrative "intelligent design" business model.

So who will win this war? Former Forrester colleague Paul Callahan has a completely contrarian and common sense answer at his site: Cisco and other network vendors who make prioritizing gear that carriers will buy but never use. And if you would rather hear Paul make the argument in sonorous MP3 tones, listen to his MP3 audio file instead. Both have great ideas and contain good advice. Too bad Congress likely won't pay attention to either of them.

Technorati Tags: Paul Callahan, Analysis, Telcos, Internet, Network neutrality, Opinion

Chi Mei's announces film-definition LCD TV

It's been a while since I wrote anything about high-definition flat panel TVs, but with CeBIT coming up next month, that is about to change. And a large Taiwan flat panel manufacturer is firing the first volley in that month-long battle for attention.

According to Gizmag, Chi Mei, the third largest producer of LCD's in the world, will show a 56-inch LCD TV, displaying 3840 x 2160 pixels at next month's CeBIT in Hanover, Germany. There's no word about whether it will display in progressive or interlaced form at that resolution, but if it is progressive, that would make it a film definition TV by our terminology. That's only slightly less than the new digital projectors being put into movie theaters, such as Sony's digital film projector at that displays 4096 x 2160 pixels. But Chi Mei's product definite has serious bragging rights, since it is a direct view device, incorporating more than 28 million transistors and displaying more than 8 million pixels.

It would make an awesome display for my PowerMac -- if only there were a video card that would drive it. Perhaps this will provide some incentive for the plasma manufacturers to up the resolution of their direct-view home displays.

Technorati Tags: 2160p, Chi Mei, Consumer Electronics, Film definition TV, Flat-screen TV, HDTV, LCD, Marketing, TV

Sony Playstation 3: The marketing game for launch

[Sony's Playstation 3 conceptual designs shown at the 2006 Consumer Electronics Show]



Sony stock has been hammered lately, largely in response to a Merrill Lynch report (PDF format) claiming that the Playstation 3 will be priced at nearly $900 because of expensive processors and Blu-ray disks, and delayed until late 2006 or early 2007. Some of this concern comes from the fact that the Playstation 3 was not shown at the Taipei Game Show. The reasoning seems to go, "If Sony doesn't demonstrate working hardware at a gaming show, something must be wrong."

My view: too many people are getting hung up on the technology behind the console and the bits and bytes around that while ignoring the bigger picture. Let's use a marketing lens to view the few facts we have and see if this all still makes sense.

1. Set prices to maximize sales and profits. Merrill Lynch's analysis puts the cost of goods for the PS3 at $900, and still at $320 after three years. But these numbers are estimated costs, not prices. Merrill's estimate of processor cost is quite out of line with processor costs IBM charged both Apple and Microsoft for similar PowerPC chips. Sony also has its own Cell chip and Blu-Ray manufacturing facilities that it can use to manage costs. And finally, Sony may set prices based upon its target market ability to pay rather than its costs to guarantee a successful launch. The bottom line: no one should be interpreting those costs as being anything but influencers, not drivers, of the final price of PS3.


2. Launch when the market, not the product, is ready.Sony itself says it is preparing for a Spring/Summer launch in Japan. But how interested is the consumer in a video game console launch in Spring or Summer? My bet: the Spring/Summer launch is intended to allow the company to work out the bugs while demand is still relatively weak, while building up to a bigger fall production run.


3. Never prelaunch a product before you launch it. Everyone is moaning about how Sony hasn't demonstrated any units nor leaked significant information about the machine. As I noted last week, this is a smart marketing strategy. Leaking information only dilutes the power of the final product launch and does nothing to actually satisfy consumers. Withholding information, on the other hand, builds buzz and word-of-mouth interest. Think of the power Apple gets from all the secrecy around its products. Sony is doing the same thing.

Don't expect Sony's going to play a technology game with PS3 just because it is competing with technology-focused Microsoft. Sony is a marketing company. It sells as much style and excitement as it does electronics. Sony's brand has historically commanded premium prices because of Sony's savvy marketing. That game isn't going to change, even with a next-generation gaming console.

Technorati Tags: Analysis, Games, Gaming, Marketing, Microsoft, Playstation 3, Sony, XBox 360

Online activities now consuming almost a quarter of marketing budgets

Blackfriars published our ninth quarterly Blackfriars Marketing Index today (you can read the press release here), setting the first quarter value to 106. That means that budgets in the first quarter of 2006 are only about six percent higher than they were in our baseline year, 2003. Given that actual spending usually comes in at between 70 to 75 percent of budget, that's not good news for marketers. Bottom line: companies are spending less on marketing this year.

But there's more here than meets the eye. Blackfriars has been noting a shift away from advertising to more non-traditional marketing efforts for about six months now. And with our new survey, we can now see more detail around what that shift looks like. As we look at 2006, the new marketing landscape is quite different from when we started looking at marketing budgets, attitudes, and spending back in 2003. What's different this year is:

1. Advertising is shrinking as a percentage of budgets. When we started our surveys more than two years ago, advertising was king, consuming nearly a third of marketing budgets. With this year, that number has fallen to only 23%, or less than a quarter.


2. On-line marketing has become huge. With our new surveys this year, we are now tracking online advertising, email marketing, and non-advertising-based Internet marketing through web sites, blogs, and podcasts. The bombshell: On-line activities are now 23 percent of marketing budgets for 2006. Why the change? Companies have found on-line marketing to be more efficient and more measurable than traditional media, making it an easy sale to corporate executives.


3. Non-traditional marketing become, well, traditional.. Buzz, word-of-mouth, and viral marketing were pretty radical ideas in 2003. Now, companies are allocating almost a tenth of their annual budgets to these activities, and they have become just another arrow in the professional marketer's quiver.

One bright note in what currently appears to be weak spending on marketing in 2006: it's not at all clear that marketing activity has declined at all. What has happened is that online advertising, podcasts, blogs, and buzz marketing are all cheaper ways to for companies to get their messages out. Therefore, while budgets may be declining, companies are still doing as much or more marketing than they did before; they are just doing it in different ways.

Commercial message: For anyone who wants to dive deeper into how marketers plan to spend their budgets in 2006, you can pre-order the 20-page Q1 report from Blackfriars at the Blackfriars eStore.

Technorati Tags: Advertising, Blogs, Buzz Marketing, Internet, Marketing, Marketing measurement, Non-traditional marketing, Podcasts, Podcasts, Retail, Word of mouth

The ultimate Apple ad: Microsoft's Vista lineup

Over at Windows IT Pro, Paul Thurrott notes that Microsoft is releasing no fewer than eight different versions of Windows Vista. Just so everyone can keep them straight, they are:

1. Windows Starter 2007. This doesn't have Aero graphics so it doesn't even get the Vista name.


2. Windows Vista Home Basic. This is targeted at single PC homes.


3. Windows Vista Home Basic N. This version eliminates Windows Media Player for the European market in accordance with its antitrust complaint.


4. Windows Vista Home Premium. This includes Media Center functions.


5. Windows Vista Business. Corresponding to XP Pro today, this version resumably includes VPN functions, crypography, and remote management, although the article doesn't say this.


6. Windows Vista Business N. Vista Business without Windows Media Player for the European Union.


7. Windows Vista Enterprise. This one includes Virtual PC, secure startup and full volume encryption and multi-language interface.


8. Windows Vista Ultimate. This version includes all features of both Vista Home Premium and Vista Business.

So now imagine you are in a computer store looking through computer systems. Now, not only will you have to decide on a processor, graphics card, monitor, and printer, but you'll have to choose among eight different OS versions, only one of which is pre-loaded (unless Microsoft chooses to use a key-unlocking system and preloads them all). There is probably no better demonstration of the tyranny of too much.

Someone at Microsoft should read up on basic product marketing. The most effective product positioning systems are along the lines of "Good", "Better", "Best". More choices simply slow down the sale and make the consumer work harder to figure out what they actually need and want to pay for.

But there's a silver lining in all this. With Microsoft spending $200 million on Vista marketing, can you think of any more effective marketing campaign for Apple?

Technorati Tags: Marketing, Analysis, Virtual PC, Windows, Vista, Microsoft, Opinion, Apple

BlogBurst helps newspapers cut through the tyranny of too many blogs

I wrote last month about that fact that blogs are eroding the business value of newspapers. But newspapers aren't dumb; some of them have decided that they can capitalize on democratized content creation by using blog content. But how should they get that content? Do they really have to sift through every blog trying to find the good stuff?

Enter BlogBurst. Blogburst sifts through blogs that register themselves and sorts the content for the newspapers. It cuts down what we call the tyranny of too much for the newspaper editors and reporters who are on deadline. It gives blog writers more exposure and a greater likelihood that they'll break into the A-list. Everyone wins, especially if the newspapers actually pay as BlogBurst's business model requires.

We'll have to see if this model scales, though. This is a system that works great with 100 or 1,000 blogs, but collapses under its own weight with 100,000 or a million blogs. No editor or reporter is going to wade through a reading list of 1,000 entries, but that could easily happen with big categories like News and Opinion or Technology. If that happens, editors will go back to reading Memeorandum.com or TailRank.com.

My suggestion to BlogBurst: take a page out of Web 2.0 and allow members of the newspaper community to vote feeds and stories up and down in the rankings. Otherwise, a successful BlogBurst could do just that -- burst.

Technorati Tags: Blogs, Newspapers, Opinion, Publishing, BlogBurst, Web 2.0

How to measure ninety days of buzz marketing?

Erik Heels over at Clock Tower Law Group turned me on to this via his newsletter. It's rather an interesting experiment in buzz/non-traditional marketing.

John Butman is going to chronicle 90 Days of BzzAgent as an experiment in corporate transparency. To cite his own words:

In December 2005, BzzAgent received $13.8 million in venture capital, and has now a reached a critical point in its development — the company will double its staff from 47 to 80 over the next year, double its sales, and make a fundamental transition from an agency to a media model.

To chronicle this extraordinary phase in its evolution, BzzAgent has invited John Butman — a writer, expert in organizational communications, and co-author with Balter of the recently published book Grapevine: The New Art of Word-of-Mouth Marketing — to spend time inside the company and blog about what he sees and learns, in real-time.

90 Days at BzzAgent will chronicle the changes that take place at BzzAgent as the company strives to grow fast and big, but keep true to its mission of "open and honest sharing of opinions" among everyday people.

This is billed as a grand experiment in corporate transparency. Fine. But usually experiments have criteria for success and failure. I wonder what those might be?

Here are some metrics I thought about using to judge this effort:

1. How many people will this effort reach? My guess: a lot. They'll probably hit half a million readers over the ninety days if not more.


2. What will it cost? Just about nothing other than John Butman's salary, which I have to guess will be quite a bit more than the media costs would be for a traditional compaign. Say $25,000 for three months. Maybe in stock.


3. What would it have cost to reach this many people in other ways?This is hard to say, but even on Google Adwords at $5 eCPM, I figure it's about $2,500 minimum. Doing it on radio or the like would cost much more.


4. What message will it communicate?Maybe that BzzAgent is a cool place to work, or that they do some interesting stuff. But I doubt there will be any clear corporate message.

I think the best way to characterize this effort is that it is an awareness campaign. More people will know about BzzAgent, and they'll learn a lot about how a company goes about spending nearly $14 million in funding to grow quickly. But what strikes me is that while it will raise awareness, people will probably have a tough time explaining what BzzAgent is or why it is different from PR companies, non-traditional ad agencies, or other new media firms.

The good news: Butman is a good writer. He'll tell good stories. If nothing else, it will be a fun daily corporate soap opera.

My view: this is going to be a bit like putting a bunch of material in a petrie dish. You may get penicillin, but you'll get a lot of other outcomes too. The experiment will be fun to watch, but no one should confuse this sort of effort with a serious marketing or branding effort. And without being able to refine out the good stuff from the bad or measure the results, it will probably end up being kind of messy.

Technorati Tags: BzzAgent, Opinion, Publishing, Marketing Measurement, Buzz Marketing, PR, Blogs, Marketing

Looking beyond the twilight of the blogs

[Graphic courtesy of Yahoo's Bradley Horowitz at Elatable.com]



Slate magazine today is running an article titled "Twilight of the Blogs", arguing that all the signs are in place to say that blogging is topping out from a business point of view. A couple data points in it:

The Wall Street Journal reported on Wednesday that "with traditional and electronic publishers keen to get their hands on Internet-advertising properties, Daily Candy could fetch more than $100 million" (my italics). Twenty-eight times your money in less than 28 months? For a business that takes in less than $20 million a year?

....

Pajamas Media: Last November, the collection of right-wing blogs (with a few lefties thrown in for laughs) grandly announced the closing of a $3.5 million round of venture capital financing. Roger Simon, the screenwriter-turned-blogger who is the CEO of the enterprise, promised "to change the way people report and access news and commentary." I don't know. It looks to me like a bunch of blogs with their own logo.

Daily Candy's valuation is clearly nuts -- but then again, so was Time Warner's acquisition of AOL. And Pamajas Media? Who knows -- venture capital is supposed to invest in high-risk investments for high rewards. But the folks I keep an eye on are those that keep working hard, writing well, and creating new ideas for others to read and build upon. If I think about a very elegant article just posted today by Bradley Horowitz of Yahoo, I look for the one percent of the population that has a passion for creating content, the Creatives. In other words, I'm interested in the peak of the pyramid. Those people will always find an audience and the Internet simply makes it easier for them to reach that audience.

So is blogging topping out? I don't think so, but the blogging bubble may be. But there are a billion Internet users out there looking for content online. That makes the market for creative content bigger every day. Any market with a billion customers is an interesting business, whether Wall Street thinks it is or not. So the real question is not whether this is the twilight of the blogs, but rather whether it is actually the dawn.

Technorati Tags: Blogs, Business, Consumers, Creatives, Daily Candy, Dawn of the blogs, Media, New media, Pajamas Media, Publishing, Publishing 2.0, Slate, Synthesizers, Twilight of the blogs

Anticipating HP's post-Valentine's Day lover's quarrel

Hewlett Packard will report earnings at the close of business today, and most analysts are still on their honeymoon with CEO Mark Hurd's cost-cutting management. General consensus is that the company will report $0.44 a share in earnings with some possibility of upside surprise.

But the real question is what the reaction to what could be good earnings will be. After all, Apple blew out its quarter, and the stock was punished about 10 percent. So to try to get some insight into the numbers driving HP sentiments, let's compare the numbers as they sit pre-earnings announcement.

	Hewlett Packard	Apple
Revenue	$86.7 billion	$16.2 billion
Trailing Price/Earnings	39	36
Profit margin	3%	10%
Operating margin	6%	12%
Quarterly revenue growth year-over-year	7%	65%
Quarterly earnings growth year-over-year	-62%	92%
Cash	$13.9 billion	$8.7 billion
52-week stock price change	+54%	+53%

So assuming the company improves its quarterly revenue growth from its present negative value, HP should look healthier than it did before Christmas. But the big question is, what factors are going to justify a price to earnings ratio of 39 when revenue growth is only 7%?

Yes, the company may get some benefits from layoffs. Yes, the company could cut its costs of sales more. But neither of those actions creates the type of growth that can sustain the multiple this stock is at. And with Forrester projecting IT spending to increase only 7% this year in the US, HP needs its growth to exceed the market to deliver big returns to investors. And with HP's rain-making printing division facing increased competition and pricing pressure, Wall Street's honeymoon with HP stock may soon come to an end.


I do not own HP stock, but I do own Apple shares. Neither Blackfriars nor I do work for either company.

Technorati Tags: Apple, Analysis, Business, Financial analysis, HP, Stocks

XBox 360 shortages may have been caused by Infineon and Samsung chips

According to the San Jose Mercury News, the shortages of XBox 360 units over Christmas may have been because of a shortfall in DDR3 memory chips made by Infineon and Samsung. I had predicted that XBox 360s would be in short supply, but that the PowerPC processor chips would be the bottleneck. It sounds like I got the result right, but the cause wrong. My bad.

As we approach the three-month anniversary of the XBox 360 launch, Microsoft has been confident that it would ship 2.5 to 3 million XBox 360s in the first 90 days after launch. It will be 90 days as of February 20th. Do you know where your three million XBox 360s are?

Technorati Tags: Marketing, Gaming, Microsoft, Games, XBox 360, Samsung, Infineon

Technorati data dispells the myth of A-list gatekeeping

Dave Sifry has published Part 2 of his State Of The Blogsphere that shows that examines the myth that the A-list bloggers are 1) relatively stable in their positions and 2) act as gatekeepers on the popularity of ideas. He also compares the number of links that mainstream media sites get with those that blogs get. The entire article is full of great data, but I'll just cite a few of his summary points that reinforce my opinions about A-list gatekeeping yesterday.

• Blogging and Mainstream Media continue to share attention in blogger's and reader's minds, but bloggers are climbing higher on the "big head" of the attention curve, with some bloggers getting more attention than sites including Forbes, PBS, MTV, and the CBC.


• Continuing down the attention curve, blogs take a more and more significant position as the economics of the mainstream publishing models make it cost prohibitive to build many nice sites and media.


• Bloggers are changing the economics of the trade magazine space, with strong entries covering WiFi, Gadgets, Internet, Photography, Music, and other nice topic areas, making it easier to thrive, even on less aggregate traffic.


• There is a network effect in the Technorati Top 100 blogs, with a tendency to remain highly linked if the blogger continues to post regularly and with quality content.


• Looking at the historical data shows that the inertia in the Top 100 is very low - in other words, the number of new blogs jumping to the top of the Top 100 as well as he blogs that have fallen out of the top 100 show that the network effect is relatively weak.

Technorati Tags: Blogs, Marketing, Media, Publishing, Technorati, Web

Testing blog searching with brrreeeport

Robert Scoble from Microsoft is testing how quickly and well the search engines discover blog postings. To do this, he has proposed that bloggers add the word "brrreeeport" to their blogs, and then check search engines like Technorati and Google Blogsearch for how quickly the postings are discovered. Rather a neat experiment I think.

Add us to the brrreeeport.

Scoble's test demonstrates some Web 2.0 marketing insight. Making up a word that no one else uses to describe a concept, be it a business, product, or service, allows you to easily measure how quickly information about that concept spreads. It also allows some measurement of your ultimate reach with your message. Did it hit 100 blogs? 1,000? 10,000? A combination of Google blogsearch, Technorati, and a few others should tell you. And using Technorati's popularity graph over time, you can even see the rise and fall of the concept over a couple weeks. Very cool stuff.

Oh, and if your concept takes off, using a weird made-up name also makes it more likely you can secure a domain name for it as well; most of the English words and phrases are taken. Expect to see a lot more made-up names for online services in the near future; call it the brrreeeport phenomenon.

Technorati Tags: Search, Marketing, Blogs, Google, Technorati, Web

The A-list blogs rule -- or do they?

Despite being down with the flu today, I happened across the article in New York Magazine titled Blogs to Riches: The Haves and Have-Notes of the Blogging Boom. It's a terrific article explaining the network effects that drive the A-list, B-list, and C-list blogging phenomenon, and why, in this most democratic of journalistic media, hierarchies have developed. It also notes (as I did last week) the tyranny of too much problem that the A-list bloggers face when every blogger and their brothers ping them for links to their latest products or stories.

But what I found most insightful was this comment at the end:

“The good news is that it’s still possible to create a top-ranked blog,” says Shirky. “The bad news is, the way to get into the top ten now seems to be public relations.” Just posting witty entries and hoping for traffic won’t do it. You have to actively seek out attention from the press. “That’s how they’re jump-starting the links structure. It’s not organic.” Indeed, when Huffington announced her venture and her celebrity guests, bloggers grumbled that it weirdly inverted the whole grassroots appeal of blogs. Larry David and Danielle Crittenden are hardly what you’d call outsiders to mass media.

But at the same time, the article notes that the long-tail argument -- namely the fact that the audience for C-list blogs actually exceeds the audience for the A-list -- means that C-list blogs aren't doomed to obscurity and failure; they simply need to occupy niches that people care about. Find advertisers that want to target those niches, and you've got yourself a business, since targeted advertising is more efficient than broad exposure. And if you keep ads on your archived content, you may end up making more money off your archives that the A-list pages!

The bottom line: marketing a blog is like marketing a magazine or newspaper -- except when it isn't. Yes, there's an A-list, but even the C-list can thrive and make money. Successful blogs will target a specific audience with regular great content and some smart business thinking about that audience. Everything else is just details.

Technorati Tags: Blogs, Marketing, New media, Publishing, Web

Sony's clever Playstation 3 marketing: much ado about nothing

[Sony's Playstation 3 conceptual designs shown at the 2006 Consumer Electronics Show]

Business Week took a whack at Sony this week with its article speculating that Sony may have bitten off more than it can chew with its Playstation 3 (PS3) system. The piece notes that Sony Playstation architect Ken Kutaragi has had launch failures before, most notably the $800 PSX launched in Japan only in 2003. The various claims that the PS3 will include Blu-ray high-definition DVD playback, online gaming, and TV show recording further fuel the concern. EHomeUpgrade even speculates that the Playstation 3 could kill Sony because of losses associated with console sales approaching $2 billion, according to Merrill Lynch Japan.

I think these articles are much ado about nothing. Why? Because that's pretty much what Sony has said about the console since last year: nothing. Even at CES, I took pictures of the Playstation 3 as shown above, and the placard in front of the consoles noted they were conceptual designs only. And this is for a console that is going to launch in less than six months! In my view, that's a pretty good marketing strategy.

Don't believe it? Look at Apple. Few companies say so little about upcoming products, yet get so much press about them. They want prospects and customers to wonder what they are up to. And when they actually do launch a new product or category, they want customers to be surprised. The result: Steve Jobs MacWorld keynotes garner world-wide coverage.

Contrast this with Microsoft's approach of providing announcements of intentions to make announcements. In the case I linked to, Microsoft announced that it intends to offer a security service called Microsoft Onecare in June for $50 a year. How much excitement do you think there'll be about that product when it launches? My view: Onecare's launch will have all the sex appeal of a visit with your accountant. Oh, the press will cover it, but it will have no heat. And that's after spending a lot of time and money promoting it.

Sony is smart. It has the lead in gaming. Everyone knows that it is next up with its console launch. It doesn't have to preannounce a thing for the PS3 to be successful. In fact, despite speculation that Sony will have 20 booths with playable PS3s at next week's Taipei Game Show, I'd encourage them to show up with movies and maybe some prototype games, but no real hardware. Not knowing what Sony is actually going to deliver is marketing that would cost millions to replace. And with financial analysts predicting a PS3 launch in Japan in two to four months, that's money better spent after the product launches.

Full disclosure: I own no shares of Sony, Microsoft, or Nintendo, nor any gaming companies, nor do I work or consult for any of these firms.

Technorati Tags: Apple, Buzz Marketing, Consumer Electronics, Games, Gaming, Marketing, Microsoft, Playstation 3, Sony, XBox 360

Vonage's IPO: it's no Google

Vonage announced it plans a $250 million initial public offering yesterday. So will we see Google-like appreciation once it hits the secondary markets? The short answer: no. I followed the Google IPO, I knew Google, Google was a friend of mine, and Mr. Vonage, you are no Google. This is a liquidity event for the Vonage investors, pure and simple. Here's why:

1. No profits. The company is losing money hand over fist. It spends 101% of its revenue on marketing, and the money raised by this IPO will be gone in less than a year. Further, the company plans losses as far as it can see in the future. Google was hugely profitable at its public offering; Vonage is in a completely different position.


2. No differentiation. Everyone from Microsoft to Google to eBay has voice over Internet protocol (VOIP) offerings in the market. Even the telcos like Verizon and at&t offer VOIP services now. Many competing offerings are bundled with other communications systems like instant messaging, while Vonage's offer is a stand-alone service. Google's market position was nearly unique when it went public; Vonage's service is a commodity.


3. No strategy. Nothing in the S-1 filing indicates to me that the company has any plan to change its operation to sell anything other than VOIP service, nor any plan to get its costs below its revenues. Google may have been stubborn about doing its offering its own way, but at least it laid out a plan for how it was going to grow its business once the offering was done.

So if the fundamentals are this bad, why is Vonage going public? The answer is simple: The investors need a liquidity event to get their money back. The big question they haven't answered is why they think consumers or institutions will want to buy shares in the IPO. All I know is that it's no Google.

Disclosure: I own no telecom stocks nor Internet stocks that might be affected by Vonage's IPO.

Technorati Tags: Google, Analysis, Financial analysis, Vonage, Telecom, Internet, Stocks, Verizon, Business, at&t, Opinion

WINE Arrives for Intel Macs

Well, we had noted last month that Microsoft didn't really have its heart in getting VirtualPC out for the new Intel Macs. While Microsoft is claiming that they don't know how long it will take to "port" Virtual PC for the Mac, The OSx86 project already has WINE running on Intel Macs. Gotta love open source development when people have a real desire to make something happen.

One things becoming very clear; if people need to run Windows on Intel Macs, they'll be able to. And that removes one more objection to Apple's unique selling proposition for Intel Macs.

Technorati Tags: Open source, Marketing, MacIntel, OSx86 project, Windows, Virtual PC, Microsoft, Apple, Business

Another contextual ad network to rival Google's?

Business Week reports that the former CEO of Altavista is planning to launch a new ad network called Turn, Inc.. What's his edge? He won't say, except to say that he has $10 million in venture capital, 16 Ph.Ds on staff, and claims it will target ads better than anyone else can. It's the new world of advertising -- on-line ad networks are screaming hot. And they must be getting close to going live; according to Yahoo Jobs, they are hiring account managers and business development people.

All I can say is that it's great to see that the new metric in Web 2.0 is how many Ph.Ds you have on staff. I do wonder though if people with multiple doctorates count as one or two. Hey, maybe Google can tell me....

Technorati Tags: Ad networks, Advertising, Google, Altavista

Halo creator wants a Revolution for his next game

Nintendo Revolution Canada notes that the creator of Microsoft's hit game Halo, Jason Jones, wants to write a first person shooter game for the next-generation Nintendo Revolution. Ouch, that's got to hurt, particularly since Microsoft is still smarting from short supply of XBox 360s. Next thing you know, the guy will want an Apple MacBook Pro to write it on. But you have to hand it to Jason: getting himself fired is a very clever way to void his Microsoft non-compete.

Seriously though, I am not terribly surprised. The new Nintendo Revolution controller creates a lot of new possibilities for first-person shooter games, and game writers love doing new things. I'm fairly bullish on Nintendo's low key approach to Revolution, having predicted that it will sell more units at Christmas 2006 than Microsoft will XBox 360s. Jason is just one more data point that Nintendo has a winner on the launch pad.

Technorati Tags: Nintendo, Microsoft, Gaming, XBox 360, Revolution, Games

Cisco's future: soup to nuts consumer networking

[Scientific Atlanta's newest cable box with personal video recorder and DVD writer built-in]



Today's Wall Street Journal took a look at Cisco today, noting that investors can't figure out if it is a growth or a value stock. The comments are telling:

Cisco's growth prospects aren't sexy enough for the former and the stock, trading at nearly 17 times its expected per-share profits for 2006, still isn't cheap enough to wow the latter.

"We have looked at it because it's come down so much," says David Dreman, chairman and chief investment officer at Dreman Value Management in Jersey City, N.J. "But there's not enough growth for a growth investor and not really enough value to tempt a value investor."

So the big question is, "What benchmark by which we should measure Cisco's earnings report due out at the close of business today? Should we be looking at its growth or its value?"

Investors are flummoxed by the company because they continue to think of it as the soup to nuts network manufacturer for large enterprises and carriers. But I believe the company has a new role defined by its purchase of Scientific Atlanta: it is becoming the soup to nuts network provider for consumers through the multifunction home cable box. Now that's a big change for a company to make. But others have successfully navigated that change; there's no reason Cisco can't.

Motorola is probably the best example of a firm that has made this transition. Motorola at one time focused largely on business needs, then transitioned to consumer markets with high-fashion cell phones like the RAZR and PEBL that convey style and fashion. But Motorola still has a lot of its business selling infrastructure systems to cell companies just as Cisco will do with networking companies, so the companies have many similarities.

Comparing the financial benchmarks for the two firms provides a bit of insight into what Cisco's future might hold.

	Cisco	Motorola
Revenue	$25.4 billion	$36.8 billion
Trailing Price/Earnings	21	11
Profit margin	22%	12%
Operating margin	28%	12%
Quarterly revenue growth year-over-year	10%	18%
Quarterly earnings growth year-over-year	-10%	84%
Cash	$13.5 billion	$14.8 billion
52-week stock price change	-2%	+25%
Market cap	$111B	$53B

The issue facing Cisco is that its focus on consumers could dramatically hurt its currently fat profit margins. That means that it will need to find more revenue to keep shareholders happy. If the company isn't currently contacting every cable company on the planet and offering to fly them to San Jose or Atlanta to meet, they should be. In the cable industry, size does matter. But this isn't going to be a value play, no matter how you look at it.

However, if we look at consumers more broadly, Cisco has an amazing opportunity in the home. All the current visions of the digital home assume some type of digital hub box that helps distribute digital TV shows, broadband Internet connectivity, and a wide variety of Internet services. Just as Apple can deliver an end-to-end music service linking iTunes on the Internet to the iPod in a consumer's hands, so Cisco has the potential to offer an end-to-end networking infrastructure from the data center to the consumer's house.

As cable boxes, high-definition digital TVS, PC media centers, wireless hubs, media extenders, and network connections permeate our homes, we at some point will want one company to guarantee it will all work. Cisco is one of the few companies that can offer a provider like Comcast or Time Warner a single source for all the pieces needed for the soup-to-nuts digital home. If it makes the pitch that simply to the cable companies and telcos worldwide, Cisco will become a growth stock again -- big time.

Technorati Tags: Digital home, Analysis, Business, Networking, Consumer Electronics, Cable, Cisco, Motorola, Marketing, Broadband, Comcast, Financial analysis

Google finds a chink in Microsoft's PC business

On page one of today's Wall Street Journal (subscription required), Robert Guth and Kevin Delaney report that Google is striking deals with PC makers Dell and HP to preload Google's software on new PCs and configure them to use its search engine. This isn't just talk; Google is actually paying the PC makers for this privilege. And the two largest PC makers are listening. The authors describe the situation eloquently:

PC makers are turning their computers into the equivalent of a supermarket, capable of stocking products made by many companies -- for a price. The idea is similar to the way food companies pay grocers a fee to get space on store shelves and could help shift the balance of power in the software world.

The article estimates that such a move could cost Google more than a billion dollars over three years. So why would the company do it? Google wants to do this because such deals will:

1. Market Google to new PC customers. These hardware deals mean that Google's software and brand will be pitched to consumers as part of the value of a new PC. Most consumers only think of Google as being a search company; this initiative will broaden their brand value.


2. Create alliances with hardware makers. The Original Equipment Manufacturer (OEM) deals that computer manufacturers have with Microsoft and Intel weren't much of a factor when PCs sold for $3,000. But with PCs now selling for $300, they are huge components of cost, leaving PC manufacturers desperate for profitable add-ons. By becoming a source of revenue for PC manufacturers, Google is building relationships that will pay off for years to come, especially should Google want to expand its hardware offerings.


3. Undercut Microsoft's monopoly power and business. Two engines power Microsoft's seemingly unlimited war chest to compete with Google: Windows and Office. It hasn't had to defend these franchises for nearly a decade, as is evidenced by the fact it hasn't released a new version of Windows in five years. Its Windows franchise is kept afloat by its secret contracts with OEMs, where prices tend to stay high because there are few competing solutions. But once Google starts to replace pieces of Microsoft's Windows bundle, Microsoft's ability to dictate pricing and terms to the OEMs will decline, opening opportunities for Google Linux and Apple Mac OS X in the future.

This is a huge change; Microsoft's control of the PC startup experience has been absolute for nearly two decades. In fact, it was cited in the Department of Justice's anti-trust case against the software company as one of the sources for its market power. If Google successfully chips away at Microsoft's Windows bundle, it may do what the Department of Justice never could: create real competition in the PC software business. And despite Microsoft's constant protestations otherwise, consumers and innovation would benefit.

Technorati Tags: Dell, HP, Microsoft, Marketing, OEMs, Windows, Business, Google, Opinion, PCs, Search

This is how we know we're in a Web 2.0 bubble

This is now the required PowerPoint slide for why Web 2.0 is important, namely that there are more companies and logos than will comfortably fit on a slide, at least if you want them to be readable. And the combined revenue and profits of all these companies is to first or second order, zero.

Thanks to BoingBoing for the link and Ludwig Gatzke for the actual creativity and work.

Technorati Tags: Business, Humor, Internet, Web, Web 2.0

The new way to launch your product or company -- NOT

Don Dodge today claimed that the new way to launch your product or company doesn't require marketing, PR, advertising, or anything like that. Noting the recent seeming success of CoComment.com, Don recommends just sending a link to your product or service to one of the "A-list bloggers" like Dave Winer, Om Malik, Michael Arrington, or Robert Scoble, and you're done! Wow! Isn't Web 2.0 amazing? Who cares about the users -- just get an A-list blogger to notice you, and you are on your way!

While we're at it, I have a great bridge in Brooklyn to sell you too. And this amazing land in Florida too.

Don's claim is that if your product is truly great, it will sell itself to these A-list bloggers. They will immediately see whatever value is in it and promote it to their readers. What could be more obvious?

Well, let's try a few thought experiments. What if I am launching a new deodorant? Sending a link to my amazing new product description isn't exactly going to create the amazing experience Dave Winer is probably looking for.

Oh, it has to be a Web service? OK, so let's send Robert Scoble a link to my great new service that removes all the unsightly facial wrinkles from his iPhoto books before they get printed. I'm sure he'd be happy to promote that. Oh, he doesn't use iPhoto because he's Windows only? What's up with that?

The reality is that nothing really has changed. This new way of launching products only applies if you have a product whose target market is the specific A-list bloggers you are sending it to. That happened to be true with CoComment.com. But even after they note that your product is cool, there's a ton of real marketing work before you are in business. You're still going to have to figure out little details like:

• Who is the target customer? The A-list bloggers get the message out, but you probably need a target market of more than five or 10 hot shots. And as was illustrated in the iPhoto example above, even some of those bloggers may not be the best people to target. Who are you really selling to?


• What customer problem are you solving? Recommended by an A-list blogger is nice, but no one will care unless you are solving some broader problem that causes a lot of people pain. You'll probably need to communicate what that is before anyone will give more than a passing glance to your Web site.


• How do you reach those target customers? Is the A-list blogging community really the best way to reach, say, left-handed basket weavers? Or might it be more efficient to post some information on some basket-weaving Web sites?


• How are you different from other solutions to this problem? Ninety-nine percent of products and services compete with other products for your attention. What are three reasons your target customers pick you?


• How much should customers pay for your solution? A-list blog references are great, but they create zero revenue. Price your solution too high, and no one will consider it. Price it too low, and you'll have the market cap of Pets.com, namely zero. How much does your target customer base value solving their problem?

There's a name for the answers to these questions. It's called a marketing plan (or if you want to get really fancy, a marketing strategy). And your company will have to have answers to all of these questions to have any hope of surviving in the world of Web 2.0

Why? Because as of this minute, Michael Arrington's, Robert Scoble's, and Om Malik's mailboxes are full of thousands of links to products that their creators think are cool. But at the end of their day, their opinions don't really matter. What matters is the opinions of paying customers. And the only way you get their opinions is to give them something of value to them, not to you. That's called marketing.

Technorati Tags: Blogs, Business, Internet, Marketing, Opinion, Web, Web 2.0

Webs of trust help us navigate the rising seas of blog content

David Sifry, CEO of Technorati, has a terrific article today on the growth of blogs and blog content over the past eight months. Highlights of the data include:

• Technorati now tracks over 27.2 Million blogs


• The blogosphere is doubling in size every 5 and a half months


• It is now over 60 times bigger than it was 3 years ago


• On average, a new weblog is created every second of every day


• 13.7 million bloggers are still posting 3 months after their blogs are created


• Spings (Spam Pings) can sometimes account for as much as 60% of the total daily pings Technorati receives


• Sophisticated spam management tools eliminate the spings and find that about 9% of new blogs are spam or machine generated


• Technorati tracks about 1.2 Million new blog posts each day, about 50,000 per hour


• Over 81 Million posts with tags since January 2005, increasing by 400,000 per day


• Blog Finder has over 850,000 blogs, and over 2,500 popular categories have attracted a critical mass of topical bloggers

So if you are feeling overwhelmed by information from the Internet -- the tyranny of too much -- now you know why. But it also explains the rise of meta-news sites like Google News, Digg.com, Memeorandum.com, and Newsvine.com. People are looking for ways to navigate this ever-growing sea of information; these sites are trying to provide landmarks and popular routes.

But even more important here from a human psychology and communication point of view is the growing amount of content being attributed to people instead of organizations. As people become overwhelmed by information, they look for other people they trust to guide them through the confusion. In fact, peers are rapidly replacing institutions and authority figures like CEOs as the most trusted sources of information, according to Edelman Worldwide. We are all forging webs of trust with people more than technology to find our way through this flood of information.

My advice: Now is the time to start building your personal network of peers to guide you through today's new media world. As you sort through the countless new information sources and technologies, give special consideration to those sites and systems that emphasize human voices and distillation of information instead of pure aggregation of ever more content. It doesn't matter whether it's Walter Mossberg at the Wall Street Journal, John Gruber at DaringFireball.com, or Scott Karp over at Publishing 2.0; spend more time identifying the people you trust and using them as guides to what's important. With our media seas doubling in depth every six months, it's these personal voices who are the life preservers that will keep us from drowning in information.

Technorati Tags: Blogs, Daring Fireball, Edelman, Opinion, Publishing 2.0, Technorati, Tyranny of too much, Walt Mossberg, Web, Web 2.0, Web of trust

More skepticism about the future of newspapers

Paul Farhl at the American Journalism Review echoes our pessimistic view of the future of newspapers last week. The article closes with the effect this will have on journalists.

Fink says the emerging newspaper world requires more flexible journalists – those who can churn out quick news stories for the Web site and in-depth analytical pieces for the next day's newspaper, which will be carried on the Web, too. The differences between "print" and "online" operations will largely evaporate within the newsroom, if they haven't already. (USA Today made this official late last year when it announced it would merge its newspaper and online newsrooms.)

Fink thinks daily journalism will be different, but he isn't so sure it will be better: "With the disappearance of so much readership and advertising support, there will be a disappearance of much of the journalism you and I love," he says. "If we're less able to support vigorous, independent journalism, that's a threat to society. It hasn't really occurred to most people that the heart and soul of journalism is being decided right now."

But Paul closes with some hopeful notes:

"...if we simply continue business as usual, it's going to be worse. But if we think about how to preserve and protect the daily paper and how we can reinvent it, if we build a huge online presence, if we can build other businesses around it, I think the future looks bright."

Said another way, we have to reinvent the news business so it thrives on today's cheaper distribution models instead of competing with them. It will be a different newspaper, but it's a different world too.

Technorati Tags: Analysis, Newspapers, Publishing

Is it the user or RSS that really matters?

I continue to enjoy Scott Karp over at Publishing 2.0 who I think is one of the more insightful writers today. In his latest post, Scott chides writers, bloggers, and publishers to focus on the user, not the technology. This was written in response to a lot of words written over the weekend by Dave Winer about how RSS technology should become more popular. Scott's reaction is refreshing.

There are two prevailing views of the evolution of online information flow — one focuses on the arc of technology, the other on what the user wants and needs. The technology-centric view focuses on issues like RSS adoption rates and RSS vs. email. The user-centric view focuses on issues like how people can find the information they want in a sea of information.

I think technology-centric view is focusing on the trees rather than the forest. Most people don’t care what technology enables them to get the information they want — they just want the information they want.

We need more people in the business world who have this viewpoint, instead of the mindset that great technology would take off if we could just show users all these wonderful features. Scott has some great responses, which I'm going to weave together here at the end, albeit in a different order than they were in the original article:

It doesn’t matter to most people whether they are in the “RSS world” or not. What matters to them is whether they can find what’s “relevant.”
....
If we achieve 100% adoption of RSS, that in itself will do nothing to solve the information overload problem. (If you think information overload is only a problem at the “edge,” you’re taking the technology-centric view.)

Scott clearly understands that the tyranny of too much is the much bigger challenge to all of us than what software we use. And given that RSS adopters are complaining nowadays about all the data they need to look through in their feeds, we need to look beyond web services alphabet soup to overcome the tyranny of too much information.

Technorati Tags: Analysis, Marketing, Publishing, RSS, Tyranny Of Too Much, Web, Web 2.0

How to improve anyone's presentation

Gary Turner claims that this is the best Powerpoint slide ever. Be sure to read the text below. It reminds me of the immortal words of Socrates just before he died, when he said, "I drank what?"

Technorati Tags: Communication, PowerPoint, Humor

A long tail advertising network appears

We've seen Web 2.0 with new live applications like Google Maps and News 2.0 with sites like Newsvine.com (invitation required). I'd argue that Advertising 2.0 is Google Adsense and its derivatives, because it sets a new standard for measurement and reach for advertisers, while providing new consumer markets -- namely blogs -- for advertising. So what's next?

I think I saw the future today at Daring Fireball, in its adoption of the new Deck ad network [note: the image shown here is a condensation of the actual images on the site to make it fit a blog entry]. Author and site-owner John Gruber describes why this is so startling:

Starting yesterday, Daring Fireball joined A List Apart, Coudal Partners, and Signal vs. Noise as a member of The Deck, a boutique ad network geared specifically toward web and design professionals.

The Deck’s advertising philosophy is almost perfectly aligned with that of the homegrown sponsorship system I previously ran here on Daring Fireball, with the only significant difference being that my own sponsorship ads were text-only, and Deck ads include 120 × 90 pixel graphics. Otherwise, the policies are the same:

• One ad per page.


• Advertisers are limited to products and services we (the member sites of The Deck) have paid for or use.


• Spots are limited (six, currently), and each ad in the rotation gets an equal slice of the total page views of the sites in the network.


• Animation is verboten.

So think about it. This is an ad network designed for a specific niche community. It offers products and presentation forms targeted specifically for that community. Ads compete with nothing, since they are only one per page. Readers love them because they aren't distracting. Advertisers love them because they are hugely efficient. Everyone wins.

It's possible that Google Adsense can achieve something similar as it continues its drive to mass-customize advertising for its huge ad network. But this ad network differentiates itself from Google ads by marketing to a specific target market not being served by Google, yet being more efficient at reaching that audience. It's long-tail advertising to a niche; maybe this is the start of Advertising 3.0.

Technorati Tags: Adsense, Advertising, Long tail, Marketing, Opinion, Web 2.0, Web advertising

Panasonic's earnings up nearly 40%

Today, the Wall Street Journal (subscription required) reports that Japanese consumer electronics giant Matsushita Electric's earnings rose 38% on a 4% rise in revenue, based largely on surging sales of digital cameras and plasma flat-screen TVs. Matsushita Electric is better known by its brand name Panasonic in the US.

Panasonic was one of the big leaders in cutting plasma TV prices about 35% in 2005. Don't expect the same to happen this year. While Panasonic has come to dominate plasma production and sales with its aggressive pricing, its brand now stands as much for high quality as it does for low prices. I believe that this year, Panasonic will largely focus on increasing resolution in its current panels while allowing prices to decline between 10% and 15%. Expect most of the action to be in panel sizes of 50 inches and above. Examples include Panasonic's under-$10,000 65-inch display and 50-inch and 65-inch 1080p displays.

Technorati Tags: 1080i, 1080p, 720p, Analysis, Financial analysis, Flat Panels, Marketing, Panasonic, Plasma, Matsushita

Telcos marketing false scarcity to create support for new Internet fees

Techdirt has a fascinating analysis today about why the telcos want to develop a two-tier billing system: Business Week claims that Verizon is reserving 80% of its fiber bandwidth for their must-lose-money TV services. Because it is compressing all Internet traffic into the other 20%, it expects there might be some bottlenecks, hence the creation of premium-delivery (and premium-priced) Internet service. As Techdirt notes, this probably isn't what the FCC expected when it granted huge financial incentives to the telcos to create an open fiber infrastructure for US homes.


Network neutrality is going to be debated February 7 in the Senate for an upcoming telecom bill. The question is whether Congress will continue to ignore this attempt to create monopolies over last-mile Internet access. Fortunately, cable companies like Comcast and Cablevision will probably send Senators Bruce Kushnick's book, The $200 Billion Broadband Scandal.

Technorati Tags: Broadband, Fiber, Internet, Marketing, Telcos, Telecom, TV, Verizon

Perhaps newspapers need a refresher on marketing....

Yesterday I published an article on deconstructing news in the attention economy claiming that newspapers need to identify and expand their audiences to survive. Today, Techdirt notes that now some newspaper owners are upset that Google is indexing their stories and photographs.


Yikes! This is a bit like complaining that doctors and dentists are putting newspapers in their waiting rooms. Google is driving traffic to newspaper Web sites to read their stories, yet newspapers are suing them to stop, or at least pay them. Next thing you know, newspapers will take a page from the RIAA and start suing their customers.


This situation is a great example of why new media news sites have a huge advantage over old media; they understand that more audience attention is good. Any new media news site loves Google because they increase their site traffic. More traffic means more ad views and more revenue. In fact, many sites optimize their pages and sites for better Google indexing. Why wouldn't newspapers want this?


I said yesterday that most newspapers underspend on marketing. This activity shows that some don't even understand the concept. Perhaps the best thing to say is that there is some Darwinian justice here. Those that don't understand marketing won't be around much longer.

Technorati Tags: Google, Marketing, Media, New media, News, Publishing, Techdirt