Paul Wallbank – Brilliant Communications

Author: Paul Wallbank

  • Google’s locksmith problem and the perils of crowdsourcing

    Google’s locksmith problem and the perils of crowdsourcing

    An ongoing frustrations of this blog is Google’s failure to execute in local business search despite the massive advantage it has in that field.

    One notable aspect of Google’s failure is the locksmith problem where thousands of fake businesses have slipped into the company’s database. The result is thousands of consumers being ripped off and honest local businesses being overlooked in search results.

    Spam in Google’s local business search is not a new problem, Search Engine Land reported it as being an ongoing issue in 2009 and the New York Times ran a feature on it two years later highlighting how genuine local businesses and consumers suffer.

    Now, five years on, the New York Times has revisited the problem of Google business listings and finds the problem hasn’t changed a great deal with locksmiths and other local search engine results being hijacked by scammers filing false listings.

    It’s hard not to conclude that the local listing service isn’t really a high priority to Google’s attention deficient managers and it isn’t surprising given maintaining databases is nowhere near as sexy as being involved in moonshots or as lucrative as the company’s core adwords business.

    Google’s bureaucrats think so little of the service that they give the task of maintaining its integrity to an army of unpaid volunteers. The New York Times tells the tale of one of these ‘Mappers’, an unemployed truck driver named Dan Austin, who proved so good at the role he was ‘promoted’ – still unpaid of course – and then ‘sacked’ when he demonstrated how easy it was to plant a false listing.

    That weakness in Google’s system shows how crowdsourced services can be subject to abuse and how volunteers themselves are abused by companies taking advantage of ‘free’ labour.

    Another weakness illustrated in the Locksmith story is the collateral damage of the ‘fail-fast’ mentality where features are released without the developers really understanding the consequences. The cost of failure may be felt by innocent parties more than the company that’s ‘failed’, as Search Engine Land flagged in its 2009 article.

    Google has continued to release features into local that are open to abuse. Google has used its release early and iterate tactic to gain market share at the expense of more circumspect competitors and on the fragile incomes of small businesses.

    The continued failure of Google’s local business service remains frustrating for small businesses, having destroyed the Yellow Pages and local newspaper advertising models most neighbourhood services have few places to advertise. While Google and the other internet giants remain focused on other matters, local business search remains a great opportunity for a smart entrepreneur.

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  • Does venture capital really matter?

    Does venture capital really matter?

    Around the world governments are trying to replicate the Silicon Valley startup model. But does that model really matter?

    On the Citylab website, Richard Florida looks at which cities are the leading centres for startup investment.

    Unsurprisingly eight of the top ten cities are in the United States with San Francisco and San Jose leading the pack. While London and Beijing make up the other two, the gap between the regions are striking with the Bay Area being home to over quarter of the world Venture Capital investment while the Chinese and London capitals com in at around two percent.

    global-startup-cities

    While these proportions are impressive, the numbers are not. The total VC investment identified by Florida in 2012 is $45 billion, according to the Boston Consulting Group there was $74 Trillion of funds under management in 2014.

    That makes the tech venture capital sector .06% of the global funds management industry.

    In the US alone over 2013 small businesses raised $518 billion in bank loans, more than ten times the global VC industry.

    What this scale shows is how small the tech startup sector really is compared to the broader economy and, more importantly, how the Venture Capital model perfected in the suburbs of Silicon Valley is only one of many ways to fund new businesses.

    Even in the current centre of the startup world, it’s estimated less than eight percent of San Francisco’s workforce are employed by the tech industry although that goes up to nearly a quarter in San Jose.

    None of this is to say the startups are not a good investment – Thomas Edison’s first company raised $300,000 in 1878, $12 million in today’s dollars, from New York investors including JP Morgan. The Edison Electric Light Company, while relatively modest went on to being one of the best investments of the 19th Century.

    That twelve million dollar investment looks like a bargain today and it’s highly likely we’ll see some of today’s startups having a similar impact on society to what Edison did 140 years ago.

    Edison’s success created jobs and wealth for New Jersey and New York which helped make the region one of the richest parts of the planet during the Twentieth Century and that opportunity today is what focuses governments when looking at encouraging today’s startups.

    So it’s understandable governments would want to encourage today’s Thomas Edisons (and Nikola Teslas) to set up in their cities. The trick is to find the funding models that work for tomorrow’s businesses, not what works for one select group today.

    While the Silicon Valley venture capital model receives the publicity today, it isn’t the model for funding most businesses. Founders, investors and governments have plenty of other options to explore.

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  • It’s hard to make a buck on the cloud

    It’s hard to make a buck on the cloud

    Microsoft released its quarterly financial results to general acclaim from the stock market which drove the shares seven percent higher after reporting slightly better than expected returns.

    The market was applauding the continued shift to cloud services with income rising five percent in the company’s Intelligent Cloud division, however the decline in the company’s more traditional strengths of software licenses and devices saw earnings fall by eleven percent over the corresponding period last year.

    More concerning for the company’s shareholders would be the profits that have fallen 23% which once again proves that cloud services are much less profitable than Microsoft’s traditional software business.

    To make matters worse margins on cloud services are falling with returns from the division declining despite sales being up five percent. It’s not hard to see the effects of Amazon Web Services’ ruthless driving down of cloud service prices.

    While Microsoft’s results are encouraging in that they show the company is continuing its evolution to a cloud services business, it’s clear the legacy products are still the key cash generators.

    As of December 31, Microsoft has a 102 billion dollars in the bank so there’s little risk the company will be going broke soon however the company has to find a way to make better profits from its new business models.

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  • Splitting two former internet giants

    Splitting two former internet giants

    Just how mismatched PayPal and eBay were is now becoming apparent since the two companies separated last year.

    Yesterday, PayPal beat the street with 23 percent growth in its payment figures along with an additional six million new users. The company’s stocks rose 17% following the news.

    For eBay’s investors the news wasn’t so good with the company reporting no increase in US sales over the key Christmas buying quarter despite the National Retail Federation reporting a nine percent gain for the entire industry.

    One of the main criticisms of eBay being part of PayPal was that there were no reasons for the two companies to be joined and so it is proving now they have gone back to separate entities.

    For eBay, it’s hard not think that the opportunity has passed with the market moving on from the days of households selling their unwanted items to e-commerce now being a major industry dominated by traditional chains and, most menacingly, Amazon.

    While PayPal is travelling better its business is still under great threat from other payment platforms, particularly while much of its revenue is still locked into desktop software. Shifting to more API and mobile based streams is going to be essential for the company wanting to compete in a very changed marketplace.

    The failed PayPal-eBay venture will go down as one of the great missed opportunities of the first Dot Com wave as both companies were distracted from growing while the industry evolved over the last decade. No doubt some of today’s unicorns will suffer the same fate as they respond to a changing marketplace.

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  • Reinvigorating Australia’s research sector

    Reinvigorating Australia’s research sector

    Could Australia’s poor track record in commercialising research be turned into an advantage? Data 61’s CEO Adrian Turner believes so.

    Australian research agency Data61 was formed last year following the science hostile Abbott government’s slashing of research budgets coupled with a merger of the National ICT Australia organisation (NICTA) with the long established CSIRO.

    The intention behind Data61 was to create a world leading data research agency. At the time of the announcement then communications minister and now Prime Minister, Malcolm Turnbull said, “Having a single national organisation will enable Data61 to produce focussed research that will deliver strong economic returns and ensure that Australia remains at the forefront of digital innovation.”

    Having been in the role for six month and now, in his words, having his feet finally under the desk, Data61’s CEO Adrian Turner met with the media last week to discuss the directions he intends to take the organisation.

    Business in a data rich world

    Coming from a corporate Research & Development background and having spent over a decade in Silicon Valley tech businesses, Turner is conscious how industries are being changed in a data rich world.

    For corporate R&D model shifting as industries are changing he says, “their challenge is they can’t hire the digital and data talent that they really need.” Turner sees one of the opportunities for Data61 in providing access to the high level expertise large companies are struggling to find.

    Giving Data61 is global focus is Turner’s main objective with an aim of capturing a tenth of one percent of the world’s private sector R&D budget, describing how he will sell the organisation’s scientific expertise to global corporations, “we can plug them into the Boeing and GMs of the world and introduce them to the people to short circuit the sales process.”

    “We’re going to go around the world where corporate R&D dollars get allocated and convince these companies that Australia is a place where primary R&D can take place,” Turner continued, “we’ve got the talent and we’ve got the capabilities to do the research.”

    Good at the basics

    Turner highligthts an ongoing problem in Australian science and industry. The nation historically has been good at basic research but poor at getting those developments to the marketplace, something the World Intellectual Property Organisation’s Global Innovation Report has regularly flagged.

    While Australia ranks at 17 overall in the 2015 WIPO report, the nation’s business community flounders at 38th in the world for its collaboration with researchers and 39th for knowledge and technology output. Put bluntly, Australian businesspeople are not very sophisticated or research orientated.

    Adrian Turner puts that down partly to the nation’s being weak at product management, “I think it’s a function of global companies seeing Australia as a sales and marketing outpost so we don’t have the product development expertise.”

    Inward looking locals

    The nation’s inward looking local corporations are also part of the problem, “for us to succeed as a country we have to have a global mindset. We can’t have the zero-sum mindset that I win if you lose in the domestic market,” Turner continued. “In that sense what we’re doing is creating a product marketing function.”

    So to meet Data61’s objectives of meeting its own financial performance targets, developing an R&D ecosystem and having an impact on the nation economy, Turner sees the organisation having to go overseas for most of its partnering with private sector researchers.

    Sparking the startups

    All is not lost though for Australia with Turner believing Data61 has a role in helping the local startup community develop. “We don’t have the infrastructure in place to support the entrepreneurs to go out and build new business,” he says.

    “In Silicon Valley over decades you have this infrastructure, you have this workforce, you’ve got the legal infrastructure, you’ve got capital, all of these things that have built up organically over decades and they stack the odds in favour of the entrepreneurs.”

    Data61 was born out of an unfortunate period of Australian politics where for the first time the nation was lead by a government that was genuinely hostile to science. Now the political winds have changed and the organisation has a global focus, it may be possible to reverse the long-term neglect of Australian research and build a new business culture.

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