Tim Oren's Due Diligence

The Roving Eye: FB Noms Yahoo, Technorati Repositions, Stupid Crypto Tricks

Coincidence or enemy action? Two stories with the same protagonists made it through the filter this holiday weekend. In one, Facebook grabs Old Friend Arturo Bejar from Yahoo. In addition to being a digital photography and racing nut, Arturo has been the 'Chief Paranoid Yahoo' for a number of years. That's the site CISO in any other organization. There are less than ten guys in the country with his level of experience in not only securing a diverse site under continuous attack, but dealing with the organizational and motivational issues of being security conscious. Arturo will be director of Site Integrity at Facebook, reporting to VP Engineering Mike Schroepfer. Considering all the issues FB has to hand in trading off security, user acceptance, and an actual revenue model, he will find plenty to keep him amused.

The second blip was a mention from a friend that Facebook has been gaining popularity with women over 30. Not only that, but a small amount of digging finds that women over 55 are joining quickly, and indeed that senior citizens on FB now outnumber the high-schoolers commonly thought to be the main users. There's no explicit mention of Yahoo in any of those stories, but if you happen to know that Yahoo's core demographic has shifted to older women, you can make the correlation: Yahoo's continued failure at social media is becoming Facebook's gain.

There's no blog search niche, after all. A while back I was scratching my head about Technorati:

...a nice feature when the Technorati API service is running and stable, which is not always the case. (It's evidently not part of their core business model, whatever that may be.)

Evidently their funders were wondering, too. Jeff Nolan calls their repositioning:

It’s easy to have missed what Technorati has been up to but CEO Richard Jalichandra has done an impressive job building a vertical content network and advertising network. In the process he has extricated himself from being in the competitive crosshairs of Google...

Good spot on the shifted business model, which should come as no surprise to bloggers who have noticed the erratic maintenance and performance at Technorati of late. Hmmm, shifting from search to content aggregation. Haven't I heard that somewhere else recently?

From the 'WIll They Never Learn' Dept. It's not enough to try to make digital goods scarce, now some geniuses want to make it possible for your copy to be stolen, not just copied in turn. This 'advance' is called Digital Personal Property. I suppose I should admire the ingenuity going into this, but instead I'm filing it under 'Dumb Research'. It's not that there are burning, unsolved technical issues in the domain, it's that the customers don't want it. Even white haired grannies have figured out that digital goods are not inherently scarce, let alone the savvy younger generations that are the marketing targets for most of these goods. From their point of view, DPP - like DRM before it - is a way of subtracting value.

Flying on water. Eye candy of the day - the French trimaran foil l'Hydroptère:

(Hat tip: Ole Eichhorn. This is bloody amazing. Can't wait to see what happens as the architectural implications of this design work their way into other classes of sailing vessels.

The Roving Eye: Correct Diagnosis, Cussing Is Good For You, Artifacts Of The Week

DRM moribund. Nearly five years ago, I wrote about digital rights management as a (negative) business diagnostic. It always creates user disvalue, so your only analytical task is to figure out whose business model is in the process of failing. Now it seems that the RIAA finally gets it, too. Now perhaps they can spend some time figuring out how they are going to build something that will actually add value. Not that I was feeling bad about it to begin with, but I regard this as final vindication for all of the so-clever DRM business plans that I've consigned to the circular file or bit bucket over the years.

A wart on Jupiter. How cool is this? An amateur Aussie astronomer noticed a new black spot on Jupiter over the weekend, which may have been caused by a meteor or comet impact (like Shoemaker-Levy in 1994) that escaped other's notice. More discussion here. Observations and analysis still coming in. Update: Confirmed.

Construction workers and mechanics have always known this. But now some scientists think they've proved it: Expletives reduce pain. The English researcher says: ""I would advise people, if they hurt themselves, to swear." Having pulled a back muscle during a volunteer trail build project this weekend, I should be cussing the proverbial blue streak, but unfortunately the positive effects seem to be transient.

Not Photoshop. From the Pink Tentacle blog, Japanese rice paddy art. Apparently by planting rice with variously colored foliage. Some of these should show up on Google Earth. Coords, anyone? And in case you need some recon capability to check it out, here's the Blackbird flying again, sort of. Awesome job!

The Roving Eye: Email Hypoxia, Content Hubris, DARPA For The Wounded

Google Mail Hacks. Not only is GMail free, but there are hidden features that make it more valuable. Your account can actually be reached two different domains, and you can tweak the address and still have it delivered. These tricks can further improve spam filitering, or give you a handle on content organization or figuring out the 'social spread' of your contact information.

Is Email Causing Hypoxia? Old Friend Linda Stone notices she holds her breath while the e-mail is downloading and takes off from there on the potential physiological impacts of electronic communications. There's a nice discussion of various breath control disciplines in the comments. I'm pretty sure I don't do this - having started with e-mail back in the '80s with a stylin' 300 baud modem, I'd probably have fallen over unconscious long since. And considering some of the messages that arrive in e-mail, one might want to consider disciplines like tactical breathing along with the fluffy bunny versions. HT: Clive Thompson.

Why Is It That Content And Hubris Go Together? Jeff Nolan catches the video-on-demand providers repeating the RIAA's mistake - crippling the customer's experience. With more and more entertainment options available every year, self-sabotaging a competitive position makes no sense. Maybe the ABC folks should call up Sony and ask how it's been working for them?

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.

Intellectual Property Run Amok

The RIAA? The MPAA? No, believe it or not, it's the military hardware vendors that are about to casually destroy an industry:

For over half a century, kits have been sold that enable military history buffs to assemble scale models of military ships, aircraft and vehicles. But that era is coming to an end, as the manufacturers of the original equipment, especially aircraft, are demanding high royalties (up to $40 per kit) from the kit makers. Since most of these kits sell in small quantities (10-20,000) and are priced at $15-30 (for plastic kits, wooden ones are about twice as much), tacking on the royalty just prices the kit out of the market. Popular land vehicles, which would sell a lot of kits, are missing as well. The new U.S. Army Stryker armored vehicles are not available because of royalty requirements. Even World War II aircraft kits are being hit with royalty demands. This move grew out of the idea that corporations should maximize "intellectual property" income. Models of a companys products are considered the intellectual property of the owner of a vehicle design. In the past, the model kits were considered free advertising, and good public relations, by the defense firms. The kit manufacturers comprise a small industry, and the aircraft manufacturers will probably not even notice if they put many of the model vendors out of business. Some model companies will survive by only selling models of older (like World War I), or otherwise "no royalty" items (Nazi German aircraft) and ships. But the aircraft were always the bulk of sales, and their loss will cripple many of the kit makers.

From the invaluable Strategy Page. Too bad about the kids who'll miss their toys, or the folks tossed out of work, but at least those fulminating about war toys will be happy. Now, just who was it paid for the designs these guys think they own, anyway?

Update: Chuqui writes to point out this issue has existed with model trains for some time. While agreeing that it's a dopey move to alienate your biggest fans, it's not quite the same. The RR trademarks really are private property; I find it hard to argue the same for designs paid for by US taxpayers, not to mention hallowed by some of their blood.

Well, this will all become academic when 3D printers reach consumer price points. A generation of kids will miss the joys of polystyrene model cement, but instead get a quick education in open sourced CAD files.

DRM as Business Diagnostic

Mike over at Techdirt cites a rant about the effects of digital rights management (DRM) at The Inquirer and opines "...these systems do absolutely nothing for end users.... It's a shortsighted plan, aimed at holding on to an obsolete business model."

I agree, and it's interesting that he puts it that way. This past weekend I was doing a short consulting gig to help out a friend, and the circumstances forced me to clearly articulate some personal rules of thumb regarding DRM - diagnostics that I had been enacting for some time without a verbal description, as sometimes happens.

First, a definition: It's necessary to distinguish between two goals that can be implemented with the technology of DRM. Permissive DRM used for auditing purposes can be reasonably innocuous to the user and could enable some interesting value chain models. I'm talking about restrictive DRM, which Mike succinctly calls 'copy protection'. To me that conjures up memories of funky floppy disk formatting tricks from the Apple II and IBM PC days, so I'll use the acronym, with the latter meaning. Here's my second pass attempt to formulate DRM as Business Diagnostic.

• Copy protection DRM always destroys end user value, in both convenience and robustness. When you see DRM in a business plan or analysis, it is always there to benefit someone other than the end user. Find out who, it will indicate where power lies in a content value chain.


• The mere presence of DRM indicates a failure to deliver end user value. If the information object were to lose value when extracted from the bundle or service from which it was derived, DRM would not be felt necessary. Therefore the presence of DRM suggests a vendor that is behind the curve, failing to find a new value to deliver as their chokepoint disappears in the digital world.


• DRM almost always means there is trouble afoot for aggregators ('infomediaries'). If it's an aggregator inserting the DRM, their value added is in question. If it's information originators mandating DRM, then they feel they can damage the aggregator's value with impunity, and will likely try to drive end users' attention to themselves.

Examples are easy to find in consumer level media. It's my experience that these diagnostics are just as relevant in vertical or industrial information situations. While they originated from venture capital, they ought to be relevant in any analysis of information value chains.

The Charlie Demerjian article that inspired this post consists of a number of very specific examples (with invective) of the disvalues of the DRM in consumer media. But his subhead nails the conclusion: "It's not good for capitalism." Taking value from the customer seldom is, in the long run.

Update: TVHarmony blog links with an example.

This Land is Your Song - or - We Can Fact-Check Your Ass

In a hilarious and poetically just turnaround, Ludlow Music - which threatened legal action against the creators of the hilarious "This Land is Your Land" election year parody that's been making the rounds - has had the invalidity of its claimed copyright over Woody Guthrie classic demonstrated by EFF and other researchers. So now they not only lose against the JibJab guys, but I'm sure they will soon hear from the attorneys of anyone who has paid licensing fees of late. I believe the appropriate word is 'misrepresentation'.

Hat tip: Cory

Elephant Twitches, Out of Rhythm

Mike at Techdirt describes a fumbling attempt by Warner to engage with music blogs. Good news: Someone is awake there. Bad news: Clumsy tactics that don't relate to any visible market strategy.

"Electronic termites are chomping out the support beams of our music culture"

From the East Bay regional paper Contra Costa Times comes a well written and provocative take on the MP3 scene, by music critic Tony Hicks. It starts out with a short but clear summary of the technology and impacts so far, a good primer for any readers who are still in the CD world. Things heat up when he turns to an interview of several music industry experts, culminating in the following exchange:

Q: Record companies are acknowledging they didn't react to digital music quickly enough. Can they survive?

[Tracks magazine editor Alan] Light: They're in a corner. For too long, their approach was how to stop (online music), rather than how to exploit it. The record industry is going to look very different five years from now. What's tricky about (digital music) is, if the labels work together, they're accused of collusion. But they need to work together. Big labels will continue making big singles for the radio; like in Hollywood, you need the big studios to do the big Tom Cruise movies. But most of the interesting stuff comes from independent labels.

[Rochester Institute of Technology professor Stephen] Jacobs: It's evolve or die. Will the business adapt? No, it's unlikely. The business model has been beyond corrupt for years, perhaps just one moral step ahead of sharecroppers. Young acts sign away their rights, the royalties are bad, (people) get cheated out of their publishing. Digital delivery is doing extremely damaging things to the old business models. It'll be like Kodak losing 80 to 90 percent of their profits on plastic film (since the advent of digital cameras). The record companies had a choice to be proactive a few years ago, or hang on to their death-hold on the business.

There's a lot more, and all on point for those following the thread of digital music postings here by Kevin Laws and myself. RTWT.

Hat tip: Casper Bass.

TiVo: The Canary in the Coal Mine

The MPAA is working to block a TiVo feature allowing customers to easily move video among platforms. This is a clear indication that Kevin Law's forecast that the MPAA will follow the RIAA straight into meltdown is accurate.

In the music domain, the iPod and iTunes show what could have been done with a usable, legitimate but minimalist protection scheme, introduced early. How many billions have the labels left on the table by going to war with their customers?

Sadly, the TiVo affair shows the video content business on the same road. Here's a chance to add some value for appreciative customers, and get a minimalist scheme of protection out there before things like BitTorrent and DivX get large audiences. Instead, we hear the crackle of legal and lobbying small arms fire preceding another war with customers.

Dumb, but not surprising. I've long had a source - who will remain forever nameless - close to the ongoing movie, CE and computer industry negotiations regarding content protection. This person's characterization of the content side can be reasonably summarized as 'lawyers all the way down.' Risk aversion and contract nitpicking have that industry focused on avoiding slippage, while the audience begins to eye the exits. Sic transit gloria Hollywood.