Decoding the new economy

I don’t get it

Mar 292012

the internet is changing business models

“I don’t get Twitter or Facebook” says the talkback radio caller, “why would you want to tell the world what you’re having for dinner?”

Once upon a time people didn’t get the motor car. There were many good reasons not to – compared to a horse a steam or petrol driven vehicle was expensive, unreliable and restricted in where it could go.

The motor car ended up defining the 20th Century.

Those who didn’t get it – like the stage coach lines and later the railway companies – eventually faded into irrelevance.

Something we should remember though is that many of the entrepreneurs in the early days of the motor car who did “get it” went broke. As did those in earlier times building railways and canals.

“Getting it” is one thing, but it doesn’t guarantee it will make you rich or guarantee your business’ survival.

You hold us harmless

Mar 252012

The law applies online to social media and other web services

Social media site Pinterest was recently caught in one of the ongoing quandaries of social media – the ownership of content.

The subject is tricky; social media sites rely on a vibrant community of users posting news and interesting things for their online friends.

Unfortunately many of things social media users post are someone else’s property, so almost every service has a boilerplate legal indemnity term like Pinterest’s.

You agree to defend, indemnify, and hold Cold Brew Labs, its officers, directors, employees and agents, harmless from and against any claims, liabilities, damages, losses, and expenses, including, without limitation, reasonable legal and accounting fees, arising out of or in any way connected with (i) your access to or use of the Site, Application, Services or Site Content, (ii) your Member Content, or (iii) your violation of these Terms.

Facebook have similar terms (clause 15.1) as do LinkedIn (clause 2.E) and Tumblr (clause 15). Interestingly, Google’s master terms of service only holds businesses liable for the company’s legal costs, not individuals.

Boilerplate terms like these are necessary to provide at least an illusion of legal protections for investors – those venture capital investors, greater fool buyers or punters jumping into the latest hot technology stock offering need a fig leaf that covers the real risk of being sued for copyright infringement by one of their users.

The risk in these terms shouldn’t be understated; by agreeing to them a user assumes the liability of any costs the service incurs from the user’s posts. Those costs don’t have to be a successful lawsuit against the service, it could be something as minor as responding to a lawyer’s nastygram or DMCA takedown notice.

Of course, none of the major social media platforms have any intention of using these indemnity terms; they know that the first time they go after a user all trust in the service will evaporate and their business collapse.

Somewhere among the thousands of social media services though there is going to be one that will pull this stunt. Strapped for cash and slapped with an outrageous claim for copyright damages, the company’s board will settle then send out their own demands to the users responsible.

Those “responsible” users – probably white, middle class folk sitting in somewhere in the US Midwest, South East England or North Island of New Zealand – will be baffled by the legal demand that requires them to file a defense somewhere obscure in California or Texas and will go to their lawyer friends.

When the lawyers tell them what it means their next step will be to their local news outlet.

The moment the story of a middle class person facing losing all their assets hits the wires is the moment the entire social media business model starts to wobble.

In many ways what the social media sites are trying to do is offset risk.

Risk though is like toothpaste. Squeeze the tube in one place and the pressure moves elsewhere.

By laying off a real risk by using legal terms the social media sites create new, even bigger risks elsewhere in their business.

The dumb thing is these terms really don’t protect the services anyway – it’s unlikely the typical social media user will have anything like the assets to cover the costs of a major copyright action by a rich, determined plaintiff.

It’s going to be interesting to see how many services still have these indemnity clauses in 12 months.

For the industry’s sake, the big players will need to have ditched these terms before that first dumb attempt to claim damages from users hits the wires.

A website can’t save a dying business

Mar 242012

even the biggest businesses can die if they don't understand the world around them

The last week has seen some interesting changes in the local online business community.

Embattled department store David Jones’ announced they are following Harvey Norman into an “omni channel strategy”.

Harvey Norman chief executive in turn appeared on national television to state the “internet drives no sales.”

In the political field, it was reported the Australian Labor Party are looking at using Blue State Digital tools to counter voter and member apathy.

Each one in it’s own way illustrates how organisations can be distracted by shiny new technology while ignoring much deeper problems.

In the case of David Jones, the department store ignored their core competencies and tried to ape their down market competitors in milking the financial services cow.

This worked fine while they could offer 24 and 36 month interest free deals and as soon as their partners American Express started charging a monthly “Administration Fee” that business evaporated.

One of DJ’s down market competitors is Harvey Norman, co-founder Gerry Harvey has spent his life building a fortune based upon providing cheap credit to consumers.

It was always going to be a mistake for DJs to compete with Harvey’s as Gerry is far better at the business than the well connected, genteel board of David Jones and their snappily dressed friends in the store’s executive suite.

Worse for DJs, the whole strategy alienated their core markets and while management focused on financial services customers went elsewhere to find the quality goods and services that the upmarket department store should be providing.

For both though, the financial services business model is now fading as the 20th Century debt supercycle comes to an end; consumers no longer want to load up on “buy now, pay later” schemes.

So all the talk of “omni-channel strategies” really doesn’t address the underlying weaknesses in both business.

This disconnect with reality is true in politics as well where the ALP is reported to be considering using the Red State Digital tools that Barak Obama used so well in his 2008 US Presidential campaign.

While the tools are impressive, they don’t address the problem that the electorate – and the member bases of the major political parties – have become rightly disillusioned and disconnected from the political processes that exclude everyone except an increasingly smaller circle of cronies and insiders.

The only good thing that will come of using US political communications tools in the spectacular eruption the first time one of the ALP’s factional warlords encounters a grass roots online campaign like The Great Schlep.

Heck, the resulting furore might even see some of the apparatchiks distracted from partying and whoring on their union credit cards for a day or two.

All the frivolity aside, the reality for the Australian Labor Party, David Jones and Harvey Norman is their problems are far deeper than a well designed website and impeccably executed social media strategy can fix. These organisations need major rethinks about how and why they exist.

It doesn’t matter how much money you throw at the web or how effective your social media strategy is – if the foundations of a business are shaky then a nice “omni-channel strategy” aren’t going to fix things.

For some of organisations, a failure to embrace the online world may be one of the causes for their problems, for many though there are far more basic issues they need to address.

ABC Nightlife: Going Viral

Mar 212012

radio programs for techonology, web, social media, cloud computing and computer advice

Paul Wallbank joins Tony Delroy to discuss technology, change and the online world on Thursday, March 22 from 10pm on ABC Local Radio.

A podcast of the program can be downloaded from the ABC Nightlife page.

Do you know who Kony is? You probably know at least something about this Ugandan warlord thanks to a video about him that recently ‘went viral’.

Tony and Paul will look at how and why videos go viral on the net – how does it start, and why do some capture the world’s attention when most don’t?

Some of the questions we’ll look at include;

What is “going viral”?
How do videos go viral on the Internet?
Are these viral videos just marketing stunts?
Is it just videos that go viral on the internet?
Who sends these around the web?
How is the Stop Kony campaign different?
Is there a downside to going viral?

An excellent presentation on what makes a video go viral on the internet from YouTube’s Kevin Allocca describes some of the factors involved.

We’ll also be covering a number of other topics including;

On the topic of Online Scams, reader James Voster recommends the Victorian government’s Consumer Affairs Page.

We’d love to hear your views so join the conversation with your on-air questions, ideas or comments; phone in on the night on 1300 800 222 within Australia or +61 2 8333 1000 from outside Australia.

Tune in on your local ABC radio station or listen online at www.abc.net.au/nightlife.

You can SMS Nightlife’s talkback on 19922702, or through twitter to @paulwallbank using the #abcnightlife hashtag or visit the Nightlife Facebook page.

The allure of free data

Mar 082012

It looks like a nice business model, you get users to generate your content for you. Many of the new digital media empires like YouTube, Facebook and Foursquare are built upon it.

The Register’s Simon Sharwood looked at the downside of this business model – junk data.

Even the most well intentioned users makes mistakes with thing like addresses and that’s before you get mischief makers or competitors putting in false information.

There’s another aspect too, what one person thinks is relevant may not be to other users or to the people running the service, Simon cites the dozens of “mom’s kitchens” on Foursquare.

For those who’ve added their mom’s house, that’s relevant and maybe even funny to them.

All of this illustrates the downside to the free, User Generated Content (UGC) model; you have to accept what the users give you.

Which means it isn’t free – it has to be collated, processed and the noise has to be filtered out.

At worst, somebody has to make the decision what is relevant and what has to go. This isn’t easy and, as Google found with their Name Wars, can upset a lot of users if it isn’t handled well.

Nothing in life is truly free and with data becoming increasingly important to business it’s worthwhile considering the quality of that free or cheap stuff you get from the net.

When history bites

Feb 222012

personal histories on the web and social media

In a strange way Peter Watson, the Australian Labor Party election candidate disendorsed and expelled for his homophobic views, is a trend setter for his generation.

Mr Watson was caught out by the unsavoury views he’d posted on Facebook and other online forums. That he defended what he had written “when I was like 14, 15 years old, so we’re talking about four, five years ago” made matters worse.

Our digital footprints – material about us on the web or in social media sites – sometimes show we’ve strayed into places we’d rather admit to.

There’s plenty of others who have posted things that will bite them later when they apply of jobs or seek political office.

It will be interesting to see how society and the media adapt to our histories and the dumb stuff we did as teenagers being freely available, Mr Watson is an early casualty of that adjustment process.

One of the more disturbing aspects of the Peter Watson case is his political party’s failure to do the most basic of checks on their candidate’s background. Something that again illustrates just how out of touch the nation’s political structures are with modern society.

When we talk about disruption, we often focus on the jobs, business and social aspects of that change. One thing we often forget is that social upheaval directly affects political parties.

Political parties who fail to adapt to the needs of their society become irrelevant and fail.

So maybe Peter Watson has, through sheer dumb luck, found himself on the right side of history in being expelled from a political party that doesn’t know how to use Google search.

Scammed

Feb 162012

sometimes things don't seem to be what they are

“Executive-level income without leaving home” claims the Facebook page, a sign at the end of my street promises a six figure wage from your own computer and one of the lead stories in this morning’s news is the tale of retirees being ripped off by ‘boiler rooms’ offering high return ‘investments’.

We all believe we have the right to be rich so the quick, easy option and the promises of those that say we can be wealthy by simply handing over a modest amount of money or trusting our investments to someone else is a tempting offer.

Deep down we know we’re being scammed.

Right now nations are on the verge of collapse because politicians promised easy wealth, corporations skirt bankruptcy because executives were entitled to bonuses regardless of performance and in the suburbs desperate people clinging to the middle class lifestyle they believed was theirs by birthright fall for get rich quick scams.

Just as the railways opened up opportunities for snake oil merchants in the 1850s and cheap telephone systems gave rise to the boiler room ripoffs of the 1970s and 80s, social media tools open up a whole new range of possibilities for the sneaky to fool the gullible or desperate.

Naturally we’ll get the nanny goats and nincompoops demanding something be done about Internet scams – maybe a law, perhaps a treaty or a code of conduct – all of which will be as effective as stopping railways, telephones or the postal system in an effort to stamp out fraud.

Fraud is technologically neutral; fraudsters just use whatever happens to be the most effective tools available at the time.

The sad thing with the social media based scams is we get to see who among our friends and family have fallen for it. Invariably when we warn them we’re told off because we aren’t believers.

Again though this is nothing new, the same thing happened when the snake oil merchant came to town or the shaman visited the village.

In the 19th Century the phrase “there’s a sucker born every minute” was coined. In today’s hyper connected world, there’s one born every second. Don’t be that sucker.

On becoming a Captive Business

Feb 142012

A business captured by suppliers, customers or services is at risk

I’ve been writing a lot recently about the risks of businesses aligning their interests too closely with one or another platform, last weekend The China Law Blog discussed the opposite – being a captive customer.

The term “captive customer” is new to me but it’s a familiar concept; in the IT industry most of us found ourselves hostage to Microsoft’s whims at one time or another and it wasn’t a good place to be.

Many smaller businesses and consultants fall for the trap of having just one big customer which their income becomes dependent upon.

While Dan’s point on The China Law Blog is about manufacturing, this risk is becoming even more pressing on the web where there’s a tendency to be captured by one platform or another.

Sometimes entire industries are captured – the Search Engine Optimisation sector is wholly dependent upon whatever Google chooses to with their search algorithm. To make things worse, no SEO expert knows exactly how Google’s equations actually work.

We’re seeing the mass media being captured in a number of ways – by granting licenses to Facebook, one suspects unwittingly, or developing content for Apple’s iPad.

For startups depending upon cloud services or single payment platforms like PayPal there are serious risks as we saw with the co-ordinated takedown of Wikileaks.

In nature, the animal or plant that depends on one source of food or habitat is at risk from even small changes in their environment. Be careful you aren’t a business dodo.

Paying the piper

Feb 112012

private property limiting access to cloud computing and social media web services

With the web increasingly dominated by four major, and many minor, fiefdoms the cost of being part of those groups is gradually becoming clear.

As part of Facebook filings in advance of their public float they published the key agreements with their developer partners including that with games provider Zygna, technology journalist Tom Foremski has a disturbing look at Facebook’s conditions that illustrate the costs and risks.

In terms of the costs, Tom identifies Clause 2.1 of Facebook’s “Statement of Rights and Responsibilities” – shown as Annex 1 in the Developers as probably the biggest price for all content creators;

… you grant us a non-exclusive, transferable, sub-licensable, royalty-free, worldwide license to use any IP content that you post on or in connection with Facebook (“IP License”). This IP License ends when you delete your IP content or your account unless your content has been shared with others, and they have not deleted it.

So by sharing something on Facebook, you grant Facebook the right to do what they like with what you’ve created. That’s something worth thinking about.

For anybody trying to make a living off Facebook, it’s important to consider they also retain the right to throw you off the service at any time. From clause 4.10 of the Statement Of Rights Annex;

If you select a username for your account we reserve the right to remove or reclaim it if we believe appropriate (such as when a trademark owner complains about a username that does not closely relate to a user’s actual name).

So get into a trademark dispute with a big corporation – and often their lawyers cast a very wide net on potential similar spellings – and your account is shut down.

There’s also the specifics of the Zynga agreement that should concern anyone investing in the games company. Right at the beginning of the agreement we see this clause;

The parties further acknowledge that Zynga is making a significant commitment to the Facebook Platform (i.e., using Facebook as the exclusive Social Platform on the Zynga Properties and granting FB certain title exclusivities to Zynga games on the Facebook Platform). In exchange for such commitment, [*] the parties have committed to set certain growth targets for monthly unique users of Covered Zynga Games.

So Zynga is closely tied into the fortunes of Facebook, we knew that on a business level but now we know just how deep and binding the agreements are.

We should be clear, all the major social media and online services have similar clauses on intellectual property and copyright infringements; there’s no shortage of businesses who’ve been caught out by eBay or Paypal and plenty of people found their Google accounts shut down by their obsession with real names.

For all businesses the message is clear – be careful before committing totally to one online platform or another. Should you end up in a dispute, or find you’ve backed the wrong service, it may be a very costly process to get your company off that platform.

Tracking the troll

Feb 102012

anonymous comments from online trolls damage the net

A BBC journalist hunted down a Facebook troll notorious for posting offensive messages on memorial sites.

He turns out to be sad, bitter and inconsequential man. But we knew that he would be.

What’s sadder is the troll’s view that “he’s done nothing illegal” and so that makes it acceptable.

The idea that offensive, immoral, destructive or unethical behaviour is okay as long as the perpetrator believes it’s “legal” is a rot in the heart of our society.

It’s not just Facebook trolling layabouts living on a Welsh housing estate that have this view – it is shared by many of our business, political and community leaders, it’s tolerated and even encouraged in our political parties, boardrooms and clubs.

We have a long road ahead to fix this.

Decoding the new economy

I don’t get it

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