This bubble stuff feels eerily familiar

Celebrating after the AOL Time Warner mergerI was sitting in a conference room at the hi-tech incubator BizTech in Huntsville, Alabama with hopeful eyes fixed on the TV. It was January 10, 2000, and on the screen was the press conference during which the AOL and Time Warner merger was announced. I remember it like it was yesterday. Here I was trying to raise a million dollars for my own start-up, ANSIR (A New Style In Relating), and these guys were talking about a merger valued at $350 billion. AOL itself was valued for the deal at $165 billion. It was then and remains the biggest merger in business history.

I remember the excitement and the wonder of it all. Little did we know it was all just part of a big market bubble, and I remember especially this provocative line from Time Warner CEO Gerald Levin, a very sane, important and knowledgeable businessman at the time.

I accept that something profound is happening in the Internet space; I believe that. The new media stock-market valuations are real — not in every case, of course. But what AOL has done is get first position in this new world. Its valuation is real, and I am attesting to that.”

Levin’s attestation would later be proven wrong, and he would be forced out as the merged company shriveled under the blended brand. It is now a case study in why what Levin said is a bad reason to take such an enormous gamble. Walt Disney built his empire with what he called “the plausible impossible,” and I suspect that was at work here. Logic is great, the old saying goes, unless you begin at the wrong spot. Believing the valuations was what grew the bubble. Turns out that if it seems unbelievable, it probably is.

I’m recalling this today, because I’m feeling the same vibe as Facebook is about to approach Wall Street with an IPO valued at $100 billion, a valuation that’s roughly 100 times its earnings from last year. It sounds and feels oh so familiar.

So are we in a bubble? The always astute Mathew Ingram has a nice overview of the subject today that’s worth a read, although his conclusion tends to support those who feel we’re not.

So while some venture funds may be doing their best to inflate expectations and cash in on high valuations, that appears to be causing problems only at the small end of the startup pool — for now. Without any obvious signs of a public-stock mania that puts individual shareholders at risk, it’s hard to argue that we are in a 1990s-style bubble yet (although some critics fear that the new crowdfunding bill could accelerate the problem). Whether Facebook’s IPO triggers a broader inflationary atmosphere remains to be seen.

Dave Winer says we’re “definitely” in a bubble, and I believe him. I mean, look at the evidence. AOL’s model was based on a pre-Internet business model, one we know of as mass marketing. They could make tons of money, if they could just keep people inside their walls, a “walled garden” as many would later call it. When the fickle public disagreed, a new garden called MySpace sprang up. This social network could make money the same way, and for awhile, things looked good, until a young guy named Mark Zuckerberg took over with his Facebook. So here we are again, and the whole thing still hinges on the same value proposition, that Facebook can somehow keep those people within its walls. Old school media value, after all, is about controlling the infrastructure for content, whether its made by the New York Times, Zuckerberg or Joe Blow.

And for the last few weeks, we’ve been treated to justification and rationalization that Facebook is somehow different than its predecessors. The company paid a billion dollars for Instagram in what most (myself included) feel was an overpriced grab at real estate Facebook needed to be inside its wall instead of outside. But is Facebook substantially different that previous walled-garden approaches? Get real. It may have a few more bells and whistles and connections, but the core competency is the same. Web research and consulting firm BIA/Kelsey is hosting a webinar on the topic this week to probe this specific issue:

…questions continue to swirl about its (Facebook’s) actual worth and whether any company can justify becoming public at such a high value. The prevailing question: How will Facebook support this valuation…?

I don’t believe it can be justified, although lots of smart people who’ve doubtless done their homework will try to explain that it is entirely justified.

I’m sure Mr. Levin had done his homework when he made that infamous statement back in January of 2000, but at some point in a gamble, you must consider that you could be wrong, partly or as the AOL Time Warner deal proved, utterly and completely. So in addition to homework, what say we also consider common sense. We could also ask a few teenagers.

Everybody’s switching to Twitter,” a 17-year old family member told me. She used to be a pretty regular user of social media, but her activity has been shrinking for the last year or so. She doesn’t need Facebook anymore, and besides, “it’s pretty lame.” Think about that for a minute. It’s AOL all over again.

To everything is a season,” we’re taught. I wouldn’t bet on Facebook’s future if you gave me the money with which to do it.

Future fame (and why it’s important)

Like a lot of folks, I have a Google search RSS feed based on my name. Call it vanity or call it “reputation management,” but today’s world allows a degree of feedback never known before.

Kari's Facebook pageLast week, I ran into (and subsequently made friends with) a Finnish sports photographer named Kari Kuukka (also here and here). He’d just returned from the Vancouver Olympics and wrote a blog entry referencing a quote of mine that he uses on his Facebook page (see image). My Google search picked it up. I went to take a look. And now we’re Facebook friends.

This kind of thing happens more often than you might think, and it kind of freaks me out. Kari is a reader of this blog and also of my essays, which are published by The Digital Journalist. I showed the Facebook quote to Karen, and she said, “You’re famous.”

A few days later, my friend (and genius) David Weinberger posted a blog entry referring to a podcast he’d done on the subject of fame. In it, David speaks of a new form of fame that is here, thanks to the World Wide Web. In days past, “the media” determined who rose to the ranks of the famous. There was a neat, orderly process that one had to go through in order to “become” famous, but even if one followed all the right steps, the decision wasn’t based on anything other than the grace of media. He’s including Hollywood, the music industry, etc.

Today, it’s very different. The mainstream media still plays a role, but fame today is generally within smaller groups, peer groups or whatever. I think this is going to take awhile for people to accept that “fame” within smaller circles is actually fame, but I think David’s right. And not only is it more like “big fish/small pond,” the method of determining fame is very different, for the mechanisms of the Web allow for the audience — everyday people — to make the decisions on who gets to bask in the light of fame.

In Lexington this week, WLEX-TV General Manager Pat Dalbey took me to the Monday night taping of Woodsongs, a popular old-time music show that’s recorded in an old theater in downtown Lexington. One of the performers was Andy McKee, a remarkable guitar player that, well, you have to see to believe. Under the old world system, it’s unlikely Andy would be touring the country and selling CDs of his original compositions. His claim to fame? The guitar channel of YouTube, where Andy McKee’s music has been heard and seen over 72 million times. The members of YouTube vaulted McKee to fame, although it’s very unlikely his name will ever be a household word (neither will mine).

There are other stories popping up all the time. Colbie Caillat presented at the Grammies this year. Nobody ever heard of her before she put her music on MySpace. David Lehre’s work on YouTube got him a spot with MTVU, and he’s now a film producer.

So fame works in different ways today.

Colbie Caillat, David Lehre and Andy McKee

I first wrote about this in September of 2007 in our AR&D Media 2.0 Intel newsletter:

This is a generation unbound by the roadblocks used by the status quo to maintain their status, and I’m especially taken by the astute views of Ms. Caillat.

In an age when marketing has been elevated above content and so many songs are written and produced to a pre-ordained formula…Records these days…tend to contain one or two good tracks which you download to your computer so that you never have to listen to the rest of the album again.

The clue to the real power of J.D. Lasica’s “personal media revolution” is found in this statement, and it assigns blame for current media chaos where it belongs — with the people who used to control everything. It’s not about technology or copyright or distribution or any of the other things you read and hear about these days that are cutting into music sales; it’s about the institution producing crap.

(Ask your employees how many watch your news, and then ask them why they don’t. Be prepared for the next response.)

So what do people do when confronted with crap? They usually find another path, and that’s at the core of what’s happening around us. This is why I so strongly recommend that local media companies search their own neighborhoods for tomorrow’s employees in addition to following the more traditional paths.

We’re being disrupted by the prosumer movement, and so far, we’ve taken the wrong path in trying to defend ourselves. Steve Jobs was asked last week why Apple came out with what could be considered an iPhone killer, an iPod with everything the iPhone has except the phone. His response is telling: “If anybody is going to cannibalize us, I want it to be us. I don’t want it to be a competitor.”

So rather than wait for somebody else to embrace the prosumer movement, we need to be doing this ourselves. This is essential Media 2.0.

So to Karen’s statement about Kari putting a quote of mine on his Facebook page, yes, I may be “famous.” But my tribe is a far cry from that which produces old world “fame,” and I’m very happy for it to be that way. You see, I write to challenge my own assumptions, not necessarily to be read, so anything that comes of that is really just an ancillary benefit. Oh it makes me “feel” good to know that people notice, but that’s not my goal.

And maybe that’s what real fame is all about anyway.

(You might be interested in a Google search on “1,000 true fans” and what that means for media professionals today as they work to grow their personal brands.)

Holy social networking, Batman!

Major news today in the world of social networking. Google has announced their OpenSocial Alliance, a way for developers to build social applications that span more than one social network. Michael Arrington of TechCrunch calls it “a set of common APIs that application developers can use to create applications that work on any social networks (called “hosts”) that choose to participate.” Hosts include Orkut, Salesforce, LinkedIn, Ning, Hi5, Plaxo, Friendster, Viadeo and Oracle.

Now comes word that the biggest Daddy of them all, MySpace, is joining, which would make everyone except Facebook a part of the alliance. Facebook, in my judgment, will have no choice but to join. So much for the value propositions that led to its $15 billion valuation last week.

In so doing, Google has again taken the position of facilitator regarding web applications. Rather than build its own social networking application (it already has one in Okrut) to compete with Facebook, it has chosen the path of adapting to the whole web as its platform. This is so smart.

Diane Mermigas agrees:

Google’s ability to create value and seize control of reinvented markets has been at the very heart of its more than 700%-plus growth from a $4.8 billion to a $220 billion company since going public three years ago. Google’s core services and technology are so fundamental to all things interactive, it can put itself in the middle of any trend or business and blow away competitors. The combination of Google’s scale and agility, vast resources and consumer intelligence make it the $700-plus share gorilla in the media space. And its social-networking plan is just another step toward cyber-world domination.

At the end of all of this is a very big hand in the growth and development of the portable web, a term I use to describe interactive media away from desktops or laptops. Its uses are, in some ways, the same as the WWW, but in other ways, it’s quite different. It’s much more personal, interactive, and reflective of the user’s real world persona. We need to watch this space and participate with great care, because the rules are being written every day.

So what can we glean from this that will help us downstream.

  1. Everything is going mobile. By talking with Verizon and Sprint, Google is setting the stage for their operating system to become the mobile standard for, well, everything except the bloody phone itself. This doesn’t have to be seen as directly competing with our efforts, because Google’s mission is not to control so much as it is to enable. I have always been impressed by how focused the company has been on this goal, and this “enabling” message is one I constantly share with local media companies.
  2. The OpenSocial Alliance will marry all of these applications in such a way that it finally makes sense to join many different social networking sites. My problem with the whole social networking concept is the same with the Web as a whole — how do you keep track of so much information? By participating with Google on this, I think everybody eventually wins. Assuming alliance members allow developers access, we could see some really interesting stuff coming down the pike.
  3. Privacy, I believe, will be in the hands of individual users, simply because that’s been Google’s model all along. Call me naïve, but I don’t think the company’s “do no evil” slogan is just marketing. I think it’s the path to prosperity in the new world. There won’t be a need for a “Do Not Track” list, because tracking, in Google’s paradigm, doesn’t include blinking and whirling or other disruptive ad attacks so popular with Madison avenue. I’ve seen enough from Google to give them the benefit of the doubt in this one.

Interesting times, indeed.

Let the HULU spin begin!

New York Times writer Brad Stone rightly set the stage with his summary of hulu.com’s private beta launch today:

Since March, when the broadcasters announced their joint effort to bring free, ad-supported television shows to the Web, critics have pounced, predicting the venture would be doomed by diverging agendas, technical challenges and an all-powerful enemy: YouTube.

Skeptical bloggers even slapped Hulu with a derisive moniker: “Clown Co.”

Now the defense is ready to present its case.

As any viewer of “Law and Order” will tell you, the defense is often not about guilt or innocence, but about the presentation of reasonable doubt. That’s what hulu has done with its highly-controlled press presentations on this, the launch of its private beta.

The NYT header says it best: “Hulu Readies Its Online TV, Dodging the Insults.” Over at TechCrunch, one of the site’s biggest pre-launch critics, the headline is just the way hulu wants it: “Hulu Launches Private Beta, Makes Very Good First Impressions.”

hulu.com logoSince I’ve been one of those critics — not of the presentation but of the strategy — I’ll admit that I’m naturally going to be skeptical of what I’m reading. Launching in private beta means you invite some people in to kick the tires. I’ve found nothing yet today from any such person, which means all of this positive coverage is coming from the information and screen grabs that hulu is feeding them. That said, everything looks very nice on the surface. The videos look well-organized. The player is portable, and they’re touting the ability of users to clip programs and embed those clips elsewhere. These are textbook unbundled media tactics, and they should help spread the monetized videos across the Web.

(You can view hulu vids via AOL Video. If this is the best they can do, it’s not saying much.)

There are two problems immediately. One, the videos don’t play anywhere except in the U.S. This is the result of trying to provide an application that lives by all the industry’s rules. Rights, you know. Secondly, the television shows that are offered stay online only five weeks. So think about this for a minute. Why would anybody embed a hulu clip if it couldn’t be seen in other countries and would disappear after five weeks?

The idea of a portal for “legal” videos is a good one, but 1.) all content creators must play in the same space, and 2.) the reach must parallel that of the Web itself. Hulu may work these things out eventually, but right now, those are big concerns.

Moreover, hulu further erodes the already damaged network-affiliate arrangement by making first-run show videos available after midnight, Hawaii time (nice).

In the Times article, NBCU head Jeff Zucker goes out of his way to position hulu as an entity separate from NBCU, and this will either be its greatest strength or its biggest weakness:

At a minimum it’s another way for us to offer our content to users and get paid for it,” Mr. Zucker said. “If the site itself does well, that will be gravy on top of it.”

This distancing himself from hulu is interesting, because it was Zucker who made the original announcements and led the original cheerleading. So now hulu is just another company that’s distributing content created by NBCU, which means if it crashes and burns, it was THEIR fault. Nice.

But this isn’t what we get from NewsCorp president Peter Churnin, who takes credit for the idea in the Times article and is a bit defensive about the criticism. “I think there’s a snarky desire to say this is big dumb media and this is a big dumb joint venture,” he said, adding that he thought of the idea as a way to distribute Fox programming. So is it a joint venture or a stand-alone company?

I guess it’s both, but the question is important in judging its viability from here. If it’s a stand alone business, will it be able to sustain itself without more investment money when the costs go up? That’s a fairly significant issue. If it’s a joint venture, then NBC and NewsCorp will foot the bills, and then it becomes just bad strategy and a drain on resources.

There is one distribution partner in this that really intrigues me, and that is MySpace. If hulu is to succeed, it would help to be THE application that exposes this content to people who don’t already watch it, and that basically is the definition of MySpace’s core demos.

Stay tuned.

What’s a “friend” these days?

Max Kalehoff writes in today’s Mediapost Online Spin that he’s overwhelmed by “friends” on various social networking sites.

We’re experiencing friends overload, and it’s a tragedy of the commons. The practice of friending has morphed way beyond the term’s original intention and utility. And that is why I declare friends — at least in the social-networking context — passé.

…Let me be clear: Social networks are very much alive and well, but our traditional, generalized notion of friend is dead. When online friendships begin to scale artificially — such as randomly or via the all-too-easy click of a button — they run the risk of overwhelming us, causing the aggregate value of deeper social-network friendships to erode.

I would add that in trivializing the meaning of the word “friend,” we’re also changing the word’s definition, and this has cultural ramifications beyond what we might think. My 22-year old daughter recently went through a personal trauma and learned that her online “friends” weren’t really friends at all. She won’t use that word lightly again.

When we examine culture, we must always look for unintended consequences and especially those that alter the definition of words that we use to communicate. A young person today reading the Robert Lewis Stevenson quote referenced by Kalehoff (“A friend is a present you give to yourself.”) would view it differently than, say, my mother, and this kind of re-writing of the source code of our culture is more serious than we realize.

This week’s Media 2.0 Intel Newsletter

This one includes more on the collapse of page views as an ad metric, RTNDA/NAB retrospectives, MySpace News (told you so), and some thoughts about students and their resumes.

Friday, April 20, 2007