Tim Oren's Due Diligence

The Newspaper Biz: From 'Controlled Flight into Terrain' to 'Flat Spin'

Newspaper ad revenue got pounded again in Q3: Down 7.4% percent year on year. Analyst Henry Blodgett (yes, bubble veterans, he's still out there) pulls together the data to show it's not that bad, it's worse. Taking a time series of top line data back to the 90s, just at the start of the bubble, and then adjusting for inflation gives a horrendous picture:

Even without the inflation hit, that makes the modest industry recovery after the twin hit of the bubble bust and 9/11 look like a last gasp, before plummeting out of the sky. That kind of accelerating slope is every VC's dream - if it were in the other direction. If you've never seen the 'reverse S curve' when a former innovation is abandoned by the population, you're looking at one here.

Blodgett sums up cause and effect:

...newspapers did a brilliant job of ramping their sales smoothly throughout the 1990s by boosting ad rates at will. Those remarkably consistent and predictable sales gains were derailed by the arrival of Internet and other disruptive, new technologies that give readers and advertisers unprecedented media alternatives. Seemingly dumbfounded by the arrival of serious competition for their audiences and advertising revenues, newspapers have been struggling for more than a decade, with meager success, to regain their relevance and economic vitality.

Having grown up in a General Motors family during the 60's and early 70's, this sounds familiar. Arrogance on the part of both management and labor, a belief the customers have no alternative but to keep paying increasing costs and accept the (low) quality on offer, followed by the arrival of competition to feast on the disgruntled customer base. But at least GM had this: Everyone kept driving, the market didn't vanish. But it's no longer clear that the major metro broadsheet fills a need for anyone but its incumbent interests.

Update: Editor and Publisher has more details and they don't make things look prettier. The 7.4% cited above is inclusive of newspapers' online ad revenue. Take that out and the drop in print only was 9% year-on-year. Online ads grew 21.1% YOY, but their growth to $773 million was swamped out by the losses in print, which was at $10.1 billion in Q3. I'm hardly the first to observe that the outcome is likely to be a much smaller 'newspaper' segment post the transition to the Internet.

All ad revenue categories suffered losses, but it's the classifieds that are just getting pounded. The overall category declined 17% YOY, with autos down 17.7%, recruiting 19.7% and downturn-plagued real estate off a stunning 24.4%. eBay, craigslist, and all the automotive sites doing serious damage, and there's no apparent way to reverse the trend. Disaggregation is a done deal.

Taking on Hollywood, The Silicon Valley Way

Marc Andreessen has taken the occasion of the Hollywood writers' strike to meditate on the folly of the entertainment industry, and the odds for revamping it in the image of Silicon Valley. When he says 'entertainment' he's really talking about the flix, both the big screen and the small screen. (For today we'll ignore the recorded music industry, over there in the corner being nibbled to death by ducks.)

If you're not in the Valley scene, the provocative nature of Marc's assertion that we can rebuild Hollywood may not be clear. In normal times, the Valley (that nebulous aggregate of entrepreneurs, funders, engineers and management) hates 'content' of all kinds. Pick your reason: We're notoriously bad at forecasting consumer tastes. We don't have the experience base. We've lost money every time we tried it. It just feels wrong. They're all partially correct over time, and collectively they mean that anyone touting the current generation's version of 'Sillywood' is going to suffer with a lot of people rolling their eyes behind his or her back.

And yet. We are all about disruption, and it's in the air. The advent of YouTube and its clones heralds that the 'visual arts' are within reach of assault, just as the coming of MP3 did for the music biz. And besides, those folks down South are more or less leaning over with a sign on their backs that says 'Kick Me'. So maybe it's time to risk the eye-rolling and have a go.

Roaming Eye: 11/14/07

If you're at all interested in new media, business models for same, or venture investing - if not, why are you reading this? - check out Marc Andreessen's post on rebuilding the Hollywood business model along Silicon Valley lines. It deserves a whole post in itself,but for now RTWT.

Now that the 2007 installment of the Urban Challenge is over, my new favorite DARPA-funded project is CALO. This is out of DARPA/IPTO's Personalized Assistant that Learns (PAL) program, so naturally just about every surviving AI lab is wrapped up in it. (Though a lot of 'AI' seems to look more and more like advanced IR (information retrieval) these days - vector models and bottoms-up clustering, and the like. Just sayin....)

Anyway, here's a big PDF'ed slide deck on the project. Among other outputs, there's an open-sourced (Win XP only) 'cognitive desktop' called IRIS. There's a long list of publications. Amongst them is this report on reverse engineering an individual's information and social context by datamining their workstation, particularly including their e-mail archive. After creating initial clusters based on a fairly standard vector representation, it repartitions them based on a social network analysis of the e-mail traffic. Another example of what I've called First Person SNA. (Hat tip to Tom Gruber, who organized the SDForum session where I saw this.)

From the Innumeracy Department, Aviation Week takes down CBS' smear on veteran's suicide rates. That probably took all of 30 minutes in the vital statistics files. You'd think the 'fact checkers' at CBS could have done that. Oh, yeah...

Remembrance Day: Why We Fight

Austin Bay has written a classic of the war at the frontiers, who fights it, and why. RTWT.

BlogWorld: A Mouse That Roars

Marc 'Armed Liberal' Danziger and Glenn Reynolds profess themselves pleased by the inaugural BlogWorld Expo, last week in Vegas. I had a more mixed reaction, perhaps based on my jaded appetites: I've been going to shows back to the old COMDEX in its heyday and the West Coast Computer Faires. And I've been to a fair number of 'first time' shows, due to a career split between developing and investing in new technologies - CD-ROMs, Atari STs, HyperCard, 'hypertext', WiFi wireless data, and on it goes. Since a first time show by definition addresses a market that is only partially defined, and due to its low cost attracts a fair number of out-and-out hucksters, it's often hard to extract a consistent theme, or to forecast the survival of the show and market.

BlogWorld certainly fits the pattern. In no particular order, there were exhibitors representing:

• Aggregators: directories, topical specialists, horizontal blog portals, branded content networks, audio and video


• Tool vendors, from basic text blogs to sound and video and DIY blog-to-book


• Far too many blog advertising networks and gimmicks


• Far too many 'feature level' technologies


• Platform providers: Yahoo, Windows Live, AOL


• Old media about new media: books, magazines, movies


• Consultancies


• Corporate and other PR presences

Many of these have the hallmarks of first time exhibitors: minimal signage, no clear message, no attempt to qualify the people that came past the booth. You can easily guess that half of them won't be back next time.

But that cacophony is normal at this stage. What matters is whether the underlying market is viable, and whether the show turns out to be a nexus bringing together potential partners and customers and vendors. That's a more relevant measure than the fact the show took up no more than one third of one of Vegas' exhibit halls, and the attendees at the sessions rattled around in the large meeting rooms. I had only a limited sample, but at least some attendees thought there was value in the connections made on the floor, in the hallways, and at the parties.

And yet, there's a difference between this show and many of the other first-timers. If you compare the still-minimalist 'large' BlogWorld presences to what you'd find at even a specialty technology show (e.g., RSA), you'd be ignoring the reality: This is an upstart sector that has discomfited the traditional media - stolen audience, discredited stories and brands, and credibly threatens to build completely new distribution networks. It has meaningfully affected everything from the value of major corporate brands to national military strategies and political campaigns. How many wannabe shows draw official representation from both the White House and Dept. of Defense communications staffs?

So, lesson one: This is a crowd that punches way above its weight. You can't judge it by the metrics of an established or even emergent technology market.

Perhaps a better comparison would be a Cable Show. There you get juxtapositions like the Playboy Channel (displaying its wares, shall we say), located right across from hard core tech vendors of video servers and optical fiber. BlogWorld was a small, low rent version of that melange of everything from content to infrastructure. You had your cheese cake, your celebrities, your live shows from the floor, as well as the techie bits. (Credit for first two images: Glenn Reynolds)

So here's my second lesson: I have seen the future of media, and it is low rent. Those big booths at the Cable Show and other mass media conclaves are made possible by high margins, which are in turn enabled by a stranglehold over distribution. What I saw in Vegas is competing effectively for part of that audience, distribution and hence margins. BlogWorld will never really look like a Cable Show, and the latter will never go away. But everything about the old media, from brands to margins and audience is at threat of being corroded by the participants in this little show.

Update: A Hollywood insider reaches similar conclusions, coming from a completely different direction. Via Mickey Kaus.

Off to Blog World

I'll be off at Blog World Expo in Vegas for the next two days. Reports as events warrant. Sometimes you just need to meet people f2f.

Ooops - Maybe We Need Autonomous Bots For Ships

A Korean container ship has banged into the Bay Bridge. No significant damage to the bridge, but the ship suffered a gash that cut into a fuel tank, dumping 140 gallons of bunker oil into the Bay. That's less than three barrels, fortunately, but the slick drifted over to SF waterfront and a cleanup is underway. That initial report was inaccurate. The actual total dumped was 58,000 - over 1,000 barrels - so we're talking major cleanup.

No word on specific cause, but there was heavy fog in the Bay Area this morning. Apparently a harbor pilot was at the helm when the collision occurred, so the ship owners are presumably clear of blame on this.

Urban Challenge 2007: Reflections

NASCAR For Nerds?

Looking at the crowds at the 2007 Urban Challenge, you'd be forgiven for wondering if DARPA has touched off another of the famous side-effects from its research projects.

The event was open and free to the public. While the teams and DARPA staff were present for the duration, the spectators came and went through the day, making it hard to judge the crowd. But I'd say at least a third and maybe half of the attendees were fans. Some seemed to have found a new kind of southern California entertainment.

In reality, the goals of DARPA and the tastes of race fans are in conflict. Safety and reliability aren't usually compatible with speed and risk. (There could be a future for autonomous bot races on the tube, however. Rumor had it that the presence of Discovery Channel talent indicated a forthcoming special or mini-series on the Urban Challenge.)

The Grand Challenges are like NASCAR in some important respects, however.

Not For Amateurs Anymore

Back in the day, 'stock cars' could be built by shade tree mechanics (and may have spent non-race nights running moonshine). Those days are long gone, and NASCAR is all business with lots of sponsorship money at stake now. That's happening here as well.

Of the teams that reached the finals of the Urban Challenge, only one - UCF - did so without major corporate sponsorship. The other shoestring efforts that were admitted to the competition fell out quickly during the qualifications.

It's a pattern common to technology. When a new area of research or products is broken open, the time and expense required to reach the 'edge' are relatively low. Those who date to the beginning of the microcomputer revolution will remember when anyone with a source of 8008 or 6500 chips and a modicum of funds could knock out a PC wannabe. A software 'product' took a few man-months. What we were actually producing were salable prototypes.

The Urban Challenge vehicles are also prototypes, and most teams will readily admit it. Sensors protrude, need to be cleaned periodically, and flake out from RFI, sun glare and dust. Server room rack mounts or Apple's consumer machines crammed into cargo areas are hardly milspec. The uniformed armed forces attendees on Friday were invariably polite, but I'm sure a number of them later had a good laugh considering how these machines would bear up in the heat, vibration and dirt of the sand box.

Miniaturization, environmental hardening, integration, testing and on and on. All of these are capital intensive, are required before seeing a return on the investment, and are beyond the charter or means of academic researchers and do-it-yourself teams. The barrier to entry is going up rapidly.

Urban Challenge: A Day At The Races

I'll start this with a big tip of the hat to DARPA and its director, Dr. Tony Tether (who has one of the world's best jobs). Not only do they push the bleeding edge and come up with clever ways to engage the research community in their endeavors, but they run well-managed events with a flair for showmanship that belies their status as a government and military agency. As an example of the latter, they had arranged for the Urban Challenge webcast and on-site video to be co-hosted by Jamie Hyneman and Grant Imahara of cable's Myth Busters, the current favorite show of the techie crowd.

They also have the guts to invite in the world press and the general public while trying something new to the world: Turning multiple autonomous vehicles loose on city streets at the same time, interspersed with human drivers. As Tether said at the start of the program, "If anyone tells you he knows what's going to happen, he's lying."

Since that test could likely take every bit of a short November day, the teams, staff and press assembled for their briefings at a chilly and dark 0600.

The Robots at Dawn

It was a day for old rivals to face off again. The Carnegie-Mellon 'Red Team' had been narrowly defeated in the 2005 Grand Challenge desert race, and were back as Tartan Racing, with their bot 'Boss'.

The victors of 2005, Stanford Racing, were also back with 'Junior', based on a Volkswagen Passat.

Urban Challenge Rushes

Lots more to follow, but here's the quick summary:

In a remarkable achievement, six of eleven bots that started finished the entire course.

Stanford's Junior crossed the finish line first, followed by CMU's Boss and Virginia Tech's Odin. That does NOT mean that Stanford is the winner, as the finish times need to be adjusted for staggered starts and stoppage time on the course. Also the total times will be further adjusted for traffic violation 'tickets' issued for moving and other violations on the course. Any of these three teams could be the ultimate winner.

We won't know until 10AM tomorrow who won, and whether DARPA considers the race to have been 'clean' enough to award the big prizes.

'Little Ben', and MIT and Cornell also finished the course, but well out of the running. The day featured bot traffic jams, the world's first bot vs. bot collision between MIT and Cornell, and the attempt of the Terramax robot truck to take out the old air base PX.

More as soon as I get a beer and download the camera.

Update 11/4/07: Team Tartan / CMU's 'Boss' was declared the winner based on elapsed time, with Stanford second and VT third. None of the three leaders committed major errors, so the race was decided on time.