SLOW Movement

NY Times: The Protocol Society

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December 22, 2009

Op-Ed Columnist

The Protocol Society

By DAVID BROOKS

In the 19th and 20th centuries we made stuff: corn and steel and trucks. Now, we make protocols: sets of instructions. A software program is a protocol for organizing information. A new drug is a protocol for organizing chemicals. Wal-Mart produces protocols for moving and marketing consumer goods. Even when you are buying a car, you are mostly paying for the knowledge embedded in its design, not the metal and glass.

A protocol economy has very different properties than a physical stuff economy. For example, you and I can’t use the same piece of metal at the same time. But you and I can use the same software program at the same time. Physical stuff is subject to the laws of scarcity: you can use up your timber. But it’s hard to use up a good idea. Prices for material goods tend toward equilibrium, depending on supply and demand. Equilibrium doesn’t really apply to the market for new ideas.

Over the past decades, many economists have sought to define the differences between the physical goods economy and the modern protocol economy. In 2000, Larry Summers, then the Treasury secretary, gave a speech called “The New Wealth of Nations,” laying out some principles. Leading work has been done by Douglass North of Washington University, Robert Fogel of the University of Chicago, Joel Mokyr of Northwestern and Paul Romer of Stanford.

Their research is the subject of an important new book called “From Poverty to Prosperity,” by Arnold Kling and Nick Schulz.

Kling and Schulz start off entertainingly by describing a food court. There are protocols everywhere, not only for how to make the food, but how to greet the customers, how to share common equipment like trays and tables, how to settle disputes between the stalls and enforce contracts with the management.

The success of an economy depends on its ability to invent and embrace new protocols. Kling and Schulz use North’s phrase “adaptive efficiency,” but they are really talking about how quickly a society can be infected by new ideas.

Protocols are intangible, so the traits needed to invent and absorb them are intangible, too. First, a nation has to have a good operating system: laws, regulations and property rights.

For example, if you are making steel, it costs a medium amount to make your first piece of steel and then a significant amount for each additional piece. If, on the other hand, you are making a new drug, it costs an incredible amount to invent your first pill. But then it’s nearly free to copy it millions of times. You’re only going to invest the money to make that first pill if you can have a temporary monopoly to sell the copies. So a nation has to find a way to protect intellectual property while still encouraging the flow of ideas.

Second, a nation has to have a good economic culture. “From Poverty to Prosperity” includes interviews with major economists, and it is striking how they are moving away from mathematical modeling and toward fields like sociology and anthropology.

What really matters, Edmund S. Phelps of Columbia argues, is economic culture — attitudes toward uncertainty, the willingness to exert leadership, the willingness to follow orders. A strong economy needs daring consumers (Phelps says China lacks this) and young researchers with money to play with (Romer notes that N.I.H. grants used to go to 35-year-olds but now they go to 50-year-olds).

A protocol economy tends toward inequality because some societies and subcultures have norms, attitudes and customs that increase the velocity of new recipes while other subcultures retard it. Some nations are blessed with self-reliant families, social trust and fairly enforced regulations, while others are cursed by distrust, corruption and fatalistic attitudes about the future. It is very hard to transfer the protocols of one culture onto those of another.

It’s exciting to see so many Nobel laureates taking this consilient approach. North, the leader of the field, doesn’t even think his work is economics, just unified social science.

But they are still economists, with worldviews that are still excessively individualistic and rationalistic. Kling and Schulz do not do a good job of explaining how innovation emerges. They list some banal character traits — charisma, passion — that entrepreneurs supposedly possess. To get a complete view of where the debate is headed, I’d read “From Poverty to Prosperity,” and then I’d read Richard Ogle’s 2007 book, “Smart World,” one of the most underappreciated books of the decade. Ogle applies the theory of networks and the philosophy of the extended mind (you have to read it) to show how real world innovation emerges from social clusters.

Economic change is fomenting intellectual change. When the economy was about stuff, economics resembled physics. When it’s about ideas, economics comes to resemble psychology.

Bob Herbert is off today.

Copyright 2009 The New York Times Company

NY Times: Helping Children Find What They Need on the Internet

December 26, 2009

Helping Children Find What They Need on the Internet

By STEFANIE OLSEN

When Benjamin Feshbach was 11 years old, he was given a brainteaser: Which day would the vice president’s birthday fall on the next year?

Benjamin, now 13, said he typed the question directly into the Google search box, to no avail. He then tried Wikipedia, Yahoo, AOL and Ask.com, also without success. “Later someone told me it was a multistep question,” said Benjamin, a seventh grader from North Potomac, Md.

“Now it seems quite obvious because I’m older,” he said. “But, eventually, I gave up. I didn’t think the answer was important enough to be on Google.” Benjamin is one of 83 children, ages 7, 9 and 11, who participated in a study on children and keyword searching. Sponsored by Google and developed by the University of Maryland and the Joan Ganz Cooney Center, the research was aimed at discerning the differences between how children and adults search and identify the barriers children face when trying to retrieve information.

Like other children, Benjamin was frustrated by his lack of search skills or, depending on your view, the limits of search engines.

When considering children, search engines had long focused on filtering out explicit material from results. But now, because increasing numbers of children are using search as a starting point for homework, exploration or entertainment, more engineers are looking to children for guidance on how to improve their tools.

Search engines are typically developed to be easy for everyone to use. Google, for example, uses the Arial typeface because it considers it more legible than other typefaces. But advocates for children and researchers say that more can be done technologically to make it easier for young people to retrieve information. What is at stake, they say, are the means to succeed in a new digital age.

“We’re giving them a tool that was made for adults,” said Michael H. Levine, executive director of the Cooney Center at Sesame Workshop, a nonprofit research center in New York focused on digital education for children. Allison Druin, director of the human-computer interaction lab at the University of Maryland, suggested expanding the concept of keywords. Instead of typing a word into a search box, children could click on an image or video, which would turn up results.

Ms. Druin said that parents played a big role in helping children search. She proposed that search engines imitate that role by adding technology aids, like prominent suggestions for related content or an automated chat system, to help children when they get stuck.

Children’s choices of search engines differ only slightly from the preferences of adults. Google ranks most popular among children, followed by Yahoo, Google Image search, Microsoft’s Bing and Ask.com, according to the research firm Nielsen. (Among adults, Bing is ahead of Google Image.)

Irene Au, Google’s director of user experience, said that rather than develop a specific product for children, her team used research findings to inform how it could improve search for all ages. “The problems that kids have with search are probably the problems adults experience, just magnified,” Ms. Au said. “It’s helped highlight the areas we need to focus on.”

For example, Google has long known that it can be difficult for users to formulate the right keywords to call up their desired results. But that task can be even more challenging for children, given that they do not always have the right context for thinking about a new subject. One 12-year-old boy searching for information about Costa Rica used the search term “sweaty clothes” because that was what he associated with the jungle.

“If we can solve that for children we can solve that for adults,” Ms. Au said.

One way Google aims to overcome that problem is by showing related searches. Ms. Au said Google had tried various placements since related searches were introduced in 2007 and had found that it could be helpful to introduce such queries — or other content like video, images or news — at the bottom of the page.

A search on the word dolphins, for example, shows a set of related searches, (sharks, bottlenose dolphins) and two YouTube videos of dolphins at play. Ms. Druin called the bottom of the screen “valuable territory” because children often focus on their hands and the keyboard when they search and see that space first when they glance up.

Stefan Weitz, director of Bing, said that for certain types of tasks, like finding a list of American presidents, people found answers 28 percent faster with a search of images rather than of text. He said that because Bing used more imagery than other search engines, it attracted more children. Microsoft says Bing’s audience of 2- to 17-year-olds has grown 76 percent since May. “My daughter who’s 5, her typing skills aren’t great, but she can browse images of various dog breeds through visual search,” Mr. Weitz said.

In May, Google introduced Wonder Wheel, a graphical search tool aimed at making browsing easier. (To find it, click on “show options” on a page of search results; it appears halfway down the left column.) For a search on “apple,” the wheel shows prongs pointing to “apple fruit” or “apple store locator” in the left panel.

Children also tend to want to ask questions like “Who is the president?” rather than type in a keyword. Scott Kim, chief technology officer at Ask.com, said that because as many as a third of search queries were entered as questions (up to 43 percent on Ask Kids, a variant designed for children), it had enlarged search boxes on both sites by almost 30 percent.

In September, Google also increased the length of its search box and the size of its font for related searches. Google said the change was meant to enhance ease of use for everyone.

Future trends in search may also be helpful to children. The move toward voice-activated search like the Google voice search on iPhones and Android phones and audio and video search will prove beneficial to children with limited abilities, experts say.

Benjamin Feshbach, who’s now considered a power searcher, has his own ideas.

“I think there should be a program where Google asks kids questions about what they’re searching for,” he said, “like a Google robot.”

Copyright 2009 The New York Times Company

FT: Human beings or human resources?

Human beings or human resources?

By Harry Eyres

Published: December 23 2009 23:11 | Last updated: December 23 2009 23:11

Recently, my partner Ching Ling got an iPhone. It is an amazing piece of engineering, so sleek and clever and attractive to handle that you could hardly fail to fall for it. A poet friend who, a while ago, penned a magnificent invective against mobile phones, comparing them to sex aids, would have to revise his lines. This thing is more like a cat: you stroke it and it purrs. Not always a well-behaved cat; plugged in for recharging, it woke us up in the middle of the night bleeping loudly. I have no idea what it wanted.

Essentially, though, it is a toy. Once you acquire an iPhone, you can’t stop playing with it. But the phone is also playing with you. It is making money out of you, cajoling you into signing up for all sorts of unnecessary applications. Watching me playing with it, Ching Ling observed that I had reverted to the age of five; shortly after she revised that to three.

The iPhone represents the power and attraction of the new – of technological innovation, promising social benefits but driven by commercial interests that do not uphold the principle St Paul enunciated in his first letter to the Corinthians: “When I was a child ... I thought as a child; but when I became a man, I put away childish things”. I really don’t know whether an iPhone will help me to live better; I rather suspect not. I have no idea whether mobile phones in general have added to the sum of human well-being. We seemed to get on quite well without them; I have a feeling they have made it harder for people to be on their own.

For a long time now the power of the new has trumped the power of the old. But almost a year ago, when President Barack Obama gave his inaugural address, I noted a sea-change. In the most stirring piece of political oratory delivered for decades, Obama made a distinction between new challenges and instruments and old values, including “tolerance and curiosity, loyalty and patriotism”. Later in the speech he harked back to one of the battles that gave birth to the US. It seemed the old was making a comeback, and in the UK that coincided with a sense of hollowness and decrepitude in the political project that has dominated the late 1990s and the 2000s, New Labour.

One old thing Obama did not so much talk about as represent was the power of the word. The word is probably the ultimate old thing that went out of fashion: words became “mere rhetoric”, windy nothingnesses set against the hard truths told by numbers. But Obama did not offer rhetoric so much as oratory, and many commented on the debt his speeches owed to classical models. Something rather strange and fascinating was going on: a youthful president, of African-American ancestry, was speaking not in bullet points but in the style of Cicero.

My gripe with Obama’s old things is that they are not old enough. He may speak in the style of Cicero but his values are drawn from the Enlightenment. Of course that makes sense, because America is a product of the Enlightenment. The Enlightenment values Obama praises, such as tolerance and curiosity, are both admirable and essential – especially so in the context of insurgent bigotry. But they are not sufficient.

Sixty-five years ago, in The Dialectic of Enlightenment, Theodor Adorno and Max Horkheimer had a nightmare. The Enlightenment, instead of liberating mankind, had bound it in chains. “The wholly enlightened earth is radiant with calamity ... What human beings seek to learn from nature is how to enslave both it and human beings.”

You don’t have to go quite as far as the two dour Frankfurt philosophers to see that the Enlightenment project of raising human reason to god-like power has had disturbing results. These can be seen both in the state of nature, reduced and damaged possibly beyond repair, and of human beings, retooled as “human resources” – that is, means to be exploited rather than ends in themselves.

I think we need to go back beyond the time of the Enlightenment and the birth of the US to rediscover the values that give god-like dignity (what Plato called the “divine something”) to human beings and restore the non-instrumental beauty of the natural world. One place to start would be the beautifully redesigned Medieval and Renaissance galleries at London’s Victoria and Albert Museum. And within those galleries you might pause in front of the Symmachi panel, an exquisite late Roman ivory carving showing a young woman performing a pagan rite at an outdoor altar. Under the shade of a spreading oak an offering is being made, and thanks are being given. We don’t know exactly of what, for what, but we can imagine it has something to do with sky and earth, and the sustaining of life.

harry.eyres@ft.com
More columns at www.ft.com/eyres

Copyright The Financial Times Limited 2009.

Forbes: Snack Attack

Entrepreneurs
Snack Attack
Christopher Steiner, 12.14.09

In 1993 Mandeep Arora rode shotgun on a vending delivery route. Even at age 13 he could see it made little sense: tromping up several flights of stairs with boxes of Snickers and Cheez-Its only to find machines still packed. Yet that's exactly what operators of vending networks expected their drivers to do. "It seemed like a huge waste of time," he recalls.

Those days may be over thanks to computer-monitoring hardware devised by Arora, now 29, and college pal Anant Agrawal. Their company, Cantaloupe Systems, launched in Berkeley, California in 2002, makes a 12-square-inch box that sits within a vending machine, captures all the transactions and transmits the data over cellular networks and the Web to Cantaloupe's servers.

The boxes also trigger e-mail and text alarms when machines sell out of an item. Result: less manpower and lower fuel costs. Not only can drivers skip machines that are fully stocked, but they also save time by prepacking their cartons with exactly what each one needs--allowing them to replenish 180 machines a week, versus 100 the old-fashioned way.

Cantaloupe's system costs $300 per machine, plus a monthly $6 service fee. The domestic vending market is huge, with 6 million machines (only 150,000 of which can't get a cell signal). Cantaloupe is in only 35,000 thus far, enough to pull in an expected $8.5 million in revenue this year, up from $2.5 million in 2008; the company has posted positive operating earnings (profit before interest, taxes, depreciation and amortization) since July. While the economy continues to shed jobs, Cantaloupe is looking for software engineers, account managers, field technicians and a technical writer.

Streamlining the vending process is an old idea. Two obstacles: clunky software and expensive, unreliable hardware. Arora and Agrawal started poking around, but the better systems on the market ran to $1,000 a machine. Then came cloud computing--programs managed on servers and distributed cheaply over the Internet. "We got lucky," says Agrawal. "Cloud computing and cellular networks were being stressed when we were in school."

Mark Stein, president of Mark Vend in Chicago, has installed Cantaloupe's hardware in 700 of his 1,700 machines, spread over a 50-mile radius. Over the course of the 12-month rollout Stein's overhead has dropped 15%. He hopes to have the boxes in all of his machines within the next two years. Says Stein: "Knowing exactly what you need is a lot better than guessing, which is what we used to do."

Arora and Agrawal met as undergrads at UCLA. Arora, whose parents ran a vending supply business in San Leandro, California, studied computer science, Agrawal economics and electrical engineering. Both had an entrepreneurial itch. On a vacation tour through India in 2001 the pair batted around a dozen ideas for startups (including a device allowing people to climb up walls without ropes), though vending seemed to have the most potential.

The pair spent the next summer interviewing vending operators in California. In the fall Arora quit working on a graduate degree in computer science to work on Cantaloupe full-time. The partners pooled $100,000 in savings--Arora had bet well on tech stocks, while Agrawal had a stash from assembling computers in high school.

A year later Frito-Lay came knocking. The snackmaker was experimenting with branded machines carrying only its products and wanted to track sales to learn what machines and locations were most effective. As a trial Frito-Lay wanted to install 100 boxes at high schools and on college campuses, but Arora and Agrawal had built only one prototype.

"We had a $30,000 check on our doorstep, and we weren't really ready," recalls Arora, who promptly turned his 900-square-foot Los Angeles apartment into a makeshift factory, thick with RadioShack boxes, wire crimps, laptops, serial cables and soldering irons.

By the next summer Cantaloupe had set up shop at Arora's parents' house in Berkeley. Over the next 18 months the two cranked out 1,000 units by hand in the garage. The following year they landed $1 million in angel funding and in 2006 another $5 million from Global Environment Fund, a venture capital outfit in Chevy Chase, Maryland.

Capital was nice, but snagging orders and filling them still proved tough. "I hung up on them four or five times before I agreed to sit down and talk with them," recalls John Sowell, chief executive of North County Vending in Vista, California, which collects $60 million a year in nickels, dimes, quarters and bills from 17,000 machines in seven states. A big problem: Cantaloupe's early software interface made it hard to mine the sales data. Sowell bought 30 units in 2005 but balked at a larger rollout for another year. "It took about that long for them to really perfect this thing," he says. At last count Sowell had installed 5,000 boxes, eliminating 40% of his truck fleet on Cantaloupe-streamlined routes.

Efficiency isn't the only benefit of computer-controlled vending. Foiling crooks is another. Cantaloupe's hardware sends a message any time a vending machine door opens. When a signal came from one of Sowell's machines that wasn't scheduled for service, a manager in the area swung by and nabbed a former employee pillaging the machine.

Such transparency also helps vending operators land accounts with commercial landlords, schools and municipalities, which typically pocket 5% to 25% of the vending revenue generated on their premises. To secure that valuable real estate, unscrupulous vending operators will offer commissions up to 40%. They get away with it by underreporting sales, effectively lowering the rate. Cantaloupe solves that problem by giving landlords access to the data stream.

Barton Shaw, vice president of Atlanta Vending, knows all about the number fudging. Last year Shaw took over a building with several machines from a competitor who had been reporting sales of $17,000 a quarter; Atlanta tallied $30,000 in its first quarter with the same number of machines. Shaw has since put Cantaloupe's system into 800 of its 2,600 machines, and he hopes to be monitoring nearly the entire network by the end of next year. "It's a big advantage when we pitch people," he says.

Next year Arora and Agrawal plan to integrate credit card readers into their hardware, potentially allowing vendors to charge more for the same candy. "There's a psychological ceiling right now at one dollar," says Agrawal. If snackers don't have to fish for coins, the logic goes, charging more than a buck won't hurt sales much. (The same behavior plays out in New York City cabs, too.)

Meanwhile, competition is brewing. Vending machine manufacturer Crane Merchandising Systems is working on its own monitoring hardware, as is Mars Electronics, maker of dollar-bill changers. Both companies' systems should hit the market within two years. While Cantaloupe doesn't hold any patents on its technology, Arora and Agrawal aren't sweating--yet. "Competition is good. It shows we're on the right track," says Agrawal. "But we're several laps ahead of everyone else."

NY Times: The Science of Managing Search Ads

December 22, 2009

The Science of Managing Search Ads

By MIGUEL HELFT

MOUNTAIN VIEW, Calif. — Cyber Monday had gone swimmingly for Tiny Prints.

Despite the economic downturn, customers streamed into the Tiny Prints online store on the Monday after Thanksgiving, called Cyber Monday because it is one of the busiest days of the year for Web retailers. They snapped up the company’s custom holiday cards at roughly twice the rate of a year ago.

But in the following days, Ed Han, the chief executive, and his team made a risky bet in search of higher profits. Hoping that traffic and sales would stay up, they pulled back on the Google search ads that had helped drive visitors to Tiny Prints.

The gamble backfired. Just as Tiny Prints pulled back, competitors appeared to spend more aggressively to display their ads when people typed “holiday cards” or “photo cards” into Google. By the middle of the week, sales growth began to taper off and a bright holiday season suddenly appeared a bit less rosy.

“We knew we had made a bad decision,” Mr. Han said. Tiny Prints reversed course, but it took the company, which is privately held, more than a day to recover — a critical amount of time during the heavy shopping season.

For most people, Google and other search engines are essential tools to navigate the Web. But the workings of the text ads, the blurbs that peddle goods and services on the search results pages, are largely hidden from Web users.

For more than one million businesses, Google’s search advertising system is like a hose inundating Web sites with traffic. Managing it effectively, though, is as much art as it is science. It requires a mix of analytics and gamesmanship, a combination of skills that has become vitally important in the Internet age.

“It is critical,” said Ellen Siminoff, the chairwoman of Efficient Frontier, which helps companies manage their search advertising campaigns. “You have to have data and be able to analyze it. It’s a bit like playing chess, but you are blind to what your competitors will do.”

Many industry insiders say search engine marketing, as the practice is known, is one of the most effective forms of advertising ever devised. In just a decade, it has grown into an $11 billion business in the United States. It accounts for the vast majority of Google’s $22 billion in annual global sales.

Google’s service, called AdWords, dominates so thoroughly that some advertisers have felt at the mercy of the company, and complained that they had little control over the complex advertising system. One company, TradeComet, filed an antitrust lawsuit accusing Google of artificially increasing its advertising rates.

But by and large, businesses find search advertising effective and continue to flock to it, albeit at a slower rate than in previous years. As growth has tapered off over the last year, Google has stepped up its outreach efforts to help midsize companies like Tiny Prints use its tools more effectively, hoping that will encourage those companies to spend more.

“It’s good for our business and it’s good for their business,” said Claire Johnson, vice president for online sales and operations at Google.

Like many other businesses, Tiny Prints also buys search ads on Yahoo and Microsoft’s search engine, Bing. While results are “very attractive,” the traffic coming from those sites is small compared to referrals from Google, Mr. Han said. As a result, Tiny Prints spends nearly 90 percent of its search marketing budget on Google, he said.

Mr. Han said that Tiny Prints, which specializes in high-end custom-designed greeting cards, had been working at perfecting its search advertising for the last two years. Its three-person team, veterans of Walmart.com and eBay, has become expert at poring over spreadsheets and sifting through the data about visitors and shoppers on the company’s Web site. During the holiday season, they monitor ads and traffic patterns hourly, and meet daily with Mr. Han and other executives to adjust budgets and strategies.

During one of the company’s daily budget meetings in mid-November, Anna Fieler, the vice president for marketing, said, “We are on a trajectory to overspend on search.” She then added, “But we are delivering on revenue.”

Search ads are bought from Google through an auction, and businesses pay Google only when someone clicks on their ad. An ad’s position on Google’s search results pages depends on Google’s secret formula derived from bid prices, the rate at which users previously clicked on the ad and a “quality score” determined by Google.

Since not all clicks turn into purchases, the trick for advertisers is to make sure that the amount they bid, multiplied by the average number of clicks needed to make a sale — the cost of acquiring a customer — does not exceed the profit derived from that sale.

But that can be easier said than done.

Early in the holiday season, for example, most people are window-shopping, so few clicks turn into sales. Tiny Prints is forced to pay more than $50 to acquire each customer, leaving little room for profits on an average order. Relying on spreadsheets of buying patterns from previous years, Tiny Prints search marketers make the case to Mr. Han that their cost of acquiring a customer is on track.

“We are seeing day by day that it is starting to dip,” said Isabelle Steiner, the director for search marketing said at the meeting in mid-November. “I’m projecting that by end of month, we’ll be spending $35.”

Based on those assurances, Mr. Han then gave the team the green light to increase spending on search ads. But Mr. Han brought up another point: competitors could disrupt the plans if they suddenly started bidding aggressively on the same keywords as Tiny Prints.

“What if Hallmark comes in on Saturday?” Mr. Han asked, referring to the Thanksgiving weekend. “Do we have a plan to react to what competitors might do?”

The plan, Ms. Steiner said, was to monitor the site around the clock.

A couple of weeks later, the vigilance paid off.

In a spot check squeezed between a birthday party and her own Christmas shopping, Ms. Fieler was welcomed by a screen of red alerts indicating that the Tiny Prints ads had fallen off the first page of Google search results for important keywords.

“We were then forced to make and implement a new plan to react to the competitive environment real-time,” Ms. Fieler said. “It was very tricky trying to balance not overpaying by participating in the frenzy with getting the impressions and clicks we needed to drive the business.”

By mid-December, with the bulk of the holiday shopping season behind them, Mr. Han and his team were looking haggard. In addition to late-night discussions of bidding strategies over instant messaging, they had pitched in to help wrap and ship orders.

Mr. Han would not disclose the company’s sales. But he said that by and large, the ad campaign on Google, which drove more than 20 percent of revenue, had been a success.

“Of the eight most important days of the year, we got seven exactly right,” Mr. Han said. “On one of the days, by our standards, we fell on our face.”

Copyright 2009 The New York Times Company

NY Times: That Hobby Looks Like a Lot of Work

This article reminded me of a blog entry by Seth Godin:

Maybe you can't make money doing what you love

===

December 17, 2009

That Hobby Looks Like a Lot of Work

By ALEX WILLIAMS

QUIT your day job?

To some craft enthusiasts that is just the name of a popular blog on Etsy, the fast-growing Web site that serves as a marketplace for crafts and vintage goods.

But to Yokoo Gibran, it was an epiphany.

Ms. Gibran, who is in her 30s, had been selling her hand-knit scarves and accessories on the site for less than a year when she decided last November to quit her day job at a copy center in Atlanta. Thirteen months later, she would seem to be living the Etsy dream: running a one-woman knitwear operation, Yokoo, from her home and earning more than $140,000 a year, more than many law associates.

Jealous? How could you not be? Her hobby is her job. But consider this before you quit your day job: at the pace she’s working, she might as well be a law associate.

“I have to wake up around 8, get coffee or tea, and knit for hours and hours and hours and hours,” said Ms. Gibran, who leveraged the exposure she got on the site to forge a deal with Urban Outfitters. “I’m like an old lady in a chair, catching up on podcasts, watching old Hitchcock shows. I will do it for 13 hours a day.” And even after all those hours knitting, she is constantly sketching new designs or trading e-mail messages with 50 or more customers a day.

“Etsy saved my life,” Ms. Gibran said. But, she added, “this is the hardest job I’ve ever had.”

These days, the fantasy of building a career on Etsy, an eBay of sorts of the do-it-yourself movement, is not just the stuff of dreams. Even before the recession, the site, which was founded in Brooklyn in 2005, was riding the “crafting” boom to prominence. When the job market collapsed, many hobbyists who already were selling jewelry or glassware as a sideline suddenly needed a real income.

While most people would find it impossible to meet a mortgage payment selling $8 crocheted mug cozies, some top-sellers on Etsy have moved beyond the stage of earning pocket money and are building careers — in some cases, earning six-figure incomes.

But even the successes add a note of “seller beware.” To build a profitable business on the site, they say — well, it’s a business. You need to build a brand identity, which often means courting design blogs or the news media. You need to manage distribution, which might mean standing in post office lines with a baby on your hip and a garbage bag filled with 30 self-packed boxes to ship. And as with any start-up, you need to maintain the morale of the labor force, which can be particularly challenging when you are the labor force, and the workday runs from “Good Morning America” to “Late Night With Jimmy Fallon.”

“Working from home, people think it’s so easy and great,” said Caroline Colom Vasquez, of Austin, Tex., who last year made $120,000 in sales from her Etsy shop, Paloma’s Nest, which specializes in ceramic and wood collectibles for weddings and other special occasions. But “there’s nobody there to tell you to take a break, or take a vacation.”

This year, she expects her business to have $250,000 in sales, but she will have to divide that with the three employees she just hired because Ms. Vasquez, who has a young daughter, could no longer handle the strain.

“I physically could just not do it in 24 hours,” she said. “My husband and I used to get up at 4 or 5 in the morning before the baby, then stay up till 1 or 2, stamping boxes, making shipping labels.”

As sales heated up for the holidays, Angie Davis, a former project architect in Minneapolis who lost her job last year, said her Etsy shop, Byrd and Belle, which sells handmade handbags and cases for iPods, laptops and cellphones, has “easily matched a month of architecture salary in five days, but I’m also working 16 hours a day.” To deal with the holiday rush, Ms. Davis said, she had to produce 112 cases in 48 hours, which involved turning her loft into a mini assembly line, where she cut leather and stitched and sewed cotton and wool fabric until 10 p.m. “It’s surprising how physical it can be on my core muscles,” she said. To get the work processed in time, she had to call in her mother from Iowa to help make tags and press fabric.

The number of people turning to Etsy as a full-time career is unknown. The site does not track how many of its members try to make a living, and it does not disclose the sales figures for individual sellers, said Maria Thomas, chief executive of Etsy. But over the last year, the number of registered members has more than doubled to 3.75 million, and the Quit Your Day Job blog on Etsy now attracts 2 million page views a month.

Several shop owners interviewed for this article, including Morgan Peterson, who runs a fashion label — Eliza + Axel — on Etsy, view their layoffs from traditional jobs as an opportunity to build a more fulfilling career online. In Ms. Peterson’s case, she lost her job as an assistant designer for Dillard’s and decided to create and sell her own line, made from reclaimed fabrics.

“In fashion school, they tell you you can do anything, they push you to be creative, but as soon as you get a job in a corporate environment, you’re only able to do certain things and it has to make money,” said Ms. Peterson, who said that she supplements her income on Etsy by selling wholesale to several boutiques. “With Etsy, I have my styles that make a lot of money, but I can also put work out there that I do just for creative reasons.”

As with eBay, start-up costs are a lot lower for people opening a “shop” on Etsy than a shop on Main Street; the site charges sellers 20 cents for each item listed and 3.5 percent of each sale. Etsy, which has a user base consisting largely of women, also provides a support network, including several blogs and forums where sellers swap tips and words of encouragement.

A healthy income, however, is far from guaranteed. After Tara Scheuerman was laid off from her job as an office assistant at a college in Milwaukee, she started a company, Cracked Designs, that sells greeting cards and wedding invitations on Etsy. After a slow start, she said she is thrilled to be selling more than 50 cards a week and is optimistic about her long-term earnings, but said she now spends more than 40 hours a week on her line, not only designing and making her products, but tirelessly promoting them on design blogs like Poppytalk and Design*Sponge as well as in magazines (her cards were recently featured in House Beautiful). So far, she said, she is earning about $15,000 to $20,000 a year, which on the low end works out to about $7.25 an hour — the same as Wisconsin’s minimum wage.

“You have to be really realistic with your goals and know you’re probably not even going to make a profit the first couple of years,” said Ms. Scheuerman, 26, who relies primarily on her husband’s income.

Such experiences were the focus of an essay, much-circulated among so-called Etsians, that ran last June in DoubleX, an online lifestyle magazine. In it, the journalist Sara Mosle (also a contributor to The New York Times) argued that Etsy was profiting off unrealistic expectations held by many women. “What Etsy is really peddling isn’t only handicrafts,” Ms. Mosle wrote, “but also the feminist promise that you can have a family and create hip arts and crafts from home during flexible, reasonable hours while still having a respectable, fulfilling, and remunerative career.”

But the experiences of at least some of the site’s successes, like Ms. Vasquez, don’t support that view. Still, Ms. Vasquez said, there is an unforeseen psychic tax even when — or especially if — one’s profit outstrips initial expectations. As her business, once a sideline run from the kitchen table, grew into a six-figure powerhouse, her work not only swallowed more rooms of her house, but also her family life. At dinners, she and her husband talked only about business.

“I felt like I was being a bad mother, a bad wife, being all-consumed by business. That was the breaking point,” she said. Ms. Vasquez has found time to exhale, at least occasionally, since hiring a staff. The family even took a trip, the first since she started the business, to the nearby Texas Hill Country.

Still, the challenge is to find balance. “What’s the point of doing something you love,” she asked, “if you are too exhausted to do what you love?”

Copyright 2009 The New York Times Company

NY Times: Site Diverts Shopping Money to Charities

December 13, 2009

Site Diverts Shopping Money to Charities

By STEPHANIE STROM

A new Web site lets people donate to charity the money they would have spent on, say, that $44.50 Henley sweater from the Gap — or, better yet, the $250,000 his-and-hers ICON aircraft that Neiman Marcus is selling this year.

BRAC USA, the American arm of a Bangladeshi development and aid organization, started the site, www.whatididnotbuy.org, on Thursday.

“What we’re trying to do,” said Susan Davis, the president and chief executive of BRAC USA, “is emphasize how much you could help accomplish with an amount of money that you might otherwise spend on something you or someone else might not really want or need.”

As of midday Friday, 89 people had contributed roughly $500 using the site, forgoing items like a blender, Champagne, power tools and a flat-screen television.

Lucy Bernholz, a nonprofit and philanthropic consultant, said she saw the new Web site as a reaction to the growth of embedded giving, in which companies promise to donate part of the proceeds from the sale of specific items. “Walgreens will no longer stand between me and my gift, which I like,” Ms. Bernholz said.

Churches often exhort their members to curtail consumption during the holidays and instead spend more on the needy, and the Dalio Family Foundation used to run advertisements that advocated charitable giving in lieu of holiday excess.

Jennifer Buffett, president of the NoVo Foundation, one of BRAC’s biggest supporters, said the foundation, based in New York, had decided to use e-cards and donate the $350 it spent on paper cards last year to support three teachers in southern Sudan. The foundation’s seven-member staff also decided that instead of buying one another Secret Santa gifts, they would put the money toward projects described on the new Web site.

“I’m so excited about the site,” Ms. Buffett said, noting that it had inspired her to swear off taxis and use the money she would have spent to support nonprofit causes. “I’m going to tell all my friends about it.”

She said she had no idea what her father-in-law, Warren E. Buffett, who is known for his off-the-rack suits, might choose not to buy.

Copyright 2009 The New York Times Company

BusinessWeek: Open Innovation's Champs and Also-Rans

Innovation November 30, 2009, 12:17PM EST text size: TT

Open Innovation's Champs and Also-Rans

Collaboration can pay off, as Procter & Gamble shows, but only if companies jump in with both feet

By Stefan Lindegaard

Open innovation is a hot topic at almost every company that is serious about innovation. Why? Because the idea of combining internal and external resources to increase innovation productivity and prowess is just too good a value proposition to miss out on.

Nevertheless, I believe that only about 10% of all companies are adept enough at open innovation to get significant benefits. Another 30% have seen the light and are scrambling to make open innovation work and provide results that are worth the bother. I call them contenders. The other 60% are pretenders—companies that don't really know what open innovation is and why or how it could be relevant for them. Some might figure out how to follow the leaders one day, but today they're mostly going through the motions.

When it comes to open innovation, Procter & Gamble (PG) is the undisputed champ. Its efforts began in 2000 with what a Web site called Connect & Develop. It's a two-way street, accessing externally developed intellectual property in its own markets while sharing its internally developed assets and knowhow with others.

Pictures on Pringles

Connect & Develop is about much more than just technology transfer. It encompasses everything from trademarks to packaging, marketing models to engineering, and business services to design. This approach has already resulted in more than 1,000 active agreements with external partners.

Here's an example of open innovation at work. P&G had an idea to print words or images on Pringle chips. It then went outside the company for technology to make this happen. P&G found a small bakery in Bologna, Italy, run by a professor who had invented an ink-jet technique to print pictures on pastries. Within a year, these customized Pringles were on the market, a launch that was much faster than usual and that cost a fraction of doing it in-house.

What makes P&G a champ in my view is that management no longer views open innovation as something new, unique, and different. It is just the way the company innovates. Not many others have reached this level of confidence.

Intuit (INTU) and General Mills (GIS) seem to be champs in the making. The reason I like Intuit is its Entrepreneur Day, held for the first time in October for 40 selected startups. Although I have not yet heard of specific outcomes on this initiative, it's a great display of setting clear goals, establishing a filter process, and showing strong commitment to creating new partnerships. All are important aspects for open innovation.

Smooth Linkage

At a first glance, the portal for General Mills Worldwide Innovation Network (G-WIN) might be mistaken for the other open innovation portals that are popping up right now, where hosts seek new business-boosting ideas and technologies. But based on an interview with Jeff Bellairs, who directs G-WIN, I picked up on some sharp thinking behind the scenes.

General Mills is making the linkage between outside and inside resources as smooth as possible. One of its tools for this is an "external speed team," a cross-functional group that meets biweekly to discuss projects, share insights, and make sure the external partners are talking with the right people. In addition, General Mills recently launched an innovation entrepreneur program. These individuals have a number of responsibilities, including ensuring that outside ideas make their way into the company's innovation pipeline.

These efforts by General Mills are highly relevant because they position the company to become a preferred partner, which means getting the first peek at new technologies and ideas and, in turn, a competitive edge.

Then there's Campbell Soup (CPB). The company jumped on open innovation through its Ideas for Innovation portal earlier this year. Unfortunately, this is more like a gimmick than a serious attempt to engage customers and business partners. While I'm singling Campbell out, the truth is that many other companies are just as clueless. Here are my specific problems with Campbell:

• Its intentions are too vague and unfocused. Campbell declares that it wants "ideas for new products, packaging, marketing, and production technologies that will help us meet the needs of our consumers and customers better, faster, and more completely." Gee, that could be almost anything, couldn't it?

• The company should be turning us on, not away. Campbell says it will take three to six months to respond to a suggestion, and if it turns down your idea, you won't receive any explanation. Why not try to make it more inviting?

• The whole thing reads like an ego trip. The Campbell Web site talks only about why open innovation is good for Campbell. If the company wants help, it should at least mention how collaboration can benefit its would-be partners.

In an e-mail, a Campbell spokesman told me that the company considered the site to be only an initial step. He added that management was pleased by receiving nearly 5,000 submissions, but acknowledged that the effort was not perfect and Campbell is working on future enhancements of the site.

To become a champ and not a pretender, here are issues that you need to deal with early in the process.

First of all, you need to ask the why question. Many people believe open innovation is the Holy Grail and race out without asking why it's relevant. Open innovation works only if it aligns with the overall corporate strategy. Many companies mess up here. They simply do not have an innovation strategy.

The next step is defining what open innovation is. Innovation, and even more so open innovation, can be defined in many different ways. Companies need to know what they're after, as Procter & Gamble and General Mills have done.

Before moving on to implementation, you must remember your people. A paradigm shift like this requires that employees change their mindset and obtain new skills. The key things here are the ability to view innovation in more holistic terms and to become better networkers.

Open innovation is by no means easy. But as I said at the start, the value proposition is just too good to miss out on.

Stefan Lindegaard is a Copenhagen-based speaker, network facilitator, and adviser on open innovation and intrapreneurship. His book, The Open Innovation Revolution, will be published in May, 2010.

©2009 Bloomberg L.P. All Rights Reserved.

NY Times: Local Governments Offers Data to Miners

December 7, 2009

Local Governments Offer Data to Miners

By CLAIRE CAIN MILLER

Eric Gundersen, a developer in Washington, D.C., has created an application showing people the safest route home from bars and another that tells people about bike routes.

SAN FRANCISCO — A big pile of city crime reports is not all that useful. But what if you could combine that data with information on bars, sidewalks and subway stations to find the safest route home after a night out?

In Washington, a Web site called Stumble Safely makes that possible. It is one example of the kind of creativity that cities are hoping to mobilize by turning over big chunks of data to programmers and the public.

Many local governments are figuring out how to use the Internet to make government data more accessible. The goal is to spawn useful Web sites and mobile applications — and perhaps even have people think differently about their city and its government.

“It will change the way citizens and government interact, but perhaps most important, it’s going to change the way elected officials and civil servants deliver programs, services and promises,” said Gavin Newsom, the mayor of San Francisco, which is one of the cities leading the way in releasing government data to Web developers. “I can’t wait until it challenges and infuriates the bureaucracy.”

Advocates of these open-data efforts say they can help citizens figure out what is going on in their backyards and judge how their government is performing.

But programmers have had trouble getting their hands on some data. And some activists and software developers wonder whether historically reticent governments will release data that exposes problems or only information that makes them look good.

It is too early to say whether releasing city data will actually make civil servants more accountable, but it can clearly be useful. Even data about mundane things like public transit and traffic can improve people’s lives when it is packaged and customized in an accessible way — a situation that governments themselves may not be equipped to realize.

A Web site called CleanScores, for instance, tracks restaurant inspection scores in various cities and explains each violation. After School Special combines data from San Francisco schools, libraries and restaurants so parents can plan after-school activities and see how children’s nutritional options compare by neighborhood. And Trees Near You, available for the iPhone, lets people identify trees on New York streets.

By releasing data in easy-to-use formats, cities and states hope that people will create sites or applications that use it in ways City Hall never would have considered.

San Francisco recently unveiled DataSF, a Web clearinghouse of raw government data that the public can download. The data sets include seismic hazard zones, street sweeping schedules and campaign finance filings. New York City’s Data Mine includes directories of sidewalk cafes, property values, horseback riding trails and historic houses.

Washington was a leader in releasing its data, and the federal government is doing it too at Data.gov.

Much of this data has always been publicly available, but until recently it has been almost impossible to find. Getting hold of it might have required tenacity, drive and endless phone calls.

The push to publicize government data goes as far back as the 1960s, but technology has made it possible for people to use the data in ways that would not have been possible even a year ago, said Eric Gundersen, president of Development Seed, the Washington company that created Stumble Safely. The company builds data and map applications for international development programs.

“The timing now with the open data movement is really critical because there are a lot of open-source tools that really make that data usable,” Mr. Gundersen said. These include the mapping tool he used to build Stumble Safely and also a site for the United States Agency for International Development that maps public health clinics.

Some activists are skeptical that governments will release politically risky data that could show that people are not doing their jobs. Mayor Newsom said he wants to release all kinds of data, and said he would not be surprised if “people who love to hate their mayor” create an application that maps his public schedule, to bolster their cases about which parts of town he neglects.

There is also the concern that people might misinterpret what the data is telling them.

“In the most basic of forms, with regard to crime stats and unemployment numbers, these kinds of bulletin boards are very useful,” said Saul Bloom, executive director of Arc Ecology, an environmental nonprofit group, who has been an activist in San Francisco for three decades. “But on detailed data dealing with very complicated material, you really have to know what you’re looking for in order to distinguish between good data and junk data.”

Mr. Bloom also worries that cities could manipulate data to gloss over things like unemployment rates by neighborhood.

Governments are trying to make data openness a more open process itself by asking people to vote for data sets they want to be released. In New York, for example, people have requested data on school violence, public restroom locations and bicycle accidents.

Still, asking for the data is often not enough. Software developers in New York have been unsuccessful in getting data feeds of pedestrian and bicyclist injuries and fatalities from the Police Department, said Noel Hidalgo, who is director of technology innovation for the New York State Senate and has been working with developers on building city-data applications. He envisions applications that overlay accident information on city bike maps.

Paul J. Browne, a deputy commissioner of the New York City Police Department, said it releases information about individual accidents to journalists and others who request it, but would not provide software developers with a regularly updated feed. “We provide public information, not data flow for entrepreneurs,” he said.

There have been other scuffles over who has the right to data. Routesy, an iPhone application, uses data from San Francisco’s Municipal Transportation Agency to show train and bus schedules and locate stations on a map. It stopped working for a while because a private contractor working with the agency wanted to charge a licensing fee for the information. The agency now requires its contractor, NextBus, to make the data freely available.

There is evidence that governments’ attitude toward publicizing data is changing. Two years ago, when a Web design and research firm called Stamen Design started a Web site, Crimespotting, that mapped crime data for Oakland, Calif., the city cut off access to the data a week after the site went up.

Bob Glaze, the city’s chief technology officer, said the frequent data requests from the site were disrupting the city’s own crime site. The city eventually changed its mind. And in August, Stamen’s designers unveiled a San Francisco version of Crimespotting with Mayor Newsom at their side.

Some government leaders are making data disclosure an official policy. Mayor Newsom signed an executive order saying city data should be released, and the White House is about to publish a directive expected to give similar instructions to federal agencies.

San Francisco, New York and Washington have all organized contests to encourage software developers to create applications with their data. And the developers are using the data to build businesses. Stamen, for example, uses Crimespotting to show potential clients what it could create for them. Other firms are selling the iPhone apps they have built.

The cities, meanwhile, are to some degree using developers to provide citizens with a service so they do not have to.

“We are increasingly governing in a time when the demand for services exceeds our resources,” said Aneesh Chopra, chief technology officer of the United States. If the contests “spur dozens of innovative applications,” he said, “then we’ve essentially achieved a policy objective at virtually no cost.”

===

Stamen Design put together the San Francisco Crimespotting site using information from the city's police department.

DC Bikes, which shows bike paths in the Washington area, and Stumble Safely, which shows the safest way to get home from bars at night there, were both developed using government data.

Copyright 2009 The New York Times Company

NY Times: Apple's Game Changer, Downloading Now

December 6, 2009

Apple’s Game Changer, Downloading Now

By JENNA WORTHAM

IAN LYNCH SMITH, a shaggy-haired ball of energy in his late 30s, beams as he ticks off some of the games that Freeverse, his little Brooklyn software company, has landed on the iPhone App Store’s coveted (and ever-changing) list of best-selling downloads: Moto Chaser, Flick Fishing, Flick Bowling and Skee-ball.

Skee-ball, Mr. Smith says, took about two months to develop and deploy and then raked in $181,000 for Freeverse in one month. The company’s latest bid for App Store fame? A game featuring a Jane Austen character in a lacy dress who karate-chops her way through hordes of advancing zombies.

“There’s never been anything like this experience for mobile software,” Mr. Smith says of the App Store boom. “This is the future of digital distribution for everything: software, games, entertainment, all kinds of content.”

As the App Store evolves from a kitschy catalog of novelty applications into what analysts and aficionados describe as a platform that is rapidly transforming mobile computing and telephony, it is changing the goals and testing the patience of developers, bolstering sales of the Apple motherships the applications ride upon — the iPhone and iPod Touch — and causing Apple’s competitors to overhaul their product lines and business models. It even threatens to open chinks in Apple’s own corporate armor.

Thanks in large part to the iPhone, introduced in 2007, and the App Store, which opened its doors last year, smartphones have become the Swiss Army knives of the digital age.

They provide a staggering arsenal of functions and tools at the swipe of a finger: e-mail and text messaging, video and photography, maps and turn-by-turn navigation, media and books, music and games, mobile shopping, and even wireless keys that remotely unlock cars.

“Apple changed the view of what you can do with that small phone in your back pocket,” says Katy Huberty, a Morgan Stanley analyst. “Applications make the smartphone trend a revolutionary trend — one we haven’t seen in consumer technology for many years.”

Ms. Huberty likens the advent of the App Store and the iPhone to AOL’s pioneering role in driving broad-based consumer adoption of the Internet in the 1990s. She also draws comparisons to ways in which laptops have upended industry assumptions about consumer preferences and desktop computing. But, she notes, something even more profound may now be afoot.

“The iPhone is something different. It’s changing our behavior,” she says. “The game that Apple is playing is to become the Microsoft of the smartphone market.”

The popularity of Apple’s app model has reached a fever pitch. Tens of thousands of independent developers are clamoring to write programs for it, and the App Store’s virtual shelves are stocked with more than 100,000 applications. Apple recently said that consumers had downloaded more than two billion applications from its store.

Major players like Research in Motion (maker of the BlackBerry), Palm (maker of the Pre), Google (maker of the Android mobile operating system) and Microsoft (maker of Windows Mobile) are taking note and scrambling to replicate the App Store frenzy.

App fever has even prompted cities like New York and San Francisco to open reservoirs of city data to the public to spur software developers to create hyperlocal applications for computers and phones.

One need not look further than the lobby of Apple’s headquarters in Cupertino, Calif., to see that the iPhone and applications that run on it are centerpieces of the company’s mobile strategy. Planted squarely in the lobby of the main office, at 1 Infinite Loop, is an impressive, 24-foot-wide array built out of 20 LED screens populated with 20,000 tiny, brightly colored icons.

As Philip W. Schiller, head of worldwide product marketing at Apple, describes how the wall works — each time an application is purchased, the corresponding icon on the electronic billboard jiggles, causing its neighbors to ripple in unison — he, too, becomes animated.

Normally reserved and on message, Mr. Schiller waves his hands back and forth and allows his voice to ascend into giddy registers as he speaks about the potential unleashed by the App Store.

“I absolutely think this is the future of great software development and distribution,” Mr. Schiller says. “The idea that anyone, all the way from an individual to a large company, can create software that is innovative and be carried around in a customer’s pocket is just exploding. It’s a breakthrough, and that is the future, and every software developer sees it.”

APPLE cloaks most of its inner workings in a shroud of secrecy — a tactic that has helped preserve the company’s mystique and generate intense interest in its product rollouts.

But the App Store relies on vast cadres of outside developers to populate its virtual shelves with products, leaving Apple in the unfamiliar and at times uncomfortable position of having to collaborate with folks who haven’t drunk the company’s corporate Kool-Aid.

This has led Apple to be deeply supportive of developers once shunned by big telecommunications companies, while also frustrating many of them more recently with what developers see as the company’s inscrutable and arbitrary process for accepting programs into the App Store.

Apple frames the issue differently.

“I think, by and large, we do a very good job there,” Mr. Schiller said. “Sometimes we make a judgment call both ways, that people give us feedback on, either rejecting something that perhaps on second consideration shouldn’t be, or accepting something that on second consideration shouldn’t be.”

For Apple, the review process is a necessary evil. The company places high value on what it describes as “customer trust,” or the idea that users have faith that an application distributed on the iPhone won’t crash the platform, steal personal information or contain illegal content.

Mr. Schiller says the majority of applications sail through the review with no difficulty, and those that do require greater scrutiny are largely those that are slowed down by bugs or glitches in the coding.

“We care deeply about the feedback, both good and bad,” he says. “While there are some complaints, they are just a small fraction of what happens in the process.”

Apple says it receives more than 10,000 application submissions each week. Most become available in the App Store within two weeks (creating yet another problem: the difficulty consumers have in efficiently and effectively trolling through 100,000 apps to find hidden gems they hadn’t known about).

Still, the App Store is markedly better than the alternative, says Peter Farago, a marketing executive at Flurry, a mobile analytics company in San Francisco. Gone are the days when mobile developers had to negotiate with major telecommunications companies if they had any hopes of publishing their applications on a mobile phone.

“It took six to nine months to build a relationship with a carrier, maybe a quarter-million to get the infrastructure built, and the company took 50 percent or more from each dollar,” Mr. Farago says, a process that limited access to mobile platforms. “Apple has helped create a much healthier middle class of developers and expanded the pie for everyone.”

Apple pockets 30 percent of the revenue earned by any App Store program, with developers keeping the balance. Although barriers to entry for software developers have dropped considerably, Mr. Farago acknowledges that “friction points have changed.”

Developers now cite instances in which applications have been held in approval limbo, neither accepted nor rejected for months. And as bigger companies begin churning out programs, the smaller, garage-size outfits worry that they will be squeezed out.

FreedomVoice Systems, a company in San Diego, couldn’t wait to roll out a mobile version of its telephone software for the iPhone. The company submitted an application to the App Store last year and excitedly waited. And waited. And kept waiting.

“We’re facing 396 days with no contact from Apple,” says Eric Thomas, chief executive of FreedomVoice. “The app has been ‘pending’ in the App Store for a year.”

Mr. Thomas says he understands that it is Apple’s decision whether to accept his app. “But the idea they wouldn’t tell us it was a no — or even why — so we could try to do something about it,” he said, “is a very strange and unneighborly approach.”

Freeverse, which Mr. Smith founded in 1994, also creates games and desktop programs for computers. But like legions of other software developers, the company shifted its focus to the iPhone as the popularity of the device skyrocketed. But that doesn’t mean it’s been an easy road to riches.

“For our size and seriousness, we are still treated like a college freshman who is doing this as a side project,” Mr. Smith says. “The trade-off being that there is a much lower barrier to entry for developers. Anyone can have a shot.”

No one knows that better than Cerulean Studios, a software firm in Brookfield, Conn. After e-mail generated only automated responses from Apple for three months, Cerulean got a call in November from an Apple employee.

“He didn’t say much, just that our app would be going live in the App Store that afternoon,” recalls Scott Werndorfer, a co-founder of Cerulean. “We knew what we were getting into with Apple. They want everything to be pixel perfect, and you have to play ball by their rules.”

Some Apple developers are willing to go to greater lengths — underground — to avoid dealing with Apple’s policies and to get their software out quickly and on their own terms. To do that, they create programs for “jailbroken” iPhones and iPod Touches. Such devices are modified to allow anyone to upload a program onto them, which Apple says is illegal.

“Developers are just tired of the review process and navigating opaque hurdles,” says Mario Ciabarra, who operates Rock Your Phone, an online storefront containing a small catalog of applications for jailbroken iPhones. “They’ve been defecting to the jailbroken community or other platforms, such as Android. That demand has created the marketplace for our products and attracted developers.”

Mr. Ciabarra says about 1.5 million iPhones have visited his storefront, an impressive figure though still a small fraction of the 50 million iPhones and iPod Touches that Apple says it has sold.

As the App Store has matured, so has the need to come up with more sophisticated ways to profit from it. Simply having a great application is not enough. Bart Decrem, chief executive of Tapulous, a start-up company that publishes musical rhythm games, recalls the early days when it was enough to develop a shiny application that used the iPhone.

The company’s first game, Tap Tap Revenge, was available in the App Store when it opened in 2008. It quickly climbed the store’s charts, and Apple eventually ranked it as the most popular free iPhone game that year.

These days, Mr. Decrem says, that kind of instant and relatively easy success is much rarer because more companies are competing in the App Store. They include giant game publishers like Electronic Arts, which recently released a version of its popular video game Rock Band for the iPhone.

“It’s still the Wild West, but the stakes are higher,” Mr. Decrem says.

Tapulous has begun working with record labels and musicians to introduce paid special editions of Tap Tap Revenge featuring big-name artists. “Simply selling applications is ultimately not a scalable model,” he says.

IT’S unclear how concerned Apple is about some of the tensions swirling around the App Store. The company’s App Store policies have faced criticism — and even prompted a Federal Communications Commission investigation of Apple’s decision to reject an iPhone application developed by Google, which is still under way. Critics say they wonder whether the company can be trusted to maintain a fair marketplace, especially when developers release products that could compete with Apple’s current or future line of products.

Apple runs the App Store under the aegis of its iTunes unit (the operation that, wedded to the iPod, transformed music downloading in a way that analysts say the App Store, wedded to the iPhone, is now transforming mobile computing).

“A rocket ship is even too small of an analogy,” says Eddy Cue, Apple’s vice president for iTunes, of the App Store’s popularity. “We’ve been able to leverage a lot of our iTunes technology for the App Store. But it’s completely different. We’re reviewing all of those apps. We really don’t have to review each and every song.”

Apple executives are quick to point out the importance of ensuring that third-party applications run smoothly and provide a high-quality experience for users.

“Our goal is very simple: We want to have the best platform for applications that there has ever been on any product,” notes Mr. Schiller, the marketing executive. “We know we’re not perfect, but we know we’re better than anything else that has been and we want to keep improving it.”

Apple says it has increased the number of product reviewers working on the App Store and has tried to improve and streamline the way it communicates with developers.

The App Store’s success — as much a surprise to Apple as it has been to competitors — has given rise to a new digital ecosystem. Today, hundreds of software aspirants, from individuals tinkering in their bedrooms late at night to established companies looking for lucrative new revenue streams, are jumping into the App Store fray.

And smartphone manufacturers across the board are trying to make their platforms more attractive and lucrative to bring in the kind of creativity and enthusiasm that Apple has.

It’s easy to see why: Although Apple doesn’t release specific financial figures for the App Store, analysts estimate that it generates as much as a billion dollars a year in revenue for Apple and its developers.

At a recent conference in San Francisco organized by Research in Motion for BlackBerry developers, the company said it would make several changes to its mobile operating system to increase the kinds of applications developers can create for its devices, including allowing advertising and e-commerce within applications. Jim Balsillie, a co-chief executive of Research in Motion, says he isn’t focusing on the sheer number of apps available on a BlackBerry (3,000) but on their utility.

“Is it about 20,000 apps or 200,000 apps or is it about changing those 20,000 apps and their deep integration and how they interrelate to one another?” asks Mr. Balsillie. “We’re much more interested in changing the applications and changing the user experience and really unlocking the promise and the money and revenue opportunity for the ecosystem.”

Regardless, says Mr. Balsillie, apps and smartphones have created a new playing field.

“It’s inevitable that all cellphones will be smartphones,” he says. “There will be more services and new ways to monetize and more consumption. Growth is a given; it’s just a question of who is going to innovate in the right way to drive that value proposition to capture that growth.”

ALTHOUGH Palm is still rolling out the e-commerce portion of its own app store, called the App Catalog, the company hopes to draw developers to write for Palm devices like the Pre because Palm’s operating system, called webOS, is based largely on the same programming languages used to create Web sites — meaning developers are already familiar with the tools they will need to create mobile apps.

So far, however, Palm offers 500 applications, a relatively slim selection compared with the iPhone, and many analysts believe that this has made the device less attractive to consumers. Palm, like Research in Motion, says it doesn’t need an avalanche of applications to compete.

“Two years ago, the iPhone blew away expectations for what mobile devices are capable of. And mobile devices and applications are the future of the computing industry,” says Ben Galbraith, co-director of Palm’s developer relations team. “But the market is becoming saturated with a large volume of applications. When you’re number 50,000 out of 200,000, how do you survive?”

Palm says it is offering a breezier review process to developers — including allowing them the option of submitting their programs as candidates for Palm’s App Catalog or immediately publishing their applications in a third-party, online storefront — which may help it avoid some of the conflicts plaguing Apple’s relationship with developers.

Meanwhile, Microsoft, which analysts have criticized for its sluggish approach to the smartphone market, also says it is emphasizing quality for the application store it introduced in October, Windows Marketplace for Mobile.

“Our strategy is to look holistically at how we can provide the best all-around user experience,” says Victoria Grady, director of mobile strategy at Microsoft. The Marketplace now has more than 800 apps.

Many developers and analysts think Google’s mobile operating system, most recently placed in the Motorola Droid, may evolve into the fiercest competitor to the iPhone. Unlike Apple, Google has eschewed a review process, allowing any developer to publish an application to the Android Marketplace, its version of the App Store, instantly. About 14,000 applications are available for Android-powered smartphones.

“We’re doing everything we can to open the device to both developers and consumers,” says Eric Chu, group manager of the Android platform at Google. “That is a critical part of what we think makes Android unique: applications are no longer limited to a single device.”

Mr. Chu said the growing number of Android-powered phones available on multiple wireless carriers increases the financial opportunity for developers. “Last year at this time, we only had one device,” he says. “The volume is going up at a tremendous pace, and the developer ecosystem is seeing that.”

Besides being a business opportunity for all of these companies, apps offerings may also be a matter of survival in a make-or-break market. Apple has another strong advantage: the iPhone offers developers a uniform, standard platform.

“When we create an application for the iPhone, you know it’s going to run exactly as you tested it on every single model,” says David Lieb, co-founder of Bump Technologies, which creates software that lets users share contact information by tapping two phones together. “The same isn’t true for the rest of the smartphones, which have varying screen sizes, processor speeds and form factors.”

HOWEVER the competitive landscape shapes up, the App Store phenomenon shows no signs of slowing. IDC, a technology research firm, predicts that the number of iPhone apps will triple next year, fueled by the growing popularity of smartphones and other mobile devices. Along the way, analysts say, the App Store will continue to upend the architecture of the smartphone business and threaten competitors that don’t have vibrant and extensive offerings.

The way the industry once operated, “Each handset company would come up with its latest iterations and maybe have the hottest device of the season or not,” says Ms. Huberty, the Morgan Stanley analyst. “Enter apps into the equation, and that changes. It goes from being a product cycle game to a platform game.”

“People will look back on the iPhone as a turning point in the industry,” says Craig Moffett, a telecom analyst with Sanford C. Bernstein. “The iPhone will be remembered as the first true handheld computer.” 

Copyright 2009 The New York Times Company

Fortune: The decade of Steve

The decade of Steve

How Apple's imperious, brilliant CEO transformed American business.

By Adam Lashinsky, editor at large

Last Updated: November 5, 2009: 8:13 AM ET

(Fortune magazine) -- How's this for a gripping corporate story line: Youthful founder gets booted from his company in the 1980s, returns in the 1990s, and in the following decade survives two brushes with death, one securities-law scandal, an also-ran product lineup, and his own often unpleasant demeanor to become the dominant personality in four distinct industries, a billionaire many times over, and CEO of the most valuable company in Silicon Valley.

Sound too far-fetched to be true? Perhaps. Yet it happens to be the real-life story of Steve Jobs and his outsize impact on everything he touches.

The past decade in business belongs to Jobs. What makes that simple statement even more remarkable is that barely a year ago it seemed likely that any review of his accomplishments would be valedictory. But by deeds and accounts, Jobs is back.

It's as if his signature "one more thing" line now applies to him as well. After a six-month leave of absence in the early part of this year, during which he received a liver transplant, he is once again commanding a 34,000-strong corporate army that is as powerful, awe-inspiring, creative, secretive, bullying, arrogant -- and yes, profitable -- as at any time since he and his chum Steve Wozniak founded Apple (AAPL, Fortune 500) in 1976.

Superlatives have attached themselves to Jobs since he was a young man. Now that he's 54, merely listing his achievements is sufficient explanation of why he's Fortune's CEO of the Decade (though the superlatives continue). In the past 10 years alone he has radically and lucratively reordered three markets -- music, movies, and mobile telephones -- and his impact on his original industry, computing, has only grown.

Remaking any one business is a career-defining achievement; four is unheard-of. Think about that for a moment. Henry Ford altered the course of the nascent auto industry. PanAm's Juan Trippe invented the global airline. Conrad Hilton internationalized American hospitality.

In all instances, and many more like them, these entrepreneurs turned captains of industry defined a single market that had previously not been dominated by anyone. The industries that Jobs has turned topsy-turvy already existed when he focused on them.

He is the rare businessman with legitimate worldwide celebrity. (His quirks and predilections are such common knowledge that they were knowingly parodied on an episode of "The Simpsons.") He pals around with U2's Bono.

Consumers who have never picked up an annual report or even a business magazine gush about his design taste, his elegant retail stores, and his outside-the-box approach to advertising. ("Think different," indeed.)

It's often noted that he's a showman, a born salesman, a magician who creates a famed reality-distortion field, a tyrannical perfectionist. It's totally accurate, of course, and the descriptions contribute to his legend.

Yet for all his hanging out with copywriters and industrial designers and musicians -- and despite his anticorporate attire -- make no mistake: Jobs is all about business. He may not pay attention to customer research, but he works slavishly to make products customers will buy.

He's a visionary, but he's grounded in reality too, closely monitoring Apple's various operational and market metrics. He isn't motivated by money, says friend Larry Ellison, CEO of Oracle (ORCL, Fortune 500). Rather, Jobs is understandably driven by a visceral ardor for Apple, his first love (to which he returned after being spurned -- proof that you can go home again) and the vehicle through which he can be both an arbiter of cool and a force for changing the world.

The financial results have been nothing short of astounding -- for Apple and for Jobs. The company was worth about $5 billion in 2000, just before Jobs unleashed Apple's groundbreaking "digital lifestyle" strategy, understood at the time by few critics. Today, at about $170 billion, Apple is slightly more valuable than Google (GOOG, Fortune 500).

Its market share in personal computers was plummeting back then, and the cash drain was so severe that bankruptcy was a possibility. Now Apple has $34 billion in cash and marketable securities, surpassing the total market cap of rival Dell (DELL, Fortune 500). Macintoshes make up 9% of the PC market in the U.S. today, but that share is increasingly beside the point.

With 275 retail stores in nine countries, a 73% share of the U.S. MP3 player market, and the undisputed leadership position in innovation when it comes to mobile phones, Apple and its CEO are no one's idea of underdogs anymore.

In 2006 Disney (DIS, Fortune 500) paid $7.5 billion to acquire Pixar, the computer animation film studio Jobs had nurtured and controlled. Jobs, in turn, became a Disney director and the blue-chip company's largest shareholder. His net worth, solely based on his stakes in Apple and Disney, is about $5 billion. Other executives have had stellar decades but none can compare with Steve's.

With Jobs back at the helm of his company, plenty of challenges lie ahead. Will the Goliath role suit him nearly as well as playing David clearly has? How will he respond to the competition he has awakened, particularly in smartphones, even as the personal computer fades in relative importance? Has he fashioned an organization that can succeed him? Can he possibly be as dominant in the decade to come as the one that is ending?

The "decade" of Steve actually began in 1997, when he returned to Apple after having been ousted a dozen years earlier. That was a year of triage, of a humbling investment from Microsoft (MSFT, Fortune 500), of paring Apple's product line to a bare minimum of four computers.

By the following year Steve's regime had kicked into gear. Jobs completed the hiring of a new management team, which included several executives from his previous company, Next. Those top players would form the nucleus of the Jobs brain trust for nearly 10 years.

Then came the first Macintosh after Jobs' return, the iMac, a breakthrough all-in-one computer and monitor that heralded Apple's return to health. The success of the pricey iMac, coupled with drastic cost cutting, allowed Jobs to build a cash cushion. By repairing Apple's balance sheet, he prepared the company for big investments to come, a shrewd business move if ever there was one.

Jobs laid the foundation for Apple's leap from stable to stratospheric when things looked darkest. In 2000, Apple missed its financial targets in a September earnings announcement, sending its stock price plummeting in subsequent months to the equivalent of $7 in today's prices. Yet Jobs by this time had set in motion the key elements of Apple's rejuvenation.

Over the course of 2001, as global markets fell and the world headed into recession, Apple launched the iTunes music software (in January), the Mac OS X operating system (March), the first Apple retail stores (May), and the first iPod (November), a 5GB model that Apple bragged would hold 1,000 songs.

The market didn't catch on quickly to the significance of those events. iTunes was just music-playing software embedded into Macs and lacked an online store that sold music. The new operating system, though impressive, powered a niche product. The iPod was a snazzy MP3 player in an established market.

As the company's stock languished, takeover rumors appeared from time to time. What was never reported was that Jobs seriously contemplated taking the company private with the help of newly formed buyout group Silver Lake Partners. An Apple buyout would have been the deal of the century, but according to people familiar with the talks, Jobs ultimately shut them down.

That was actually the second serious proposal to buy Apple. In 1997, Jobs' friend Ellison, later an Apple board member, lined up financing to take over the company on the assumption that Jobs would run it. In a recent interview Ellison said Jobs didn't like the idea of being "second-guessed" if it looked as if he'd returned simply to make money. "He explained to me that with the moral high ground, he thought he could make decisions more easily and more gracefully," says Ellison.

For those paying attention after Jobs' return, the CEO was telegraphing Apple's trajectory. "I would rather compete with Sony (SNE) than compete in another product category with Microsoft," he told Time in early 2002. "We're the only company that owns the whole widget -- the hardware, the software, and the operating system. We can take full responsibility for the user experience. We can do things that the other guy can't do."

Jobs was convinced that the masses would turn to Apple, but only if he could speak directly to them -- and not just to faithful Macintosh users, a club that included mainly artists and students. The strategy of building company-owned retail stores, so integral to Apple today, was derided at the time as a risky cash drain.

"He did this with a nervous board," says Bill Campbell, a former Apple executive who went on to become chairman of Intuit (INTU) and an Apple board member. "He knew that this is what customers wanted." What's striking looking back is how little there was to sell in the original Apple stores. Jobs knew how he'd fill them.

Jobs made it his business to know everything about Apple. "He's involved in details you wouldn't think a CEO would be involved in," says Ken Segall, a former Chiat/Day creative director who has worked with Apple on and off for years. Jobs commissioned the iconic "Think different" campaign, says Segall, well before any of Apple's new products were introduced -- or even described to the ad team. "He'd say, 'The third word in the fourth paragraph isn't right. You might want to think about that one.' "

The rare pairing of micromanagement with big-picture vision is a Jobs hallmark. Early in his return to Apple, he recognized that gorgeous design was a differentiator for Apple in a computer industry gripped by the successful blandness of Dell, Microsoft, and Intel (INTC, Fortune 500).

"I cannot count the number of clients who have marched in and said, 'Give me the next iPod,' " writes Tim Brown, CEO of product-design consultant Ideo, in his new book "Change by Design." "But it's probably close to the number of designers I've heard respond -- under their breath -- 'Give me the next Steve Jobs.'"

Jobs also has a knack for pouncing at the right moment. The music industry had failed repeatedly to develop its own digital-music sales site before Apple came along with iTunes, which was by then prepared to become a store for buying music.

Jobs cleverly made his pact with the record labels when iTunes worked only on Macs, which in 2002 had a personal-computing market share in the low single digits. Apple's humble position -- before iTunes became compatible with Windows, expanding its potential market share to nearly all PCs -- was a virtue. This made iTunes an experiment rather than a destructive paradigm shift.

"I don't understand how Apple could ruin the record business in one year on Mac," said Doug Morris, the head of Universal Music, according to "Appetite for Self-Destruction," a new book about the record industry's ills by Rolling Stone writer Steve Knopper. "Why shouldn't we try this?" Writes Knopper: "By the time Steve Jobs came around, he was the last resort. He was merely smart enough to know it. He played tough, but not any tougher than any lawyer for a major label who had negotiated an artist contract in recent decades."

A key Jobs business tool is his mastery of the message. He rehearses over and over every line he and others utter in public about Apple, which authorizes only a small number of executives to speak publicly on a given topic.

Key to the Jobs approach is careful consideration of what he and Apple say -- and don't say. Harvard professor David Yoffie estimated that in the months between announcing and selling the first iPhone in 2007, Apple received $400 million in free advertising by not making any public statements, thereby whipping the media into a frenzy.

Jobs himself is careful to avoid overexposure, preferring to speak only when he has products to promote. He didn't disclose his 2004 cancer surgery until after it occurred, and then only in an employee e-mail that was strategically released to news outlets. Similarly, he told the world of his recent leave in another employee missive, with no additional comment from him or anyone else at Apple.

Nobody in Jobs' sphere speaks without the permission of the company's media relations team, which reports directly to Jobs. Apple declined to make Jobs available for an interview for this article. It did bless the participation of some people in Apple's orbit to speak about him, while nixing requests for others.

The secrecy has rankled corporate governance experts, who insist the health of such an indispensable CEO warrants greater disclosure.

Jobs was initially mum as well about a stock options backdating scandal that embroiled the company's former finance chief and general counsel. In an eventual SEC filing, Apple said Jobs was aware that the company had adjusted option grant dates so that the grants were more profitable for employees. Jobs apologized for the backdating, calling the episode "completely out of character for Apple."

Jobs manages the money, the message, the deals, the design, and more. Consider the case fairly made that the long-ago enfant terrible of the computer industry has built up impressive business chops and that his company is peerless. But if nothing else, his recent illness is a reminder that Steve Jobs is mortal. When he's gone, how long will his company thrive without him?

Apple's future.

This past September, when Steve Jobs made his triumphant return to the public eye, he thanked precisely one Apple executive by name: Tim Cook, Apple's chief operating officer.

At an event to introduce a new line of iPods, Jobs first informed a crowd of journalists, analysts, and Apple developers that he now possessed the liver of a "twentysomething liver donor who had died in a car crash." Then he thanked Cook and the rest of the management team for "ably" running Apple in his absence. Cook, in turn, led a standing ovation for Jobs, his arms raised over his head from the front row of a San Francisco auditorium.

With Jobs back at work, the conversation has been postponed as to whether Cook, or anyone else, is prepared to fill Jobs' shoes. "At Apple the hierarchy is determined by who Steve calls," says a former Apple executive. "There's a lot of value in 'Steve said.'"

Larry Ellison, a CEO known to dislike the topic of succession, says of his friend, "He's irreplaceable. He's built a fabulous brand. He's got a wealth of products. Whenever he leaves, I hope he retires in good health and he's sailing off in his yacht in the Mediterranean. But they're going to miss him terribly, because it's a consumer products company. The product cycle is so fast."

There are signs that Jobs has inculcated the troops enough to last awhile without him. "The organization has been thoroughly trained to think like Steve," says someone with contacts among the Apple executive team. "That's why the six months went so smoothly. People could envision, 'This is what Steve would do.'"

Jobs, in fact, inspires far beyond Apple. Larry Page and Sergey Brin recently told The New Yorker that Jobs is their hero. When Jeff Bezos released Amazon.com's smooth, shiny Kindle 2, the Jobs envy was obvious. Venture capitalist Marc Andreessen, who co-founded Netscape, says he often evokes Jobs in his advice to entrepreneurs. He says, "The threshold for the release of the first product should be, 'What would Steve Jobs do?'"

Looking out on the next decade, Jobs may well be asking himself a variation of that very question: After creating more than $150 billion in shareholder wealth, transforming movies, telecom, music, and computing (and profoundly influencing the worlds of retail and design), what should Steve Jobs do next? Given his penchant for secrecy and surprise and his proven brilliance, it's a fair bet that he'll let us know when he's good and ready.

Reporter associate Doris Burke 

A decade of hits (and a few misses) Check out our interactive timeline to see Jobs' early struggles and recent victories, Apple's coolest product launches of the past 10 years, and how investing in Apple stock has paid off.

FT: Open your mind to idea of innovation

Open your mind to the idea of innovation

By Stefan Stern

Published: November 16 2009 22:37 | Last updated: November 16 2009 22:37

The three most dangerous words in management? “Not invented here.” Only complacent leaders believe that their way of doing things cannot be improved upon. But that attitude can lead apparently successful businesses astray.

As Henry Chesbrough, executive director of the Center for Open Innovation at the University of California, Berkeley, has pointed out, senior management teams can fail to spot important innovations because the new business models they rely on do not easily fit in with the way things are being done now.

Researching the performance of Xerox, the copier and printer company, between the late 1990s and early 2000s, Prof Chesbrough found that, out of 35 projects that had been rejected as part of a review process, 10 had gone on to become highly successful businesses. Indeed, the combined market capitalisation of these 10 new ventures, even after the “new economy” crash of 2001, was twice that of the former parent itself. He calls these unfortunate rejections a “false negative”: the innovations had looked bad, but that was because senior managers were unable to recognise their virtues.

Prof Chesbrough was one of the speakers at last week’s Financial Times innovation conference in London. The good news is that the war on corporate complacency seems to be going quite well. Delegates were keen to hear about examples of successful innovation, and many speakers were able to provide them.

Tough times can be the mother of invention. Consider EMI Music. The EMI story, recently at least, has been an unhappy one. Consumers have been rejecting CDs in favour of digitally downloaded music, most of which they are getting for free.

Elio Leoni-Sceti, EMI’s new-ish chief executive, gave a presentation which suggested that, very late in the day, the company has started to come to terms with the new world.

“You have to leave your baggage behind,” he said. Some EMI artists – Coldplay, for example – have started experimenting by offering free downloads of some tracks with a view to attracting future purchases.

More ingeniously, a new service called Abbey Road Live gives music fans a chance to buy a CD recording of the live gig they have just attended. And to think that, in the old world, we had to wait 13 years before EMI had cleaned up its recordings of The Beatles performing live at the Hollywood Bowl for them to be good enough to go on sale.

Speaking of the Fab Four, EMI has imaginatively recycled their back catalogue, providing the digitally remastered complete works for £180, or $260 in the US. A USB memory stick version is now also available.

The company has joined forces with Viacom to offer a new video game called The Beatles: Rock Band, which allows for rare (and pirate-resistant) digital downloads of Beatles songs – at 99p each.

Not all innovations are so glamorous or high-tech. The conference also heard from Brian Dunn, chief executive of Best Buy, the electrical goods retailer. He told a story of how his company had in the past 20 years brought in new ways of doing things again and again, innovations which were usually “born of desperation”, he said.

Whether it was abolishing commissions for sales staff, or embracing the internet as a medium for selling, or revamping the company’s approach to customers, or expanding abroad: each time, Best Buy’s leadership agonised over the decision.

Each time, there were smart people at the top who resisted change, he said. Necessary innovations are hard to introduce when, as in Best Buy’s case, the business seems to be doing fine.

One slightly odd phrase, or a variation of it, cropped up again and again during the conference: “Be where the customer is.” I took this to mean that innovation should not be a question of shoving more, slightly better products out into the market. Rather, as Matt Kingdon of What If?, the consultancy, put it, businesses should ask themselves: “What is the job that customers need doing for them?”

Companies still struggle with this. New survey data from the consultancy Accenture reveal deep dissatisfaction among corporate leaders with their efforts to innovate. For some of them, the greatest innovation of all might be waking up to what they have to do to allow innovation to flourish. Try new things, see what works, pursue the ones that do, and then try again.

For more on management or to comment, visit www.ft.com/managementblog

Copyright The Financial Times Limited 2009.

NY times: On a Mission to Banish the Saggy Bottom

 

 

 

November 27, 2009

Advertising

On a Mission to Banish the Saggy Bottom

By CLAIRE CAIN MILLER and ANDREW ADAM NEWMAN

WHEN women try on pants, the first thing they do is turn around and look over their shoulders into the mirror. If Andy Dunn has his way, men will soon do the same.

Mr. Dunn, the co-founder and chief executive of Bonobos, an e-commerce company that sells men’s pants, is on a mission to give American men a complex about their backsides. The pants’ distinguishing feature is that they eliminate the sagging bottom of ill-fitting trousers.

“It’s like a shame campaign,” Mr. Dunn said.

As much as he is trying to improve the way men’s clothes fit, Mr. Dunn may be having more impact on the way men buy clothes. Bonobos, which is based in New York, has no stores in which people can try on the pants, even though its pitch is superior fit. Instead, it aims to use various Web technologies to make clothes-buying less of a chore.

Bonobos would not have broken even last year on $1.6 million in revenue if it had to pay for stores and sales clerks, he said. And the men it is focusing on — those who hate to shop and have not given much thought to the way their clothes fit — prefer the ease of going online and choosing from few options.

Most men have been brought down by “the revenue-maximizing Gap or Banana Republic cut,” made to fit the widest group of people, Mr. Dunn said. The secret to the fit of Bonobos pants, which start at $88 for basic khakis and go up to $188 for silk-lined wool, is the curved waistband, said Mr. Dunn, whipping off his belt to demonstrate how a properly fitting waistband arcs in the back. The $50 Gap versions do not curve.

•

Bonobos’ other co-founder, Brian Spaly, started making the trousers in 2007, while he and Mr. Dunn were housemates at Stanford Graduate School of Business. Mr. Spaly, a former athlete, could not find pants with both a slim waist and enough room in the rear and thighs.

The Bonobos pants, which come in straight leg and boot cut, are best for those with athletic builds, although it is developing pants for slimmer and bigger men.

Mr. Dunn is well aware that manufacturers could easily replicate Bonobos pants, so he is trying to distinguish the company with customer service, convenience and technology.

Many shoppers still prefer going to stores over shopping online because of the in-person help. But some unlikely online marketers have succeeded, like Zappos.com, the shoe seller that was acquired by Amazon.com for $1.2 billion this month. It offers free shipping both ways, allows returns for a year and answers customers’ questions on the phone and online.

Bonobos also offers free shipping both ways along with lifetime returns, and encourages people to buy and return several pairs of pants to find the right fit. Its so-called style ninjas are available by phone, e-mail and, soon, video chat, where they will assess fit and give style advice.

A few other online stores also sell men’s pants, with different marketing strategies. One, Cordarounds, is a two-man design shop that makes a rare item: pants made of corduroy with wales that run horizontally, instead of up and down. It manufactures a couple of hundred of each style and then moves on to the next. Another, called Bills Khakis, is more concerned with durability and comfort than the style and fit that Bonobos’ customers seek. It also sells in stores.

•

Bonobos, named after a promiscuous species of primates, is now preparing to pitch the pants to women with advertisements on Web sites including Refinery29.com and Jezebel.com and in magazines like OK! The ads urge women to “give the gift that fits” to husbands, boyfriends, sons and fathers. “Let your man wear the pants this holiday,” proclaims the ad copy in the internally produced campaign.

Men are being pitched too. An ad for Bonobos that appears in the November issue of Men’s Journal features a photo of a male from the waist down, modeling pants under the headline, “Here’s your chance to tell women, ‘Hey, my eyes are up here.’ ”

The ad, by the New York office of the Gate Worldwide, continues, “When you wear the world’s best-fitting pants, women tend to stare. Even gawk. If you can handle being seen as a sex object, visit bonobos.com and order a pair.”

During Bonobos’ first year it advertised only on Facebook, aiming at affluent men in the financial sector; it now casts a wider net. “We have tons of customers who are school teachers, because they have to wear a comfortable nonjean every day, and those finance guys are actually wearing a suit four times a week,” says Scott Peterman, vice president for marketing.

One advantage online stores like Bonobos have over those in the mall is the ability to track exactly who buys things, which sizes and styles they prefer and whether they return them.

Eventually, shoppers on the Bonobos Web site will have a personalized home page, based on what they like and their size and body type. Bonobos is also planning marketing campaigns that will include surprising pants customers with a free dress shirt.

Bonobos, which could bring in $4 million this year, plans to stick to the few types of men’s clothes that have fit problems, a lesson learned the hard way when a swimsuit line sold poorly. Men, it seems, do not have a problem with swimsuits that cling or droop. Bonobos makes shorts and polo shirts and is working on dress shirts that do away with the “muffin top” created by excess fabric around the waist. And it plans to make suits.

Bonobos is “crowdsourcing” the design of the dress shirts using TweetSwell, a program for conducting surveys on Twitter, to figure out what people want. This has provoked heated debates over things like whether there should be a placket and whether cuffs should have one button or two. Even men who aren’t sure what a placket is (it is the vertical strip of fabric sewn onto the front of the shirt to reinforce the button holes) seem to care whether or not their shirts have one.

Only about 10 percent of men can be classified as fashionistas, said Marshal Cohen, the chief industry analyst at NPD Group, though that is up from 3 percent two decades ago. “I can’t tell you how many times I stop a guy in a store and say something doesn’t fit right, and he says, ‘I don’t care,’ ” Mr. Cohen said. “So he’s got a big hill to climb.”

Ray Kramer, 27, a debt researcher at Bank of America Merrill Lynch who calls himself a fashion novice, has already started the uphill trudge. His wife, Dominika Smereczynski, often complained about the way his trousers fit, and was relieved when the seat of his pants tautened, with Bonobos’ help.

On a recent morning, Mr. Dunn visited Mr. Kramer’s closet, and took out a pale blue Brooks Brothers dress shirt. “Billowing. Billowing!” he exclaimed. “You should throw this out.” Another, blue with black checks, was deemed as a source of muffin top.

Mr. Kramer began to nod. “I see most guys at work, even the skinny guys, with this big puff coming out the back,” he said. “It’s kind of embarrassing, I don’t have shirts that fit well.”

Mr. Dunn had succeeded at his goal of giving another guy a fashion complex. “Oh man, we can help him so much,” he said on the way out the door.

Copyright 2009 The New York Times Company

BusinessWeek: Apple's Schiller Defends iPhone App Approval Process

Byte of the Apple November 22, 2009, 9:28PM EST text size: TT

Apple's Schiller Defends iPhone App Approval Process

In his first wide-ranging interview on the matter, the Apple senior vice-president explains his company's App Store vigilance—and why it sometimes loosens up

By Arik Hesseldahl

Apple (AAPL) is under fire from some developers for the way it vets applications that can be sold on its online App Store. Facebook developer Joe Hewitt goes so far as to say he's "philosophically opposed" to the very notion of a company deciding which applications can and can't be used on its hardware. The presence of "gatekeepers" in software development "sets a horrible precedent," he says.

But in his first extensive interview on the subject, Phil Schiller, Apple's senior vice-president for worldwide product marketing, outlines the many reasons Apple keeps close tabs on which applications can be downloaded onto the iPhone and iPod Touch. He also outlined ways the company is trying to become more flexible in its approval process. "We've built a store for the most part that people can trust," he says. "You and your family and friends can download applications from the store, and for the most part they do what you'd expect, and they get onto your phone, and you get billed appropriately, and it all just works."

The number of applications available at the App Store is now north of 100,000, and about 10,000 are submitted each week. As the volume rises, so does the number of potential problems. Schiller compares Apple's role to that of a retailer determining which products line store shelves. "Whatever your favorite retailer is, of course they care about the quality of products they offer," he says. "We review the applications to make sure they work as the customers expect them to work when they download them."

About 10% of rejects: "inappropriate"

Most are approved and some are sent back to the developer. In about 90% of those cases, Apple requests technical fixes—usually for bugs in the software or because something doesn't work as expected, Schiller says. Developers are generally glad to have this safety net because usually Apple's review process finds problems they actually want to fix, he says.

In some 10% of cases where an app is sent back, that's because it's inappropriate. "There have been applications submitted for approval that will steal personal data, or which are intended to help the user break the law, or which contain inappropriate content," Schiller says.

About 1% or fewer of returned apps fall into some gray area that Apple hasn't anticipated—for instance, applications intended to help the user cheat at gambling in casinos. "We had to go study state and international laws about what's legal and what isn't, and what legal exposure that creates for Apple or the customer," Schiller says. The verdict: Apps that help a user learn how to play are O.K.; those designed to help a person cheat don't make the cut.

Apple is also vigilant about potentially illegal use of trademarks, particularly its own. "If you don't defend your trademarks, in the end you end up not owning them," Schiller says. "And sometimes other companies come to us saying they've seen their trademarks used in apps without permission. We see that a lot." Still, the trademark rules can be applied inflexibly, he concedes.

Rogue Amoeba's Run-In

In a widely reported case, developers at Rogue Amoeba, a maker of popular Mac apps, built an app called Airfoil Speakers that transmits audio playing on a Mac or Apple TV to an iPhone or iPod Touch that's connected to external speakers. In an effort to make clear the audio source, Rogue Amoeba used images of Macs, Apple TVs, and other Apple products. The app was initially approved. An update was rejected for running afoul of Apple's rules forbidding the use of Apple images in apps. The current version contains a non-Apple icon that links to a Rogue Amoeba Web page explaining the flap.

Schiller didn't directly address Airfoil Speakers, but he says Apple is trying to make trademark guidelines more sophisticated. "We need to delineate something that might confuse the customer and be an inappropriate use of a trademark from something that's just referring to a product for the sake of compatibility," he says. "We're trying to learn and expand the rules to make it fair for everyone." Rogue Amoeba will soon submit a version of the app with the Apple images intact, Rogue Amoeba CEO Paul Kafasis says.

One of the biggest accommodations Apple has made with applications is adding parental controls. Parents now can block apps with adult content or games that depict violence from being downloaded to an iPhone or iPod Touch. Turning on parental controls lets Apple boost the number of apps and the type of content allowed. "We've had a lot of eyes on us," Schiller says. "We've had inquiries from governments and political leaders asking us what we were doing to protect children from inappropriate content," he says.

Is a smartphone Gatekeeper needed?

Schiller makes a strong case for Apple's role as the arbiter of what goes on the iPhone. Still, it's tempting to consider the implications of a less hands-on approach, as is the case with Macs, Microsoft (MSFT) Windows PCs, or other smartphones, including those running the Google (GOOG)-backed Android operating system. The software market for personal computing has existed in this way for nearly three decades, and while there have certainly been some problems along the way, I'd argue that overall we're better off without Microsoft or Apple or some other organization approving software applications before they're released to the market. PC users have learned to be careful about what they put on their computers through unhappy trial and error.

My hunch is that greater vigilance is needed with smartphones, in part because they're a relatively recent phenomenon. The iPhone has been on the market only 28 months. Users take them everywhere and are quickly inserting them into daily life in ways the personal computer never could have fit. Malware on smartphones could do significantly more damage than malware on a PC. Imagine a nasty application that records every word you speak—both on and off the phone—without your knowledge, and then e-mails the audio to a stranger. Or picture one that surreptitiously tracks your movements and sends them to a stalker.

There may come a time when Apple finds it no longer needs to play such a comprehensive a role as app approver. Apple has shown a willingness to let its app approval process evolve. But today, with smartphones permeating our lives and going everywhere we go, it makes a good deal of sense to have someone keeping a close eye on what those apps do. At least for now.

Hesseldahl is a reporter for BusinessWeek.com.

Copyright 2000-2009 by The McGraw-Hill Companies Inc. All rights reserved.

 

NY Times: A Translator Tool With a Human Touch

 

 

 

 

November 23, 2009

Link by Link

A Translator Tool With a Human Touch

By NOAM COHEN

HOW hard can it be, as the joke goes, to speak Chinese? (Six-year-olds do it all the time.)

Yes, it turns out that learning languages is one of those skills that humans, even relatively young ones, master seemingly magically. It is all enough to make a mainframe computer jealous.

At I.B.M., a team of nearly 100, including mathematicians and software developers, is working on a project to create an automatic translation tool, so-called machine translation, that has the speed and accuracy to be used in instant-messaging between speakers of two different languages.

The project, called n.Fluent, is intended to teach the computer terminology that is specific to I.B.M.’s businesses, and, more significantly, allow the computer to learn what it has been doing wrong. To that end, the company is extracting and organizing contributions from I.B.M.’s 400,000-member work force spread across more than 170 countries, adding a human touch to the project.

Over a two-week period last month, the company issued a “worldwide translation challenge” to its employees, using a points-based system to award the biggest contributors prizes that were converted to charitable donations. About 6,000 I.B.M. employees made improvements in 11 languages to more than two million words of text translated by n.Fluent.

So, when a machine translation from French produces, “MTTP is the time of 30 minutes and it is steadily declining since January 2006,” a human correction comes up with this improved English version: “The MTTP delay is 30 minutes and it has been steadily declining since January 2006.”

“From this parallel data, we update the models,” said Salim Roukos, an I.B.M. researcher in language-related technology at its T.J. Watson Laboratory in Yorktown Heights, N.Y., home of the n.Fluent project. “You want to learn the idiomatic expressions — when you say someone has kicked the bucket, you don’t want that translated word for word.”

•

So far, n.Fluent is used only by I.B.M. employees, but the intention is to create a product that can be sold to other businesses.

Efforts like this at I.B.M., as well as social networking tools behind the company’s firewalls, amount to a new twist on “crowdsourcing,” the term I.B.M. officials use to describe them. In addition to the n.Fluent project, I.B.M. has its own companywide version of Wikipedia (Bluepedia), with contributions from 1,300 employees.

Perhaps the most innovative social networking experiment at I.B.M., according to Irene Greif of the I.B.M. Center for Social Software in Cambridge, Mass., is Dogear, a tool similar to Delicious that allows employees to share links and tagging on the Internet as well as on the I.B.M.-only intranet. The project itself was a bit of an experiment, and I.B.M. developers tweaked further, she said.

This led to Dogear, a system of tags and descriptions contributed by 10 percent of users. It has become more popular than I.B.M.’s own internal search engine.

“A small crowd, a self-selected crowd can often be useful,” Ms. Greif said.

This highlights the differences between what is occurring at I.B.M. and other large companies and what traditionally constitutes crowdsourcing.

I.B.M. employees are not just any “crowd”; they have expertise and a loyalty to their employer that any old posse wrangled up on the Internet may not. In fact, crowdsourcing may be the wrong way of thinking of such internal corporate projects. Employee-sourcing?

Maybe that catch-all term “collaboration” is the best way to think of what social networking technology can bring to the workplace.

After all, collaboration is an old goal for employees and employers.

In the case of the n.Fluent project, programmers are not trying to have a computer master the “rules” of a language, but rather are looking for statistical patterns between two sets of translated texts and among the words themselves. For example, Mr. Roukos said, the text of a Canadian parliamentary debate in French and English can help programmers to “build statistical models based on the parallel corpus.”

•

It is language’s fluidity and unpredictability that thus far make translation resist simple computer-based solutions. Which means that for the foreseeable future, translation experts will also need to become experts on collaboration.

“One of the reasons we’ve got senior-level executives behind this is that it is kind of a Harvard Business School case study of how the crowds inside the company help you develop a better product,” said David Lubensky, another researcher on the n.Fluent project. “We should be able to replicate this over various domains.”

For example, initially, all rewards to contributors were in the form of donations to one of seven worldwide charities. Over time, the team heard that some contributors “would personally want some trinket,” he said. And now small gifts are awarded as well.

Something any 6-year-old could have told you.

FT: Book extract - Viral Loop

Book extract: Viral Loop

By Adam L Penenberg

Published: November 6 2009 14:24 | Last updated: November 6 2009 14:24

Businesses are keen to harness the digital world to extend their brands and increase sales

It was the autumn of 2005 when Fritz Grobe, a professional juggler, and Stephen Voltz, a trial lawyer, first heard from a friend the amusing revelation that if you dropped Mentos into a bottle of Diet Coke, it would explode. Performers at heart – the two were members of a regional theatre company in Buckfield, Maine – Grobe and Voltz went out to the backyard to try it. After the pyrotechnics, their first thought was: how far could they take it?

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They weren’t the first. For decades, high school students had mixed vinegar and baking soda to make volcanoes erupt at science fairs and, since the early 1990s, the people at Mentos had been aware of the geyser phenomenon, which would come and go in popularity. Then, in September 2005, science educator Steve Spangler demonstrated the Mentos-Diet Coke effect on a news programme in Denver, Colorado, with the anchor Kim Christiansen getting soaked in the process. The online video became a minor hit.

In Buckfield, Grobe and Voltz spent a morning playing around with the idea. After corralling as many bottles of Diet Coke and Mentos as they could, they constructed a 10-bottle fountain with the aid of some cement blocks and put on a show at the nearby Oddfellows Theatre for other members of their troupe. The response urged them to greater heights and they spent about five months experimenting – cutting slits in bottles, drilling holes, adding screens.

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After settling on the idea of recreating the Bellagio Fountain in Las Vegas, the two drafted blueprints and carefully choreographed their effects to match those of their glitzy muse. On April 29 2006, they laid out 200 bottles of Diet Coke in an intricate design and prepped more than 500 Mentos mints (total cost: $300), then spent eight hours doing walk-throughs. “It felt like blowing up a building,” Grobe says. “We had one chance. We had never done more than 20 bottles at a time before that.”

While a friend with a digital video camera recorded the action, the two, dressed in white lab coats, crossed their fingers and let it fly. Amazingly, it all went off without a hitch. It was an unseasonably warm day, so the effects were even more spectacular, especially at the end when the grand crown shot out in different directions and spun. They got soaked, puddles of Diet Coke gathering in their goggles.

On the first Saturday in June they posted the experiment to their website. Voltz told one person about it: his brother. Within hours, thousands of visitors were viewing “Experiment #137”. By the end of the first day, they counted 14,000 downloads. Two days later, The Late Show with David Letterman called. Grobe told producers they had only done the fountain once and would need a chance to rehearse. Over the next few weeks, Grobe and Voltz grew confident they could perform the Mentos geyser live. Meanwhile, the video became a runaway hit. Over nine days, more than 2m people logged on to their site.

The concept of collective curation has been around for thousands of years; it just didn’t have as sophisticated a propulsion system as it does today. At first it was verbal, with gossip and information spreading from person to person. Chain letters mailed through the nation’s postal system urged recipients to make copies and send to 10 other people, or suffer the consequences. Then there was the telephone, the first efficient person-to-person mode of communication, which, before the rise of the internet, offered an unprecedented level of virality.

Once Mosaic and Netscape seeded the viral plain, though, jokes, memes and information that touched someone’s heart or funny bone – or both – could be dispatched to dozens, if not hundreds of people in an instant. It was only a matter of time before businesses began to recognise the benefits of viral campaigns to extend their brands and, in the process, increase sales. They just had to figure out how.

The answer came from Burger King in the form of a guy dressed up as a chicken willing to do whatever you wanted. The brainchild of ad agency Crispin Porter and Bogusky in 2004, the “subservient chicken” was one of the first mega-successful corporate viral campaigns. There were some wacky television spots, but it was the ensuing interactive web campaign that turned it from idle curiosity into a phenomenon.

Crispin launched a website with the chicken in a living room, encouraging visitors to type commands and watch him perform them, as long as they corresponded to one of more than 300 pre-recorded moves – from a cartwheel to a Michael Jackson moonwalk. But the chicken would draw the line at anything obscene (such as a sex act), approaching the camera to wag his finger in disapproval.

Within a week, the chicken hosted more than 20m visits, with the average user spending an astonishing 5 minutes and 44 seconds on the site. More to the point, sales of Burger King chicken sandwiches increased 9 per cent a week in the month following the site’s launch.

. . . .

Pete Healy, vice-president of marketing at Mentos, heard about the geyser phenomenon on radio. He told a reporter that Mentos was “tickled” by the video. He called Grobe and asked if there was anything the company could do to help.

“Send Mentos,” Grobe replied.

Healy did more than that. What followed was a marketing coup that has become a textbook example of how a company can harness the power of viral video, where the 30-second TV ad, which is waning in influence, is replaced by the audience. Because collective curation means the audience alone decides what’s good and what should be watched while the traditional gatekeepers – TV networks, movie studios, news media – are pushed to the sidelines.

Although Healy knew there would be risks to involving Mentos in this type of new-media campaign, in the end Mentos was candy, not a cure for cancer. How much effort would people put into ridiculing it? “As long as we maintained a light touch and were authentic, we figured we would probably be OK,” he says.

When Grobe and Voltz appeared on Letterman’s show, Healy dispatched the Mentos-mobile, a Pontiac Solstice wrapped in Mentos graphics, which was parked outside the theatre, while street marketers toting six-foot rolls of Mentos gave out sweets to passers-by.

Unlike Healy, the people at the Coca-Cola Company didn’t know what to think. A Coke spokeswoman said: “We would hope people want to drink [Diet Coke] more than try experiments with it.” She added that the “craziness with Mentos” didn’t “fit” Diet Coke’s “brand personality”.

Michael Donnelly, the company’s interactive director, admitted that Coke wasn’t prepared for this. But in July 2006 the soft- drink maker relaunched Coke.com with a new focus: consumer-generated media that celebrates creativity and self-expression. Within days of starting his job at Coke, Donnelly contacted Voltz and Grobe. This led to a meeting between Coke, Mentos, Grobe, Voltz and Google, which also wanted in on the action.

Fritz Grobe and Stephen Voltz told one person about ‘Experiment #137’; after nine days, 2m had downloaded it

The companies agreed to work together to support the performers in a second Mentos-Coke sprinkler video, which Grobe and Voltz dubbed “The Domino Effect”. At the end, there was an advertisement that linked to Coke.com or cocacola.com, announcing a contest. For three months, people could submit videos of ordinary objects doing extraordinary things, with Grobe and Voltz judging. Coke supported the campaign by buying up hundreds of search keywords on Google, MSN and Yahoo, anything relating to Coke, Mentos and explosions, and counted 1.5bn ad impressions.

This democratisation of content is made possible by cheap video cameras, camcorders and mobile phones that capture user-generated infotainment, aided by powerful software like Final Cut Pro and iMovie to shape it, and distributed via a massive digital infrastructure with ample bandwidth. The technological zeitgeist is, however, equal parts human, as online communities blog about what interests them or disseminate links to everyone in their e-mail address books. Meanwhile, user communities have sprouted up on people portals such as MySpace, Flickr, YouTube and Digg. There, people share everything from blog posts to news articles, pictures, audio podcasts and videos in a quest for their own 15 megabytes of fame.

“It’s all about the combination of next-generation content creation and distribution coupled to instant access to your social network community,” says Adam Lavelle, vice-president of strategy for iCrossing, a digital marketing agency. “Because distribution is so huge and fluid and easy, your community connects to other communities, which fosters this distribution. If I know you, then I know everyone you know.”

As for companies caught up in a viral loop, they have little choice but to let go of their brand. As AG Lafley, chief executive of Procter & Gamble, once told the US Association of National Advertisers, “The more in control we are, the more out of touch we become. But the more willing we are to let go a little, the more we’re finding we get in touch with consumers.”

A company willing to let go of its brand can find untapped riches, as Mentos did. The Bellagio Fountain video was downloaded 20m times and more than 10,000 copycat videos were posted online, which created a multiplier effect: Mentos tallied a staggering 215m mentions of its product in TV, print or radio stories over nine months, and estimates the free publicity was worth $10m to the company, half its annual marketing budget. Sales climbed 20 per cent during the first viral wave and, even after the commotion died down, they remained 15 per cent higher than they had been. Mentos made a mint.

Before the video, Diet Coke’s sales had been flat, while the company as a whole was losing market share. But Donnelly reports that after it went viral there was a “significant spike” in sales of two-litre bottles of Diet Coke, the ones used on camera. He wouldn’t give exact numbers but confirmed it was between 5 and 10 per cent.

On YouTube some videos have been downloaded tens of millions of times. There is a cat playing the piano , a music video set on treadmills at a gym, a cackling baby. At first there may not seem any rhyme or reason behind their appeal. Yet there are shared characteristics to some viral videos, and companies seeking to advertise their products are keen to decipher these.

A series created for the Sony Bravia HDTV featured explosions of paint covering whole buildings, thousands of bouncing balls and giant clay rabbits, all in vivid colour; a Dove Evolution ad showed a normal-looking woman instantly transformed into a supermodel before our very eyes. The tagline read: “No wonder our image of beauty is distorted.”

These are the antithesis of the hard sell. In exchange for entertaining us, the companies are afforded the privilege of mentioning their product. The narrative of each video is woven tightly into the brand’s message. Sony’s ad played up the Bravia’s colour and image clarity. Dove’s idea expanded the idea of beauty to encompass more than twiggy supermodels. On YouTube alone, several parodies were viewed a total of 5m times. (“Slob Evolution”, in which a male model eats, drinks and smokes himself into someone who resembles Christopher Hitchens, is a personal favourite.)

Plenty of others have played the system, with decidedly mixed results. Samsung released a series of videos on YouTube featuring a Saint Bernard named Sam on an aeroplane. The few who actually watched characterised these ads as “lame”, “a stinker” and “zzzzzz”. And though Dove scored big with Evolution, another promo for Dove Cream Oil Body Wash received more than 10,000 comments on YouTube, almost universally negative.

What’s the secret of a campaign like this? “You have to have a light touch and be careful not to act like a guy in his mid-40s trying to be a hipster,” says Pete Healy, the fifty-something Mentos marketer. “It doesn’t smell right.”

This is an edited extract from ‘Viral Loop’ by Adam L Penenberg, (Hodder & Stoughton, £12.99). © 2009 Adam Penenberg.

.....................................................................................................

Adam L Penenberg on what’s next for the virtual economy

One need not be fluent in the lingua franca of social media to realise that Facebook is viral through and through. From the start it grew because each new user begat others, for what’s the sense of being on Facebook if none of your friends are? Today there are more than 300m Facebookers and it is en route to half a billion.

Facebook not only constantly expands, stacked atop it is a teeming ecosystem of thousands of social networking applications: games, horoscopes and quizzes, apps for business and charity, all of them also viral in nature. With 25m users, one notable Facebook app is the gruesome game Mafia Wars. Users start their own mafia family with their friends, operate crime syndicates and shoot to be the next Godfather.

While the script isn’t all that interesting, the gamemaker Zynga’s revenue scheme is, because it turns bits and bytes into cold hard cash by trading in virtual goods, which yield about half the company’s revenue (advertising is responsible for the other half). Zynga combines free-market capitalism with high-tech killing hardware. Need an assault rifle for your arsenal? Pay Zynga real money and it’s yours. How about a “meat grinder” machine gun, an Easter egg bomb or napalm? Yours, for your next ambush, at a price.

Even more popular is Farmville, enabling its 60m users to buy digital representations of seeds, chickens, eggs, tools and plots of land. (While neither game runs exclusively on Facebook – they are also available on MySpace, Yahoo and over the iPhone – Facebookers form the biggest base of users.)

Don’t laugh. The market for virtual goods is estimated to be about $1bn in the US. It is spawning entire virtual economies, even being funnelled into charitable causes. Zynga released a special “sweet seed” it sold for the equivalent of $5 each, promising to donate half the proceeds to two non-profits in Haiti. Farmville players generated $640,000, with $320,000 going to charity.

These games, like the social networks they sit on, are viral, with each user attracting others to play. They will not only continue to spread, they will become more realistic and it’s not far-fetched to think that one day an alternate economy could arise.

Copyright The Financial Times Limited 2009.

Isreal News Agency: SEO, Google and Sex

SEO, Google And Sex

Tel Aviv ---- October 21, 2009 ..... The following parody is a cute tale of SEO, Google and sex which may have it creative origins in India. A magical place where thousands are employed for only a few dollars and whose mission is to attract both reader and search engine using any means they can. These busy Indian optimizers use a variety of legal spam methods, including employing the word sex to attract. Sex is the number one searched word on the Net with over 582,000,000 pages coming up on Google.

Even The New York Times has worked to ensure that its site and search results are incredibly Google friendly, so Google friendly in fact that a recent search for “sex” on Google currently serves the NY Times internal archive search results for sex as #2. 

In the story below, notice how often the word sex is used, along with the words Google and SEO. But what really made us smile in writing and editing this story was how organized and creative the writer was. He didn't just throw out some words hoping that some literally trash would stick to the search engines. For it remains the creative balance between good and interesting content and the optimization of that content which makes today's Internet Web and news author relevant.

SEO or search engine optimization is a term widely used in Internet marketing. It is quite useful for any Website in Israel, New York, London, Paris, China or India for increasing traffic, sales and services. It is crucial for any site to achieve its optimum ranking results in Google, Yahoo and numbers of other search engines.

SEO is the process of increasing the volume and traffic to a web site from various search engines by increasing organically the search results for targeted keywords. Usually, the earlier a site is presented in the search results or the higher it “ranks”, the more searchers will visit that site. SEO can also target different kinds of search, including image search, local search, and industry-specific vertical search engines.

Now, what is sex?
I think there is no need for the explanation of this term because it is the most searched term on the Internet. Everyone knows about sex and its importance for stability, sensation and satisfaction in life. So, it is referred to as a basic need. In the same way as SEO is critical for your site.

Why SEO and sex is important? SEO is important for the instant growth of your business. If you are not ranking well in the search engines then it can help you in various ways. It will enhance your site traffic. Traffic will increase your sales and services as you penetrate the market.

If you rank well, you may even establish a brand name in your specific market.

Sex is a sensation which is most important for a healthy, happy and peaceful life. A greater satisfaction may increase your thinking and coolness in life. If you enjoy healthy sex on a daily basis then it can enhance many other aspects of your life.

For ultimate satisfaction, a healthy sex life is important. In the same manner with SEO if you secure more organic traffic results on Google then the greater will be your satisfaction.

With a more natural and open approach as to your involvement in sex, the more powerful the sensation. In the same perspective as when you get a boom in business then naturally powerful results may fill you with sensation.

There are various similarities between SEO and sex.
But there are some differences which makes SEO better than sex. Well friends, I am going through the alphabetical approach to describe how SEO and sex is similar and dissimilar.

Both create sensation. SEO and sex both create intimacy and boundless sensations. SEO is a sensational thing for any Website and sex generates sensation through physical intercourse. As I stated above - SEO brings traffic to a site organically or naturally and sex creates sensation in the orgasm and in the human body by a natural phenomenon.
Both are organic functions - although both can be paid for. But please, do not confuse Google Adwords with prostitution. Although both may be optimized through the use of keywords.

As traffic increases for a site it brings new customers and increases business for the company or organization behind the site. In a similar way, as the climax during sex increases the pleasure increases. So, traffic for a site may be simulated with the orgasmic climax in sex.

Expertise is needed. In both cases an expert may generate wonderful results.
An SEO expert can manage the site for Google and Yahoo rankings well in the SERPs and secure increased traffic to the site. It is the tactics based on extensive professional marketing knowledge, social networking (Facebook, Twitter, YouTube, blogs), Web 2.0, viral marketing, PR and the practice of the SEO expert by which he or she can have a site ranked high in a very short time for targeted traffic. A practice which can work quicker and stay stronger than Viagra!

In a similar way, an expert in sex can generate more pleasure than a new member. He or she may know about the right sexual positions, time and the procedure to follow which can increase organic results and pleasurable sensation in the body.

Optimization is critical. Here is where SEO differs from sex because the word sex does not contain the letter “O”. SEO is the process of optimizing search results by using the professional knowledge of an SEO professional.

Professional SEO services will increase the optimum results day by day. But in the case of sex a human having more sex may lessen his or her interest and stamina with time.

Then we have the X - Factor. The “X Factor” refers to the indefinable“something” that makes one thing better than other. SEO is the process of making an “O”rdinary site into an e“X”tra ordinary site so the X letter is silent in SEO in this way. So, here is the difference or X - factor which differs SEO from sex and makes SEO more potent than sex.

Well friends, SEO has an extra silent X which proves that it is better than sex.
Now let's examine excessive linking in SEO and excess of sex.

Excessive means “exceeding a normal, usual, reasonable, or proper limit”. Linking which means “to become connected with or as if with a HTML link”.
Google released their guidelines on Link Scheme and below one can find violations of Google’s Webmaster blackhat practices that can negatively impact your site’s ranking in search results.

One must be wary of links intended to manipulate PageRank. Links to web spammers or bad neighborhoods on the web. Excessive reciprocal links or excessive link exchanging such as "link to me and I’ll link to you." Buying or selling links that pass PageRank are also forbidden.

Excessive linking may harm your site SEO Google search results and authority. When you link excessively the search engines will stop counting them when evaluating your authority.

Now in the case of sex the result is the same.

Excess sex may be harmful to your health. Some health care providers say that excess of sexual activity can put an extra strain on your heart, especially if your heart is already weak from a heart attack or heart disease. There is an exception to this rule when it comes to prostate cancer where recent research indicates that daily sex and ormasturbation may actually reduce incidence of this cancer by up to one third. And that daily sex for females may actually act as a catalyst for them to perform more domestic chores. Please do not slay the messenger here for these recent news developments.

Now for our professional assessment of the effect of no SEO and no sex.
If a site owner has no SEO then he may loose an opportunity to increase his or her business. And the site and owner may worry about other tactics which may be far more expensive for him or her. And he or she may go for paid or sponsored referrals such as Google Adwords - or sponsored links. And he or she may loose the opportunity to secure customers naturally.

These men are optimized but not for the Internet. The INA cautions all males athletes from taking part in sex before participating in sports. This is due to endorphins being released from the male's brain during sex. Research does indicate that endorphins have little or no affect on SEO, social networking, Web 2.0 or Internet marketing practices.

In the same way in the case of no sex the life of a human being may become random and full of dissatisfaction. We only recommend no sex activity in sports for male athletes about to set Olympic records in track and field, basketball, football, soccer, tennis, skiing, baseball, cricket, swimming, hockey and shooting. Sex is a basic need so its fulfillment is necessary for a healthy and peaceful life.

The concept for the above news story was found on the Web from SEO experts in India. We from the Israel News Agency spent hours correcting grammatical mistakes but must give credit to our busy friends in India for their unending, relentless enthusiasm and non-verbal Web creativity. 

If you care for more information on SEO or sex, you may check out the following websites: Israel Pr.com (English), Israel SEO Pr.com (Hebrew) or New York SEO Pr. Or you can take a relaxing and sensual trip with us to India in the near future!

The above news content was edited and SEO optimized in London and Israel for the Internet by the Leyden Communications Internet Marketing PR SEO Group London SEO Pr New York SEO Pr Israel SEO Pr Israel, London, New York.

Search Insider: Everything I Need to Know About Business I Learned From Google

Everything I Need to Know About Business I Learned From Google by Aaron Goldman , Wednesday, October 21, 2009 And the beat goes on. What started off as 10 simple marketing lessons learned from Google blossomed into 15 and then 20before seeding a full-fledged book (in-progress). From there, I dove into lessons from Google about product development.Today, I'd like to bring it up a level to what Google can teach us about general business practices. For my next topic, I think I'll lighten the mood with we can learn from Google about dating -- so start tweeting your suggestions now! 1.     Innovate or die. Google fosters a culture of innovation by allowing employees to spend 20% of their time working on non-core projects. And, for core projects, it puts a relentless focus on continuous improvement. Heck, in the past year alone, Google made 359 changes to its Web search product. I guess when it's as easy as a click to switch from Google's bread-and-butter product to a competitor, it had better keep innovating. Netflix is a great example of a company devoted to innovation. It runs a contest awarding $1 million to anyone that can improve its recommendation algorithm by 10%. 2.     Automate or die. Despite ballooning to over 20,000 employees, Google is still a very lean operation. It's long held the belief that most problems can be solved by machines, not people. For example, when it first developed its search engine, rather than manually classify the Web into a directory of helpful links -- as some other companies had -- it created a technology to crawl the Web and assign value to  Web sites based on the number of inbound-links. Search marketers know better than anyone the power of automation -- whether that means bid management or multivariate testing. One that I'm particularly fond of is Kenshoo for its ability to automate not just the bidding process, but many parts of the campaign management process, including keyword generation and copywriting. 3.     Tap the long tail. This, of course, is another Chris Anderson theory -- in my last column, I riffed on " FREE" -- that draws from Google or, rather, helps explain its success. Google has made a living on the tail, from allowing people to access obscure Web assets to activating small mom and pop advertisers. Anderson's book has plenty of examples showing companies exploiting and profiting from the long tail, so I won't rehash them all here. Clearly, though, the Internet has moved the market for many products from mass to niche. When it comes to drawing up a business plan, size simply doesn't matter as it used to. Scale, on the other hand, matters very much. Just don't confuse the two. One example worth highlighting here is crowdSPRING, a start-up in Chicago. CrowdSPRING has unleashed the power of the long tail for sourcing creative services. Anyone can post a project and a bounty and get submissions from around the world before choosing the one they like best.  4.     Keep your head in the cloud. Google has made no secret of the fact that it believes cloud computing is, to quote Howard Hughes, "The way of the future." Google's product suite -- from Search to Gmail to Docs -- fully harnesses the power of the cloud and makes it one of the world's biggest metaphorical squatters on the other Big G's real estate. I've been on a bit of a sustainability kick lately. Scott Kier, a friend and colleague, has opened my eyes to the power of the triple bottom line -- people, planet, and profit. Not only is cloud computing environmentally friendly due to improved resource utilization, but it can be people- and profit-friendly as well by eliminating data-loss and fostering virtual-collaboration. The concept of tethering employees to offices in knowledge-work industries is quickly being proven ineffective. Let your people work from anywhere and reap the benefits of increased productivity -- no more death-by-meeting, not to mention, lower rent and overhead. Salesforce.com is a terrific application of cloud computing, allowing customers to manage CRM effectively and collaboratively. And HP is a company that's long embraced the "work from anywhere" model to much success. 5.     Don't scare users. Google practices this principle in a number of different ways, and it was part of its early rallying cry when introducing advertising. From its clean, inviting homepage to its overt lobbying, er... I meandisclosure around data collection and privacy protection -- Google goes to great lengths to avoid scaring consumers. Google also works hard to keep from frightening its other core constituents -- media publishers, advertisers, and agencies -- with varying degrees of success. Ain't that right, Frenemy? There are plenty of organizations that have put this lesson to good use. One recent example is the Corn Refiners Association running a campaign to dispel myths about high-fructose corn syrup. I'll close this thread in my next column with... 6.     Respect the law of supply and demand. 7.     Focus on your hard-core users first. (Submitted by Dave Chu of Eton Corporation.) 8.     Keep your customers close and your competitors closer. 9.     Follow the law of averages. (Via David Gould of Resolution Media.) 10.  Find your golden goose, then give away the farm. 11.  Make yourself very profitable for other businesses. (Another Chu-ism.) Aaron Goldman is founder and managing partner of Connectual, a rep firm dedicated to connecting the digital marketing ecosystem. Contact him here.

Economist: Cloud Computing - Battle (Clash) of the clouds

Computing

Battle of the clouds

Oct 15th 2009
From The Economist print edition

The fight to dominate cloud computing will increase competition and innovation

Illustration by Jon Berkeley

THERE is nothing the computer industry likes better than a big new idea—followed by a big fight, as different firms compete to exploit it. “Cloud computing” is the latest example, and companies large and small are already joining the fray. The idea is that computing will increasingly be delivered as a service, over the internet, from vast warehouses of shared machines. Documents, e-mails and other data will be stored online, or “in the cloud”, making them accessible from any PC or mobile device. Many things work this way already, from e-mail and photo albums to calendars and shared documents.

This represents a big shift. If you store more and more things online, and access more and more software through an ordinary web browser, it suddenly matters much less what sort of computer you have, and what kind of software it is running. This means Microsoft, which launches the newest version of its Windows operating system this month, could lose out—unless, that is, the software giant can encourage software developers and users to migrate to its new suite of cloud-based services. Its main rival is Google, which offers its own range of such services, and continues to launch new ones and interlink them more closely. Yahoo!, which is allied with Microsoft, and Apple also offer cloud services for consumers; specialists such as Salesforce and NetSuite do the same for companies. Amazon has pioneered the renting out of cloud-based computing capacity. Some firms will offer large, integrated suites of cloud-based services; others will specialise in particular areas, or provide the technical underpinnings necessary to build and run clouds. But battle has been joined (see article).

Life among the clouds

The new approach has great promise. It makes life easier for consumers (no need to install any software) and cheaper, too: many cloud services are free, supported by advertising or subsidised by a minority of users who pay for a premium service. Using a cloud-based e-mail service means you do not have to worry about losing all your e-mail if your laptop dies, and you can access your mail from any web browser. As cloud services expand, the same will be true for other documents and data.

There are also benefits for companies. By switching to cloud-based e-mail, accounting and customer-tracking systems, firms can reduce complexity and maintenance costs, because everything runs inside a web browser. Providers of cloud services, meanwhile, can benefit from economies of scale. Why should every company or university set up and maintain its own mail server, when Google or Microsoft can do it more efficiently? Companies are already happy to rely on utilities to provide electrical power, after all. Cloud computing will do the same for computing power.

The ability to summon computing capacity from the cloud when needed will also give the software industry a shot in the arm. During the dotcom boom, the first thing a start-up had to do was raise the money to buy a room full of servers. If a website experienced a sudden surge in popularity, more servers were needed to meet demand. Today a capacity can be rented as needed, allowing cloud services to scale up smoothly. This lowers barriers to entry and promotes innovation and competition. It also presents an opportunity to Microsoft, Amazon and other companies that are hoping to create the cloud platforms on which other firms will offer services.

To anyone familiar with the history of computing, there is an obvious concern: that one company will establish a dominant position and attract the attention of antitrust regulators. What IBM did in the mainframe era, and Microsoft did in the PC era, one of the new challengers may succeed in doing in the cloud.

Regulators are already acting to head off incipient problems. They are signalling worries about, for instance, overlapping board members at Apple and Google, or the indefinite retention of search histories by search engines. So far none of these skirmishes has led to a big court battle—something technology firms, which are keenly aware of the industry’s history, are anxious to avoid. But there are three areas where users of cloud services should be vigilant, and providers must be responsive, or regulators may yet step in.

A storm brewing?

First is the familiar risk of technological lock-in, as rival companies promote their own, mutually incompatible, standards and formats, as they have done in the past. Moving data from one cloud-based storage system to another, for example, is not always easy. Buyers of cloud services must take account of the dangers of lock-in, and favour service providers who allow them to switch between services without too much hassle.

Second, storing so much personal information, and using it to target advertising, has privacy implications. Consumers who are unwilling to pay for cloud-based services will have to put up with some advertising based on their online activities, since it pays the bills. Most users will be happy to trade some privacy for free services, but they should have control over their personal data, and be able to amend the profiles which service-providers compile and use to target advertising.

Third, data stored in the cloud may not be safe. This month tens of thousands of people with Sidekick smart-phones, for example, lost their address books, calendars, photo albums and other personal data, all of which were being stored in the cloud by Danger, an aptly named subsidiary of Microsoft. But a disaster on this scale is unusual: occasional outages are more common. Ensuring that cloud-based systems become more reliable is in the best interests of the firms that provide them, if they want to attract and retain customers.

Prodded by users and regulators, providers of cloud services are gradually moving towards new standards and greater transparency and reliability. If they do not move fast enough, regulators may yet have to intervene more forcefully. But cloud computing’s advantages already outweigh its drawbacks for many consumers and business users. In contrast with previous computer-industry battles, a single victor seems unlikely this time around. May the best clouds win.

Copyright © 2009 The Economist Newspaper and The Economist Group. All rights reserved. === Cloud computing Clash of the clouds Oct 15th 2009 From The Economist print edition The launch of Windows 7 marks the end of an era in computing—and the beginning of an epic battle between Microsoft, Google, Apple and others Illustration by Ian Whadcock DO YOU have plans for next weekend? If not, don’t worry: perhaps a friend will be throwing a party to celebrate the launch of Windows 7, Microsoft’s new operating system, on October 22nd. You’ll get help installing the program and be shown how to use the new features. To maximise the fun, your friend will get tips from the “HostingYourParty” video on YouTube or go to the dedicated website, complete with downloadable party favours and a trivia quiz (sample question: “The Microsoft Pretzel Hunt is an annual pretzel hunt held at the Redmond campus. True or false?”). This is not satire. It is a toe-curling attempt by Microsoft to create some buzz for its new software. Fortunately for the firm, it will hardly matter, because Microsoft dominates the market for operating systems. After the let-down that was its predecessor, Windows Vista, Windows 7 is certain to be a success. There is plenty of pent-up demand, because Vista’s aged predecessor, XP, is still widely used. Reviews of Windows 7 have been positive, some even glowing, although the software is sometimes hard to install. Windows 7 is not just a sizeable step for Microsoft. It is also likely to mark the end of one era in information technology and the start of another. Much of computing will no longer be done on personal computers in homes and offices, but in the “cloud”: huge data centres housing vast storage systems and hundreds of thousands of servers, the powerful machines that dish up data over the internet. Web-based e-mail, social networking and online games are all examples of what are increasingly called cloud services, and are accessible through browsers, smart-phones or other “client” devices. Because so many services can be downloaded or are available online, Windows 7 is Microsoft’s first operating system to come with fewer features. As one window closes… The launch of Windows 7 coincides with the closing of the book, after more than a decade, on Microsoft’s antitrust woes. The company got into hot water in America and Europe mainly for abusing its dominance of PC operating systems to promote its web browser. On October 7th the European Commission said it had all but reached a settlement with Microsoft. The firm has agreed to give Windows users in Europe a “ballot screen” that allows them to choose a rival browser in place of its own Internet Explorer. Windows is not going to disappear soon, but cloud computing means it is no longer so important. Other products, some being launched this autumn with less fanfare than Windows 7, represent Microsoft’s future. Last month the company opened two data centres that between them will contain more than half a million servers. This month it released a new version of Windows for smart-phones. And next month it will launch Azure, a platform for developers on which they can write and run cloud services. The rise of cloud computing is not just shifting Microsoft’s centre of gravity. It is changing the nature of competition within the computer industry. Technological developments have hitherto pushed computing power away from central hubs: first from mainframes to minicomputers, and then to PCs. Now a combination of ever cheaper and more powerful processors, and ever faster and more ubiquitous networks, is pushing power back to the centre in some respects, and even further away in others. The cloud’s data centres are, in effect, outsize public mainframes. At the same time, the PC is being pushed aside by a host of smaller, often wireless devices, such as smart-phones, netbooks (small laptops) and, perhaps soon, tablets (touch-screen computers the size of books). Although Windows still runs 90% of PCs, the fading importance of the PC means that Microsoft is no longer an all-powerful monopolist. Others are also building big clouds, including Google, a giant of the internet, and Apple, renowned as a maker of hardware, with a market capitalisation that now exceeds those of both Google and IBM, its original arch-rival (see chart above). Granted, there are hundreds if not thousands of firms offering cloud services—web-based applications living in data centres, such as music sites or social networks. But Microsoft, Google and Apple play in a different league. Each has its own global network of data centres. They intend to offer not just one or two services, but whole suites of them, with services including e-mail, address books, storage, collaboration tools and business applications. They are also vying to dominate the periphery, either by developing software for smart-phones and other small devices or by making such devices themselves. These three giants (for their vital statistics, see table) are already preparing for battle. In July Google mounted a direct attack on Windows by promising to launch a free PC operating system, Chrome OS. Rumour has it that a basic version may hit the market on the same day as Windows 7, or soon after. Microsoft’s new operating system for smart-phones represents its latest effort to catch up with Apple’s iPhone and Google’s operating system for handsets, called Android. On October 12th Apple and Google severed a tie when Arthur Levinson, a member of both boards, resigned from Google’s. In August Eric Schmidt, Google’s chief executive, had quit Apple’s board because “Google is entering more of Apple’s core businesses,” in the words of Steve Jobs, the gadget-maker’s boss. A taxonomy of giants Despite the growing similarities among the three, each is a unique beast, says Michael Cusumano, a professor at Massachusetts Institute of Technology’s Sloan School of Management. They can be classified according to how they approach the cloud, how they make money and how openly they approach the development of intellectual property. Google, you might say, has been a cloud company since its birth in 1998. It is best known for its search service, but now offers all sorts of other products and services, too. It has built a global network of three dozen data centres with 2m servers, say some estimates. Among other things, it offers a suite of web-based applications, such as word processing and spreadsheets. Lately it has branched out, releasing Android for phones, and its Chrome web-browser and operating system for PCs. It took Google a while to come up with a way of making money, but it found one in advertising, its main source of revenue. It handles more than 75% of search-related ads in America. Worldwide its share is even higher. Google is also trying to make money from selling services to companies. On October 12th it said that Rentokil Initial, a pest-control-to-parcel-delivery group, would roll out Google’s online applications to its 35,000 employees, making it the biggest company to do so. Google’s reliance on advertising explains its open approach to intellectual property. Giving Android and Chrome OS away as open-source software not only makes life difficult for rivals’ paid-for products but also increases demand for Google’s services and the reach of its ads. Its openness has limits: Google says little about the architecture of its data centres and search algorithms, because they give the company its competitive edge. The way it organises R&D internally is open and decentralised: self-organising teams come up with ideas for most new services. If Google was born in the sky, Microsoft started on the ground. Office, its bestselling suite of PC programs, is almost as ubiquitous as Windows. But the company is less a stranger to cloud computing than it may seem. It has built a network of data centres, and is starting to gain traction after losing billions developing online services. Its Xbox games console has powerful online features. Bing, its new search engine, has gained a shade in market share (though it is still miles behind Google). It is even preparing a stripped-down web-based version of Office, and it now offers much of its business software as online services. However, most of Microsoft’s revenue and all of its profit still come from conventional shrink-wrapped software. But the company cannot leave online advertising to Google, because consumers expect cloud services to be free, financed by ads. Hence Microsoft’s efforts to convince Yahoo!, another online giant, to merge its search and part of its advertising business with Microsoft’s. The deal, sealed in July, means that Microsoft will handle 10% of searches, against Google’s 83%, says Net Applications, a market-research firm. Given Microsoft’s history, it is hardly surprising that its treatment of intellectual property differs from Google’s. It gives other software firms the technical information they need to write programs that run on, say, Windows. Otherwise, it guards the underlying recipes of its software jealously. That said, the firm now supports many open standards and has even started using bits of open-source software. Internally, its R&D is somewhat more centralised than Google, at least in its online division: teams are bigger, work with more co-ordination and get more guidance from above. Apple, too, came from outside the cloud. Online services have always been a bit of an afterthought to what the company excels at: pricey but highly innovative bundles of hardware and software, of which the iPhone is only the latest example. Its online offerings—the iTunes store for music and video, the App Store for mobile applications, and MobileMe, a suite of online services—were all originally meant to drive demand for Apple’s hardware, but the firm’s interest in the cloud has grown. It is building a $1 billion data centre, possibly the world’s largest, in North Carolina. Still, Apple’s financial health thus far has depended mainly on selling hardware. Gadgets generate most of the firm’s revenue and profit. The firm does not reveal its revenue from services separately, but it is not to be sneezed at. Apple accounts for 69% of online music sales in America and 35% of all sales, more than Wal-Mart, reckons NPD Group, a market-research firm. Apple has so far forgone advertising revenue: its services are ad-free, but most of them require payment. Apple’s services are aimed at consumers, not businesses. Illustration by Ian Whadcock Apple is also the odd one out when it comes to openness. The word does not appear in its vocabulary. It does not allow any other hardware-maker to build machines using its operating system. It blocks iPhone applications it does not approve of from appearing in the App Store. Apple is also secretive about the way it conducts its internal R&D. Mr Jobs clearly calls most of the shots. But insiders say that there is a system of teams that pitch projects to him. How will this three-way contest play out? The last similar war was in the 1980s and early 1990s, when Apple, IBM and Microsoft fought for mastery of the PC. After much fire and smoke, Microsoft was victorious. Thanks to what economists call strong network effects, which allow winners to take almost all, Windows relegated its rival operating systems to mere sideshows, securing fat profits for its owner. Such a lopsided result is unlikely this time. One reason is that the economics of the cloud may be different from those of the PC. Network effects are unlikely to be as strong. Much of the cloud is based on open standards, which should make it easier to switch providers. To underline this point and to counter arguments that it is trying to lock users in, Google has set up the Data Liberation Front, a team of engineers whose job is to devise ways of allowing people to transfer their data. Unfortunately for Google, it is equally unclear whether the most open player will win, as Microsoft did last time. Many of Google’s new services have failed to take off. Having control over the software on the PC, smart-phones and other client devices, Microsoft can more easily create what it calls “seamless experiences”, for example by keeping a user’s address book and other personal information in step. Consumers may also prefer Apple’s tightly integrated, easy-to-use devices and services, despite the restrictions they impose. Lots of people buy iPods and download music from iTunes even though it is difficult to play the songs on other devices. Second, all three giants have reliable sources of cash to sustain them. Windows may be under attack, not least because of the boom in cheap netbooks, which has forced Microsoft to reduce prices, says Matt Rosoff of Directions on Microsoft, a newsletter. Even so, the operating system will keep on giving for some time. Microsoft has other strong divisions too, including business and server software. Google may lose some market share in search (and some advertising) to the combination of Bing and Yahoo!, but it is unlikely to be dethroned. Apple is still able to command premium prices, although others make hardware just as slick. Full war chests This means that all three will have ample resources to spend in the main areas of the fight: data centres, cloud services and the periphery. In data centres, Google is ahead, but Microsoft is catching up in size and sophistication. Apple has most to learn, but this, too, seems only a question of time and money. Just as much of hardware has become a commodity, knowing how to build huge data centres may not be a big competitive advantage for long. And data centres can get only so big before scale ceases to be an advantage. In services too, Google is ahead. But in Bing Microsoft may at last have created a worthy rival. The “decision engine”, to use the company’s term, does a good job of helping people choose a new camera or book a holiday. The big question is whether Apple can catch up. Its iTunes and App stores are successes, to be sure, but for now they are highly specialised. Its broader suite of cloud services, MobileMe, is nothing to write home about. At the cloud’s periphery, however, Apple has a strong position, thanks to the success of the iPhone. More than 30m have been sold so far, 5.2m in the quarter ending in June. Its share of the American market is pushing 14%. The App Store now boasts 85,000 applications and a total of more than 2 billion downloads. But recently Google’s Android has gained momentum. Several handset-makers have released smart-phones based on it, or will do so in the next few months. In early October it received the backing of Verizon, America’s biggest mobile operator. At the end of 2012, predicts Gartner, a market-research firm, Android phones will have a bigger share of the market than iPhones. Microsoft’s mobile strategy, though, is in disarray. This could prove to be a serious weakness, as people increasingly use mobile devices to reach online services. Plans to build smart-phones of its own seem to be going nowhere. Its music player, Zune, will remain just that, Steve Ballmer, Microsoft’s boss, said recently. Pink, a project to develop phones based on technology from Danger, a start-up acquired by Microsoft in 2008, is said to face death by cancellation—even more likely after Danger lost personal data belonging to tens of thousands of its customers earlier this month. And the latest version of Windows Mobile is no match for the iPhone and Android. Some handset-makers, including Motorola, have ditched the software. However, as with Bing, Microsoft has only recently been getting serious. It has put Windows Mobile under new management. Another version is expected by the end of 2010. Some analysts fancy Microsoft’s chances. According to iSuppli, a market-research firm, “Reports of Windows Mobile’s death are greatly exaggerated.” What could disrupt the three-sided struggle? The antitrust authorities, possibly. Now that Microsoft has made peace, the other two are likelier targets. Most observers imagine Google would be first, pointing to the hullabaloo caused by a settlement with book publishers that allows Google to create a vast digital library. But Apple may beat Google to the dock. The firm’s tight control over its technology is no problem in markets where its share is small (in PCs, it is a mere 7.2%). But in mobile applications and digital music distribution Apple is by far the market leader. America’s Federal Communications Commission is looking into its refusal to carry Google Voice, a telephony and messaging application for the iPhone. Its bar on rivals’ devices connecting to iTunes may cause trouble too. Tellingly, Apple recently hired a lawyer with antitrust experience: Bruce Sewell, the former general counsel of Intel, the world’s biggest chipmaker, which the European Commission wants to pay a fine of more than €1 billion ($1.5 billion) for abusing its dominance. Then there are market forces. One of the three may come up with something “insanely great”, an expression used at Apple in times past to describe the original Macintosh computer. Apple itself may do so with a tablet computer, rumoured to be ready for release as early as January. Others have built such a dream device, but none has yet overcome the problem of input: typing on a screen is difficult and handwriting recognition has never really worked. If Apple has cracked it, it could upend the PC industry, as the iPhone did the handset market. If the tablet is also a good substitute for paper, the publishing and newspaper industries could be in for more upheaval. The blogosphere is abuzz with rumours that Apple is talking to publishers about offering their content on its device. The final possibility is for another contender to emerge. The obvious candidates are Amazon, the world’s biggest online retailer, and Facebook, the leading social network. Amazon already has a cloud of sorts. It offers cloud computing services to other online firms and has developed the Kindle, an electronic reader, which is due to be available worldwide from October 19th. Facebook runs what is arguably the most successful cloud service, with more than 300m registered users. It provides a platform for people to communicate, share information and collaborate online—all things that businesses want to do, too. Only one thing seems sure about the future of the digital skies: the company or companies that dominate it will be American. European or Asian firms have yet to make much of an appearance in cloud computing. Nokia, the world’s biggest handset-maker, is trying to form a cloud with its set of online services called Ovi, but its efforts are still in their infancy. Governments outside America may harbour ambitious plans for state-funded clouds. They would do better simply to let their citizens make the most of the competition among the American colossi. Copyright © 2009 The Economist Newspaper and The Economist Group. All rights reserved.

Fast Company: When Great Design Becomes Its Own Language

October 14, 2009

Tags: Design, Duffy Point of View, Joe Duffy, Duffy & Partners

When Great Design Becomes Its Own Language

By Joe Duffy

I've never been very good at learning a language. I was terrible in high school Spanish and couldn't grasp it at all until I started traveling to Mexico and had to learn at least enough to get by or starve. I tried to take up French some years back when I was working on a project in Paris and could barely retain enough to order in a restaurant or ask for directions on the street. I've been going to China every year for the past ten and I can hardly get beyond "hi", "how are you", "goodbye" and "thanks." Learning languages and how to play the piano are my biggest failings in life. Oh well, there's still time, some day...

On the other hand, I am quite good when it comes to making up new languages--if I do say so myself. Every new brand design project we take on requires that our entire team master the art of visual and verbal linguistics. If you think of any successful brand, you will no doubt know what I mean. The brands that have been designed in the best possible ways have their own proprietary language that tells their story, sets them apart from all the brands they compete with, and connects them in a very meaningful way to their audience.

The basic elements of a brand's visual language--type, color, photographic/illustration style and layout also establish a filter for making decisions on how to best "speak" from the heart. If all the basics are in sync, it will make choices like story, set design, talent, wardrobe, physical space, dialog and tone of voice easy to make.

It's really no different than being true to yourself when you speak to others about how you really feel or most importantly, who you really are. It's also the key to creating the world that surrounds you in a one-off, true to you kind of way. You already know the real you, from where you came, what got you here and what you stand for. These basics are the filter for designing your own language that sets you apart from everyone else. We all know the people who are most successful at this, as well as the brands that have been designed in a unique and meaningful way.

I can think of no better example of combining these two examples of originality--brand/person--in one piece of brand communication than this now somewhat old positioning spot from Apple that coincided with Steve Jobs retaking the helm and Chiat\Day's brilliant new phase of work with him. For my money, there has never been any brand that has so beautifully mastered the art of creating its own distinct language in everything they do.

Article location:http://www.fastcompany.com/blog/joe-duffy/duffy-point-view/when-great-design-becomes-its-own-language