Apr 192014
 
newspapers are dying as the media business models move online

Last week, Google’s share price slumped on news of poorer than expected revenue results and website Asymco has a detailed examination of how the company’s growth might have reached its limits.

Asymco’s warning to the online advertising industry is clear with the warning that revenues might start to decline in 2016.

That online advertising may have reached its peak means even an even more uncertain future for businesses rely on those revenues, and times have been tough for those sites in recent years as returns have fallen.

At the same time online ad spending seems to be peaking, print advertising revenues in the United States dropped a further 8% last year with income at now at 1982 levels. It seems publishers can’t win either way.

So its now wonder that online services like Google and Facebook are looking to payment systems and other ways to generate revenue, for online publishers things are even more problematic.

What is clear is the advertising driven revenue methods that work so well for the broadcast industry aren’t working for online publishers and quite possibly other internet based businesses as well.

The online industries need a David Sarnoff to figure out a model that works.

 

Apr 112014
 
heartbleed

The big tech news story of the last two days has been the Heartbleed security flaw, that might have compromised users’ passwords and other details.

Given the nature of the bug where a server can tricked into giving away bits of what’s stored in its memory, it’s hard to say exactly what has been compromised – on most sites you’d be very unlucky to have your password on banking details in the system at the precise millisecond a malicious attacker exploited the bug – but the risks are still real.

While webmasters and system admins around the world are frantically patching their systems, for the average user the best advice is to wait before changing your passwords as if the bad guys already have your details you’d have probably used them by now and changing your logins on a vulnerable server might actually increase the risk of crooks stealing your information.

The Internet of Things

The longer term risks with Heartbleed are actually in embedded systems and the Internet of Things; many systems will have hard coded implementations of the buggy software which may never be patched and these devices may be give up much richer data than a web server would.

It’s another illustration of how difficult the task of keeping embedded technologies up to date and how to secure the Internet of Things.

Open source blues

While there’s no shortage of similar security lapses in commercial software, the Heartbleed saga is going to concentrate the minds of open source community on how to tighten peer review and audit version updates.

Most open source projects are staffed by small groups of time poor volunteers, making auditing and quality control harder. That key parts of the internet and computer industries rely on these underfunded, and often unappreciated groups is a weakness for the entire sector.

No technological change is simple or without problems and securing information is one of the great challenges of today’s tech revolution and Heartbleed is a strong reminder of that, hopefully we’ll learn some lessons about building robust systems.

Apr 062014
 
Times change and business poitical and state empires fall

A regular topic of this blog has been the rise of the internet empires that want to lock users into their kingdoms.

On the edges of these empires things can get ugly as the competing groups fight for supremacy and to capture users.

In these wars, no-one was capable of getting uglier that Steve Jobs.

Which makes Steve Jobs’ declaration that 2011 would be a year of Holy War with Google unsurprising.

The statement typical Jobsian hyperbole, but we should under estimate just how serious Apple’s staff would take such a statement.

Apple’s intention to wage ‘holy war’ illustrates just how high the stakes as the online empires try to capture users.

Those Holy Wars and the reason they are being fought is something all of us should keep in mind when we’re asked to choose between Apple, Google or Microsoft.

Mar 172014
 
alibaba-head-office-hangzhou

One of the questions in the online business world for the last year was were would Chinese Internet giant Alibaba decide to list – the US or Hong Kong?

Listing in Hong Kong would have been a coup for the Chinese territory and possibly marked a shift in Asian web properties away from listing in the United States.

As it turned out, Hong Kong’s listing rules were too stringent for Alibaba’s Jack Ma who wanted to retain a controlling stake in the business in a way that isn’t allowed on the HK stock market so the company is going to the US for its IPO.

Jack Ma and Ailbaba’s rise is a fascinating story partly told by Porter Erisman in his Crocodile on Yangtse who was interviewed for Decoding the New Economy last year.

Alibaba’s listing on a US exchange, the announcement isn’t clear if its the NASDAQ or NYSE, will also be a test for the valuation of Asian internet properties in Western stockmarkets.

With revenue of around a billion dollars this year, a Google like P/E of 30 would see the company  valued at around $30billion, although there could be arguments that a Facebook like valuation of 100 times earnings might be more appropriate.

Regardless of how much it is valued, Alibaba is going to be blazing a trail for Asian and, specifically, Chinese companies over the next few years.

Feb 062014
 
Cisco-fog-computing-cgr-1240-hub

One of the annual events in the tech world is Cisco’s Visual Networking Index, the company’s survey of internet traffic trends.

The numbers, as always, are staggering and this year Cisco are forecasting that global internet traffic will grow by a factor of eleven over the next four years to 190 exabytes – that’s 190,000,000,000,000Mb or the equivalent of 19o billion hard drives.

What’s particularly fascinating about this year’s index Cisco forecast that by 2018 there will be more mobile devices on the planet than people.

Many of those devices will be the sensors and equipment that makes up the Internet of Things (IoT), or Machine to Machine (M2M) technologies and Cisco expects the internet traffic in this area to surge fifty-fold over the next four years.

This is remarkable as most of the M2M devices don’t use much data as the vast majority only need to send out the odd short signal – as opposed to smartphones that download megabytes of information each day.Cisco’s predictions underscore just how pervasive this technology is going to become in the next few years, the challenge for us is to understand how to use and protect the masses of data these systems are going to generate.

Jan 242014
 
honestly you'll love the new Microsoft Windows

Microsoft’s evolution to the post PC era has been a fascination of this blog for several years now as the company’s once flagship Windows becomes irrelevant in a world dominated by smartphones and tablet computers.

The launch of Windows 8 and the Surface tablet were the great hope for the company, but it appears the business model that built Microsoft into one of the world’s biggest companies is doomed. Microsoft is shifting to the post-PC era where Windows has little role.

Yesterday’s financial results emphasised the shift as the consumer licensing business fell 6% year against last years revenues while the company’s overall revenues rose 14% – the old consumer Windows business is dying.

This is illustrated in the company’s quarterly report, where the business units that delivered the growth were all in non-Windows areas.

  • SQL Server continued to gain market share with revenue growing double-digits
  • System Center showed continued strength with double-digit revenue growth
  • Commercial cloud services revenue more than doubled
  • Office 365 commercial seats and Azure customers both grew triple-digits.

Drilling down into the numbers the trend against Windows is even more stark, here’s a chart of the performance of the division over the last ten years.

Microsoft Windows division financial performance

Microsoft Windows division financial performance

As we see, life was good for Microsoft Windows until the iPad arrived.

Following Apple’s proof that tablet computers could deliver what business and home customers wanted from a portable device, Windows’ revenue stagnated and now income and margins are falling.

The devices and services strategy of outgoing CEO Steve Ballmer recognises is a reflection of how Windows is becoming irrelevant to the business.

It’s hard to see where Microsoft now goes with Windows, the product still remains a key part of the business with 22% of revenues – although that’s down from 27% last year – and its hard to see a buyer parting with the hundreds of billions the division would be worth as a stand alone business.

For Steve Ballmer’s successor as Microsoft CEO dealing with the Windows problem will be one of many big issues they’ll have to deal with, the future of the once iconic product though won’t define the future of the business.

Jan 192014
 
workers

This week’s edition of The Economist asks about the Future of Employment and where the jobs are in a society where work is increasingly done by machines.

For the Economist the conclusion is that the future of employment is ‘complex’ and observes economists and politicians haven’t given enough thought to the effects of the changing workplace and the dislocation of many workers.

Much of the Economist’s story is based around the ideas of professors at MIT Erik Brynjolfsson and Andrew McAfee in their upcoming book “The Second Machine Age”.

The race with the machines

Professor Brynjolfsson gives his view at TED 2013 in the key to growth? Race with the machines, a presentation countered by Robert Gordon in the ‘death of innovation, the end of growth’ and followed by an excellent debate between the two.

Brynjolfsson cites the dilemma of bookkeepers being displaced by software applications such as Intuit Turbotax as an example of where service sector staff are being displaced.

“How can a skilled worker compete with a $39 piece of software?” Brynjolfsson asks.

“She can’t. Today millions of Americans do have cheaper, faster, more accurate tax preparations and the founders of Intuit have done very well for themselves. But 17% of tax preparers no longer have jobs.

“That is a microcosm of what’s happening not just in software and services, but in media and music, in finance, manufacturing, in retailing and trade. In short, in every industry.”

The great decoupling

Brynjolfsson’s key point is that workers’ wages have been decoupled from productivity and that the workforce isn’t sharing the rewards of improved practices and increased wealth.

That is certainly true over the last forty years, however that may not be a technological effect, but the business consequences of liberalising the financial sector which has seen massive pay increases to the banking industry and managerial classes that has been way out of kilter with the rest of the workforce.

It may well be the current golden era of high executive salaries is a transition effect of an evolving economy, albeit one where our grandchildren will puzzle over an era where a failed executive can receive a $100 million payout on being fired.

As The Economist points out technological change itself tends to create new jobs that make up for those displaced in old industries, this is a view supported by GE’s Chief Economist Marco Annunziata.

The main problem that Brynjolfsson identifies is the medium term issue of dislocated workers finding themselves out of work with superseded skills and, as The Economist point out, it’s clear the developed world’s political leaders haven’t though through the consequences of that transition.

In almost every sense, the current crisis of confidence about employment prospects is more a political and social problem rather than technological.

Helping displaced workers is going to be the greatest challenge for today’s generation of business and political leaders, the real question is are they up to that task?