Putting iTunes into Perspective

   
  Originally uploaded by neuskool.

From Eric Garland of Big Champagne:

Number of songs sold on iTunes in the past three years: 850 million.

Number of songs traded on P2P file-sharing networks during the same time: 90 billion

850 million iTunes songs/ 42 million iPods = 20 songs/ iPod.

Over three years that comes to people spending an average of $7 a year on music at the iTunes store.

As Garland says:

People do not buy music from Steve Jobs. That is fine with Steve Jobs.  He is not in the music business.

Of course the actual number is actually higher than $7 a year spent at iTunes per iPod owner because most of those 850 million songs were bought by far fewer than today's total current iPod-toting population (the 42 million).  But it does put into perspective how far we still have to go to make digital music a meaningful business.

The Next Sims

One of the best presentations at this week's Entertainment Gathering in LA was given by Will Wright, the creator of Sim City and the other Sim videogames.  Wright gave a preview of his next video game, called Spore, which is like no video game ever made before (it will come out in about a year).  It is all based on user-generated content beyond any current game, including teh Sims.  Wright explains the appeal to videogamers of creating their own stuff:

With the computer people can start creating their own artifacts.  It doesn’t matter how good it is, people bond to things they create because it is theirs.  It is scaffolding for their imaginary world.

In Spore, he takes this idea to a completely new level.  You start as a bacteria that you can design yourself and then you evolve by adding a spike on your tail or a different type of propeller tail, and so forth.  Eventually you evolve from a bacteria to a sea creature.  Then you can add feet and crawl out of the water, and get a bigger brain (which you pay for with points you get for eating and mating).  "The computer becomes a creative amplifier," says Wright.  "At every stage the player is designing the content." 

As you evolve into new creatures you get to design your own character in a sophisticated modeling mode that lets you stretch your snout, inflate your body, or add new parts.  Explains Wright:

I want the player to have the skill set of a Pixar animator.  Anything the player can imagine, the computer will analyze and make come to life. As we bring the character back into the world, the computer figures out how he should behave. 

Once you get to land, you can start forming tribes, and cities, and then finally spaceships so that you can go explore other planets.  (You can even abduct other creatures from your planet and seed them on other worlds). 

Now here is where the game gets interesting.  Predicts Wright:

We will have several million worlds the player can explore because these worlds will be built by the other players.

In other words, he's figured out a way to break the ever-escalating costs of producing more and more complicated video games.  How?  Let the players create the game themselves.  The creatures you create will populate my world when I play, as will the cities and planets and solar systems (But this is not a multiplayer game.  Only your creations—your data—populate my world).  Wright notes:

For the longest time, games have been considered almost a new form of movie, but that ignores the really interesting opportunities we have in games.  Games are in a unique position to bring content consumers into the role of creators. 

It's a lesson that other forms of media can learn from. Give people the chance to create amazing content and they will.  Tomorrow's media is not so much about entertaining people, but about helping them entertain themselves (and each other). 

What Comes After the Blockbuster? The Nichebuster

I am at the Entertainment Gathering conference in LA and there is a lot of talk about the death of the blockbuster.  Wired editor Chris Anderson showed some nifty charts from his upcoming book on the Long Tail documenting the decline in hit albums, TV ratings, newspaper circulation, and the percentage of the movie industry's revenues contributed by the top-25 blockbusters.  The chart for the music industry is the most dramatic:

In the past five years, the number of gold and platinum albums have been cut in half.  Part of this no doubt has to do with the rise of illegal file sharing, but part also has to do with the greater variety of music now accessible in digital form, and the ease of searching and discovering that music.  Anderson suggests that the hit album may have peaked with the March 21, 2000 release of 'N Sync's "No Strings Attached," which sold more than 11 million copies.  Contrast that with Green Day's more recent "American Idiot," which sold less than 5 million.  As the Wall Street Journal's Walt Mossberg (another speaker here) puts it:

There is a continuing breakdown in the power of the people who package this stuff for us.

At least, that's the new conventional wisdom.  If people like Anderson are right that the long tail of content "collectively represents a market that rivals the hit-driven market we have known for a hundred years" and that "small is the new big," then where does that leave traditional media companies?  Is all media going to be replaced by stuff that appeals only to an audience of one or two?

I don't think so.  There is an opportunity here for media companies (as well as new professional-amateur entrants into the industry) to create content that appeals to targeted audiences of tens of thousands, hundreds of thousands or even millions.  I think the best of this content will come to be known as nichebusters: movies, songs, and stories that become extremely popular within certain, large niche audiences. 

In other words, media companies will need to shift away from creating a few blockbusters every year, and instead try to create hundreds of nichebusters.  Admittedly, this will be a big challenge. But if they do it right, media companies could actually reach more people and create deeper connections to many different audiences than they do today.  Because for every blockbuster today there are at least three or four flops.  That's often what happens when you try to appeal to everyone with generic, mass-market drivel: you end up pleasing no one. 

Finely-tuned nichebusters might have a better chance of reaching smaller audiences.  We just need a lot more of them than we have today, and find a way to create them more cheaply than today's blockbusters.

If media consumption is fragmenting, then so must the media industry.

Google Enterprise

If Google's earnings miss tells us anything it is that it needs to find some serious new lines of revenue.  For all of its cool products that it seems to launch every week, none of them outside of search ads are making much, if any, money.  Here's my latest column on why Google should  become a platform for online enterprise software apps and take on SAP (which is about to launch its own online CRM service) and Salesforce.com.  Excerpt:

Think of the range of small-business customers, from architects to plumbers to restaurant owners, as well as the diverse jobs they need software to do—payroll, inventory management, sales leads, you name it. Google could provide the underlying technology platform to support all of these applications. And if it does, thousands of entrepreneurs would flock to Google's platform to create and deliver those applications. The world of conventional, shrink-wrapped software would shudder.

Capellas Gets a New Gig

What's Michael Capellas up to, now that the sale of MCI to Verizon is a done deal? Cisco has named him to its board of directors. Before joining MCI as CEO, Capellas was the president of Hewlett-Packard, a role he entered into after selling Compaq to H-P. See a pattern? Here's another pattern: Cisco seems to have a thing for HP executives -- Carly Fiorina previously served on the Cisco board. She left in 2003, so there won't be an awkward boardroom reunion for Mike and Carly.

Flickr Photo of the Day: The Nürnberg Rabbit Army

The Nürnberg Rabbit Army, originally uploaded by RevrendMaynard.

Attack of the Social Networks

Does the world need another social network?  Apparently some entreprenuers out there feel that MySpace, the Facebook, LinkedIn, TagWorld, and, yes, Friendster (remember them?) are not enough.  Next week will see the launch of Uspot.com, a Web 2.0-licious social networking site targetted at the college market. 

And (here's another scoop for you) former E-Trade CEO Christos Cotsakos is developing a social network for older international socialites called MoLi (as in Money Life, not "more lies").  It's based out of Palm Beach, Florida, appropriately enough. 

The logic behind these businesses seems to be: Got a hot demographic marketers want to reach?  Build a social network for them!  That's what Uspot is all about.  It will let college students (only people with a .edu e-mail account will be able to join) create personal blogs, podcasts, and vidcasts, as well as share photos, music, videos, and email.  The site uses lots of Flash.  Co-founder and CEO Todd Cohen tells me:

Right now we are focussed on the college market because it's a targeted market that is so highly sought after.  I think it is a hot market.  A lot of companies are interested in this because of the video, and it is college.

Like with MySpace, rock bands will be able to create their own artist pages.  But Cohen is gunning more for the college-oriented Facebook than MySpace.  "Most college kids don't like MySpace," declares Cohen.  He thinks that his video-, photo-, and blog-friendly site has enough bells and whistles to do to Facebook what MySpace did to Friendster.  Consumer-generated media, he says, is his competitive advantage:

Media is a great way to meet people, through common interests of films or music.  But through a general population site it is hard to target my school.  Uspot really enables you to get more local.

He might be right.  But you've got to wonder how many personal profiles people are going to want to fill out for every new social network that pops up.  The fact that the Facebook already has a community of six million college students, is a huge network barrier to any new entrant, no matter how great the site is.  Because at the end of the day, college students just want to hook up, and they are more likely to find who they are looking for in a bigger, more established network.  Second, even if they all do flock to Uspot, what's to stop them from moving on when the next great social network arrives? 

And don't even get me started on MoLi.

Google Misses

Call your stockbroker.  Oh, too late.  Google announced earnings and it's profits rose only 82%.  Sounds pretty good, right?  Trouble is, investors were hoping for a 148% gain, so they slammed the stock, which is down $67 in after-hours trading.  Ouch. Not even a Google version of a Linux desktop or speculation of a Napster buyout can help them now.  The Mo' has left the building. (Where's your $600 price target now?)

Scoop: NYTimes.com Says, "Indeed."

If you can't beat 'em, join 'em.  Like all newspapers, the New York Times is facing the erosion of its highly profitable classifieds business from the likes of Craigslist and online job sites.  Embracing the inevitable, today it is partnering with Indeed.com (in which it is an investor) to add job search results from Indeed in the "Job Market" part of its Website.  When you do a search for a job on NYTimes.com, it gives you results from its own listings, but it now also offers a link titled "Job Market Web Results" powered by Indeed.

If people are going to search the Web for jobs, they might as well be doing it from the NYTimes.com, where they can compare the results side-by-side with the Times' own classifieds.  May the best job listings win.

Major Moolah for Sling Media and Root Markets

  slingbox 
  Originally uploaded by martyz.

The WSJ reports today that Sling Media raised $47 million from Liberty Media, Echostar, Allen & Co., Goldman Sachs, and Mobius Ventures.  The startup is the maker of the Slingbox, a Tivo-like device that ads place-shifting to the already common time-shifting made possible by DVRs.  You hook it up to both your TV and PC, and you can access stored TV shows from anywhere on the Web, and soon cell phones too.  (My man Om first wrote about it two years ago in B2.0).  Imagine the Slingbox built into your satellite set-top box.  That would be just another reason to ditch cable.  This investment though is yet another endorsement of the notion that media wants to be free.

In other financing news (you heard it here first), I've been informed that Root Markets (the startup that wants to make a market out of consumer attention) just closed an initial $10 million round with private investors including former Time Warner co-CEO Nick Nicholas and former Goldman Sachs partner Mark Green.  Did that grab your attention?

The $500 Phone Versus the $100 Laptop

Bill Gates thinks that instead of giving the world's poor children $100 laptops that run on Linux, as Nicholas Negroponte wants to do, we should give them cell phones that run on Windows.  Spreading computing to poorer nations through cell phones might be the right answer in the long run, but last time I checked full-fledged smartphones cost about $500. 

Sure, those costs will come down fast, but then you've got to add a keyboard and a bigger display.  The all-in-one hand-cranked laptop Negroponte is pushing seems like it could get to the right price-point (with the right features) much faster. 

But let's not forget another $100-PC project being pursued by a less-heralded tech startup in India named Novatium that might be the best solution of all: a network computer with no hard drive that connects to desktop-like applications on the Web and can use a TV as a monitor.  That way all those poor kids can have the most up-to-date apps with the cheapest hardware.

Startup Watch: Kosmix (Another Clustering Search Engine)

A new search engine called Kosmix ranks Web pages by category (like other clustering search engines).  Started by the founders of Junglee (a price-comparison search engine they sold to Amazon) and former Stanford classmates of Sergey Brin, Kosmix is focussed on health search right now, but has plans to expand to other categories (SiliconBeat has the details). 

An interesting test would be to see if Kosmix returns more relevant health results than Healthline (which I wrote about here).  The difference between the two is that Healthline limits its search to a predetermined set of less than 100,000 health-related Web sites, whereas Kosmix crawls 2.7 billion Web pages and infers which ones are health-related based on its content and the content of pages linking to it.

Guided navigation is definitely a next step in search (a company called Endeca pioneered this with its enterprise search product year ago), but ultimately you don't want to have to go to a hundred different vertical search engines to find what you are looking for.  Eventually (through building or buying it), it's just going to be part of your Google, Yahoo, or MSN search results.

Flickr Photo of the Day: The View from Wonderland

looks like summer..., originally uploaded by Rosina.

BadgeRank (at Davos)

  KO1P6773 
  Originally uploaded by HBM Marcom.

Ever wonder they figure out the pecking order at Davos?  My former Fortune colleague Justin Fox, who is at Davos this year, explains:

The gradations of status at the World Economic Forum are many. There are the legions of worker bees:  Their badges come in various shades of blue.  Then there are the working press, who get to attend some WEF events but not the really interesting ones. Their badges are orange. Then there are security people, aides to really important participants (less important ones, such as Congresspeople and run-of-the-mill CEOs, don't get to bring staff), and various other categories with badges in various different shades.

It's among those who possess the white badges bespeaking full Davoliciousness, though, that the status game gets really interesting. At the lowest rung are spouses, girlfriends and partners of WEF participants, who get to join in on all the fun stuff and avoid actual work if they want, but are condemned by their badges to the soft bigotry of low expectations. While everybody else's badges say where they work, the spouses' are left blank -- even though many of them have jobs far more impressive than mine. 

In a nice reflection of how our world now works, though, the biggest stars of all here this year are Angelina Jolie, in her function as a UN goodwill ambassador, and Brad Pitt, who I presume is wearing one of those spouse badges that doesn't say what he does for a living.

All hail the white badges.

The B2Day Searchroll

With the help of Dave Pell at Rollyo, I've finally added a search box to this blog.  Try it out in the sidebar at right (or here, for those reading this as a feed).

If you put in a search term, it will search B2Day.  But if you click on the drop-down menu you will see that you can also search the "Business Web."  This is a list of business sites and blogs (including CNNMoney.com, Bloomberg.com, Businessweek.com, Yahoo Finance, Memeorandum, GigaOm, John Battelle's Searchblog, TechDirt, TechCrunch, and others) that I've rolled into my own search engine mashup. Check out the full list here.   (You can also add this custom search engine to your own Website/blog or to the drop-down searchbox in a FireFox browser).

What other sites or blogs should be included to create a comprehensive business search engine?  What other custom search engines would you like me to add to the drop down menu?

The whole thing is powered by Yahoo.  I'm going to try it out for a while and see how people like it.  So please let me know your thoughts (in comments).

A Hundred-Thousand-Dollar Idea: Inflatable Concrete

Last night was the Saatchi & Saatchi World-Changing Ideas awards.  Finalists included a nanotech startup that wants to make spinach-powered solar cells, the Frozen Ark Project (which aims to save the DNA of all the planet's endangered species), an Australian startup called Plantic that sells a biodegradable, cornstarch-based alternative to plastic packaging, and Wikipedia.  But the winner was a concept called Concrete Canvas.

After all the recent disasters of the past year—from the tsunami to the Pakistan earthquake to Hurricane Katrina—Concrete Canvas is a fitting choice.  The idea is to create hardened, concrete structures for disaster victims that are much more durable than tents.  Conceived by two recent industrial design graduates of London's Royal Academy of Art, Peter Brewin and Will Crawford, the structure comes in a 500-pound bag filled with dry cement that can be easily air-lifted to disaster areas.  Then construction is relatively simple.  As Brewin explains to me:

You have a package, you add water, you add air, and you have structure.

The volume of the bag is equal to the exact amount of water needed for the cement inside, which is held in a fiber mesh that become the igloo-arched wall and roof.  After the cement hydrates for 15 minutes, you unroll the shelter into an oval footprint.  Then you inflate it with a chemical pack while the cement is still wet.  The fabric mesh holds the wet cement in place as it dries, and provides the structure with the necessary tensile strength to hold up.  It's like inflating a balloon and casting it in concrete.  Brewin and Crawford figure they can sell the shelters for $2,000 each in volume production.  Says Crawford:

If you compare it to a soft tent, it is about twice the price.  But it can last ten years.  Tents need to be replaced at least every two years. Any structures left after a crisis are extremely valuable to help the community.  Nothing is wasted.  These will find secondary use as accommodation or agricuiltural storage.  Or they can be demolished using hand tools, and will leave very little rubble because the inflation allows for a very efficient use of concrete. 

With the Saatchi & Saatchi award comes $100,000.  Brewin and Crawford say they need another $100,000 to start field testing, and about $2 million to start full-scale production.

Why Google and IBM Should Partner on Biz Apps

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  Originally uploaded by aiesecnz.

With so much software moving to the Web these days, you sort of wonder why more enterprise software companies don't take the Salesforce.com route and deliver their software via a browser.  I spoke with IDC research honcho Frank Gens earlier this week, and he's wondering the same thing.  Not only does he think companies like SAP and Microsoft are about to make further moves in Salesforce.com's direction, but he also argues that Google will get in the game in partnership with existing enterprise application companies.  Says Gens:

My prediction is in the next 30 to 60 days you will see some big names pick up Google as a strategic partner around information management and search.

In his schema, Google would provide the Web platform with its existing, massive, computing infrastructure of hundreds of thousands of servers around the world.  It could team up with a whole array of companies to actually write applications—from information and content management to business analytics—on top of that platform.  Rather than targetting large corporations, Gens suggests that these Google biz app partnerships will be targeted at small to medium sized businesses.

But forget about the small fry. The most scary-powerful partnership in this area would be Google and IBM.  They should be able to get along because they both are steeped in an engineer's culture and they are the least threatened by one another in the tech universe.  Such a partnership would be a good way for IBM to address small and medium businesses in a truly on-demand way, and it would help Google diversify its revenues away from purely ads.  Gens concurs:

Talk about a powerful partnership.  It would bring hipness to IBM's brand and corporate gravitas to Google.

It would also help IBM put its money where its mouth is on "business transformation services" and "on-demand" software.  Gens calls this a "prove-it year" for IBM in that regard:

IBM spent the last three years convincing the world it can transform their businesses a la McKinsey. There are new ways of conducting business through leveraging technology, and IBM has not fully delivered that.  They have done it in a one-off way for their larger customers, but have not come up with what is the new Walmart-In-A-Box or Amazon-In-A-Box.

That is what the world is waiting for.  The world wants that consulting army fused with technology so you can get business innovation, and get it up and running without hiring McKinsey.  You can get McKinsey ideas and fulfill them on a Google budget.

A Google-IBM partnership could be very successful with smaller businesses, at least from a marketing angle. Already it sounds so accessible in a way that IBM by itself doesn't.   

The big hurdle (as with any online enterprise software) would be to get people to trust their sensitive business data to Google.  That means the data must belong to the business customer, not Google (which is not the case today with our personal search histories). And, please, no ads alongside those sales graphs.

XBox Portable?

  Whisper......... 
  Originally uploaded by DevotioN.

While we're trafficking in rumors here, BizWeek says Microsoft is considering its own answer to the iPod and the Sony PSP:

What would it look like? Xbox boss Peter Moore says any Microsoft media device would have to leverage the company's most significant consumer strength, video gaming. "It can't just be our version of the iPod," says Moore, who nonetheless would not confirm that Microsoft is considering making such a device. So in addition to playing music and videos, a Microsoft device would include games. Microsoft would probably use the Xbox brand to market the gadget.

The question still remains: Will Microsoft really do it? It has abandoned efforts over the years to make everything from computer speakers to PC-connected telephones. The company gave some clues in December, when it put its digital media software unit and its MSN Music service under Robert J. Bach, president of the Entertainment & Devices division.

I say, Go for it.

Digg This Rumor

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  Originally uploaded by darkshapes.

Yahoo, which has already bought social media startups Flickr, del.icio.us, Upcoming.org, and Webjay, is now rumored to be eyeing Digg (or not).  (Digg is a news aggregation site where users both post stories and vote to get the stories ranked highly on the homepage).  There were some predictions of a Digg-Yahoo matchup back in December.  It would certainly fit into Yahoo's growing portfolio of social media companies.  But the rumor is pretty unsubstantiated at this point.

Flickr Photo of the Day: The Purpose Driven Life

the wicked thoughts of a trespassing mind, originally uploaded by Guido Oliver.