Strategies for a discontinuous future.

Saturday, September 24, 2005

History Lesson of the Day

History of World GDP Share
Remarkably enough, both India and China had larger share of world GDP at one point than that of the US today. It is also striking to see how well coorrelated India's fall is with UK's rise.

-- Mahashunyam // 11:27 PM //

Friday, September 23, 2005

New Stuff

Hi folks, since there seems to be a bit of discussion about the charts I uploaded last week, I've decided to upload the ppt (224 kb) they're taken from.

It's a work in progress - a shorter, friendlier synthesis of my denser stuff on media/web 2.0 econ, with new concepts thrown in (edge competences and new scale economies), as well as data to help make things more concrete. Yes, this means more irritating charts :)

A couple of caveats:

1) I crunched what limited public data there is. If you have better stuff you'd like to share, I'm happy to revise. YMMV with respect to conclusions - my girlfriend the hardcore econometrician laughed me out of the room since I have <1 billion data points. Of course, if I waited that long, Web/Media 2.0 would be as obsolete as a Brick.

2) This is a work-in-progress. Unlike much of my other stuff, this ppt is very much unfinished (and so I'm a lil hesitant to share). Stuff I'm in the process of adding/sorting - definitions, more examples, and a better setup (in terms of explaining returns to scale).

3) The goal is to inject some fresh thinking into the discussion about what we should be looking for in media/web 2.0 plays - not to claim my answers are necessarily the right or only ones.

Enjoy - and since I'm sharing my work with you, consider dropping me a few bucks via PayPal, even if it's just Starbucks money. Emails telling me how cool you think my stuff is are always appreciated, but cash is appreciated even more.

-- umair // 4:45 PM //


Prediction Markets

Hi guys, this post about Google's use of internal prediction markets reminds me that I coded a prediction market a while back.

I would like to repurpose and rerelease it, but I have no time. So I am looking for an intern to get involved. This means minor code tweakage, possibly a bit of AJAX, and some new graphics. So you should have somewhere between tiny-l33t [email protected] web guru skillz.

It won't be a huge amount of work, and you can help set up what will be a pretty cool project which will get a fair amount of exposure. If you'd like to help me with this, drop me a line.

-- umair // 4:31 PM //


Simulation Economy

Blackbelt Jones has a nice post on the G's interview of Castronova.

-- umair // 4:27 PM //


GoogleTV vs 3rd World TV

GoogleTV makes me think about how, in one of the 3rd world countries I visit every so often, cable TV has recently been deregulated. Except it's been deregulated 3rd world style; which is to say, half-assedly.

What's happened there is that one license has been granted in each city. Now, the outfit that holds the license, since they don't really care about international IP, do something pretty incredible: they buy a single satellite subscription, and rebroadcast it over the entire city's cable network.

See where I'm going with this? That's a city's worth of cable sub revenues for the price of a single consumer satellite subscription. Talk about a margin.

I bring this up to talk about what kinds of market structures emerge when such insane monopoly dynamics are the dominant force. What happens?

Well, the license holder does something even more amazing: they splice all kinds of ads - rotating, spinning, flying, blinking - into the feed, right on top of the stuff you're trying to watch.

Why? Well, pretty clearly, their incentive is to extract total monopoly rents for as long as they possibly can. I mean, what are you gonna do? It's not like there are too many real substitutes for MTV if you're in the 3rd world - even if ads are covering half the screen.

Similarly, they have no absolutely no incentive to share revenues and help develop a local content industry - why should they, when they can free ride off 200 satellite channels?

Now, clearly, Google isn't evil, so they wouldn't make GoogleTV like 3rd world TV. Or would they? Industry economics are (very) similar.

On the other hand, maybe GoogleTV would be more like AdSense meets TV - helping microproducers for TV emerge. That would be cool, because, as we all know, TV sucks everywhere in the world at the moment, except for Japan and maybe Europe. Oh wait, that's because the government helps pay for it...

Maybe some food for thought.

-- umair // 11:51 AM //

Thursday, September 22, 2005


Killer article about mass-market 'feminization' of male consumption in Japan. Highly recommended.

-- umair // 5:16 PM //



The Guardian talks to Jobs...blah, blah.

-- umair // 11:06 AM //


Media 2.0

No kidding.

-- umair // 10:59 AM //


Google's Big Problem, or Google vs the Social

NYT piece contrasting Google Answers with Wondir, etc.

What's Google's Achilles Heel? Well, there's a big glaring one at the moment. It's not (as every analyst seems to point out) that Google's a one trick (ie, contextual ads as far as the eye can see) pony - contextual ads across domains won't be commoditized for a very long time.

The problem is that in a world of media hypercompetition, algorithmic approaches aren't as efficient at large scale as social approaches. This is what I call connected consumption. Here's a nice article summarizing.

To make this intuitive, if it's not already, think about either finding new music via Last.fm, or relying on HSS. Which is more likely to be efficient? Pretty clearly, Last.fm.

But, as the article points out, even collaborative filters eventually break down in terms of novelty, and everyone gets hyperpolarized into their own microdifferentiated niches.

The interesting thing is that there seems to be a kind of exponential relationship between the algorithmicness of your approach and novelty - the more algorithmic it is, the less efficiently it can generate novelty. On the other hand, here's an example of a purely social approach generating some pretty cool novelty hyperefficiently (talk about digging through the crates!).

I mentioned this a few weeks back - if we're thinking in terms of the DJ metaphor, the best DJs also play tracks that infuriate and challenge people - not more of the same stuff over and over again. Think John Peel.

So what does all this have to do with Google? Simple - Google is heavily algorithmic. It isn't very good at social approaches (as you might expect from an algorithm-driven company). Most of it's efforts to build social competences ads have been soundly beaten and reduced to irrelevance by (simple) social approaches. It's a long list - Orkut, Google News, Froogle, Groups, etc. Google doesn't do communities (which most social approaches require) very well - it does the opposite; make hyperefficient markets.

Now, this is a big problem (at least, it is if you wanna take over the world). That's because as micromedia explodes, algorithmic approaches become less and less valuable. They'll certainly remain valuable in vertical and narrow domains (viz, SideStep), but the 100x gains will flow to a new kind of play - plays which, instead of going algorithmic, leverage peer production to engineer entirely new kinds of sociality. You know what I'm talking about - Skype, Flickr, Metafilter, Habbo, etc.

I haven't really named these social plays yet, but I think we should - any ideas?

-- umair // 10:30 AM //

Wednesday, September 21, 2005

Let's Make a Deal

Hi everyone, just a quick note to let you know those of you I don't know personally that I've decided against continuing towards a PhD and am looking for a new full-time position.

Ideally, I'm thinking an Associate spot at a fund, or a strategy role in www/media/tech, but I'm open to interesting ideas.

To sweeten the deal, I will pay a bounty of $750 (plus pints if you're extra cool) to whoever refers me to a position/place/person that leads to an offer I accept.

USA/UK/Europe is OK. I'm in London now, but am getting back to the Bay Area next week.

Make some easy cash and hook me up. In lieu of a CV, you've got a whole blog (but you email me for my CV if you want :)

-- umair // 8:05 PM //



To everyone who's emails I haven't returned yet - it's been a (really) crazy week so far, and I haven't had a chance to stay connected for long. Ah, life in Europe...increasingly like life in the 3rd world.

Tomorrow, I promise...:)

-- umair // 7:32 PM //


Small World Effect

So I was reading Metafilter today, and staring back at me from the screen (in an ad for some dating site) was what looked suspiciously like an old friend of mine I haven't talked to in about 6 or 7 years (scroll down).

I went to the dating site, dinklink, to see if I could get in touch and say hi, but dinklink (of course) wants me to pay $15. Maybe if one of you is a member, you could send RedPaige a note saying I said hi (disclaimers: no, not an ex, just an old friend, no, I'm not looking for a date, I just wanna say hi. Sheesh).

-- umair // 11:25 AM //

Monday, September 19, 2005

Peer Production/Web 2.0

BusinessWeek can't get enuff. Let the land grab begin...

-- umair // 6:16 PM //


Simulation Economy

Be sure to check out this GS research note BBB's posted about Shanda/Netease. Apart from search, there are just a handful of business models slowly emerging across the Media 2.0 space - and a biggie is the pay-for-items (but not to play) model that Habbo's exploited.

-- umair // 4:45 PM //


Google vs AOL = Search vs Media 2.0

Rafat notes:

"...As WSJ says, under the current AOL-Google agreement, Google pays AOL a portion of the ad revenues generated from searches by AOL users. In 2004, AOL received about $300 million in revenues from the arrangement. Google says in filings with the SEC that AOL accounted for 12% of revenues in 2004. No other customer accounted for more than 10%, it said."

If you do the math, that means that Google's margin is ~ 20% on it's AOL deal, which is roughly in line with other Google deals/product lines (viz AdSense). Why is this interesting? Well, I think it's important to note that search is probably going to be the lowest margin Media 2.0 business - compare it to, for example, MMOGs or other viral plays.

For a structurally attractive industry - with very nice huuuge natural monopoly dynamics - margins on the order of 20% are (really) low. You could compare to, for example, MS (at 30+%), newspapers in their heyday (30+%), etc. Interesting.

Why is this? I think right now, it's because search hasn't really tapped high-value domains yet. But it's something that bears thinking about.

-- umair // 4:18 PM //


FIM + NCSoft?

Rumours...my model values NCSoft at 1.5-1.7 billion, which is a bit steep (a 7xish revenue multiple), but it's not really an exhaustive valuation. Let's see (if the deal goes through) what the price works out to be - my guess is Fox will have to pay a significant control/strategic premium.

-- umair // 4:06 PM //


Peer Production/Viral Economies

NYT notices FatWallet. Note, this is not 'tariff arbitrage' - this is peers realizing exponential gains from getting together and doing cool stuff - talking to each other about negotiation tactics for discounts, for example.

-- umair // 12:13 PM //




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