Archive for February, 2007

Trackbacks – Keep the Discussion Going

Wednesday, February 28th, 2007

Internet enthusiasts and non-techies alike can appreciate the value of conversation and the ‘two-way dialogue’ provided by the blogosphere. Unlike the push model of traditional media companies where articles and information are disseminated from the top-down, there is a give-and-take in the blog world. Comments are the obvious example. A given reader can quickly and easily provide his/her opinion on a blog post. What are often overlooked in the blogosphere are trackbacks. This is unfortunate as I believe trackbacks are one of the most important parts of the conversation.

There are certain levels of user participation by readers of a blog. Deeper involvement occurs over a period of time. Firstly, the reader must discover a given blog, whether it be via a back-link, search engine result, or blog roll, for example. Next, the reader will browse the posts and articles to determine if the content is both meaningful and useful to them. If so, the RSS feed may be added to their reader. At this point, the reader may comment on a personally stimulating post, or may refrain until a later time. User-participation and commenting are two of the most sought-after actions by bloggers.

Commenting isn’t the only way a reader can get ahold of a blogger. Some bloggers encourage e-mail correspondance or communication over an instant messenging client. I highly encourage both.

Finally, we come to trackbacks – probably one of the most useful, underrated aspects of blogging.

As defined by Wikipedia, trackbacks (or pingbacks) are “methods for Web authors to request notification when somebody links to one of their documents”. In the blogosphere, a trackback appears below a blog post when another blogger has linked to that specific post. In other words, the trackback is coming from a blogger who has additional information to provide or an alternative view, with respect to the original post.

These are what keep the discussion going in the blog world. If every blog post had a trackback, the conversation would be perpetual. A personal goal of mine is to have at least one trackback per post at some point in time. This would ensure all conversations I start or continue live on.

Although comments are nice, trackbacks are the ultimate form of participation. Comments are more pervasive and widespread, as they aren’t labour-intensive or overly time-consuming. But they do provide an opinion or perspective on the reader’s behalf. Trackbacks, on the other hand, are much more labour-intensive and time-consuming. If a blogger provides such a linkback, he/she has not only gone to a lot of trouble in terms of evaluating the topic of the post itself, but also formulating a blog post of their own. This is not only flattering in some ways, but also very productive for all blog enthusiasts – authors and readers alike. It provides a deeper view and insight into the topic at hand.

For this very reason, trackbacks should be given more light, if not the spotlight. They are both powerful and meaningful. They are the black sheep of the blogosphere.

Open Vs. Closed Communities

Saturday, February 24th, 2007

Most agree that the more users you have, the better. Interestingly enough, this is not always the case. Another misconception arises around pricing. Most would like to offer their services free of charge at all cost (no pun intended). Once again, this is not always the best option. Often times, a smaller, closed, paid community may offer more advantages than a larger open community.

Nowadays, it’s almost unheard of to charge for a service. Google AdSense is a staple. Advertising is considered the main revenue stream for most start-ups. This eliminates the commitment and barriers to entry for new users. By alienating potential users with a fee, the company may be bypassing a high percentage of their target market.

However, there is a quasi-hybrid version. Free trial periods eliminate the financial burden and provide a glimpse into the service. Forcing the ‘blind jump’ upon new visitors is not only dangerous, but unacceptable in this day and age.

Many services offer a free, ad-supported version or a premium, ad-free subscription with additional features. For the most part, users are satisfied with with the former option. But power users and those annoyed by ads may pay the usually small premium. But what do paid, closed networks offer that is often overlooked?

Quality.

By limiting a network to paying customers, the service is able to elude (for the most part) spammers and illegitimate users, as well as uneducated and inactive users. If a credit card is being billed monthly, you’ll quickly find out who your power users are.

Implementing a paid system should in theory lead to a higher quality network, which in turn should lead to a more respected, credible name. This branding strategy further solidifies the outward facing image in terms of quality.

I’m not saying that all networks should be closed, or multi-level, or even free for that matter. Each individual site or community must determine which path is most appropriate. If a paid option is considered, there must be a significant value proposition for the user. The service must provide differentiation and a strong bond with the user, otherwise they are prone to switch to a competitor or simply drop the service altogether. If a user can’t live without your service or depends upon it very highly, you’re on the right track. It’s quite possible that the user is willing to pay.

New companies must decide which revenue model to adopt. Obviously, a case-by-case analysis must be performed. But the important thing for new companies to understand is that it is okay to charge if you feel the service merits the fee. Not all companies can and should be monetized by Google.

Satellite Radio Deal = Sirius Regulatory Fiasco

Wednesday, February 21st, 2007

XM Satellite Radio and Sirius Satellite Radio merger logoAfter numerous months of speculation, satellite radio titans XM and Sirius have agreed to tie the knot. This new media monolith has not yet announced a new name, although Xirius might be an interesting thought. The marriage creates an entity with a market cap of $13 billion (including $1.6 billion in debt) and a subscriber base of over 13 million. Current Sirius CEO, Mel Karmazin, will remain CEO of the new company, while XM chairman Gary Parsons will retain his position after the merger as well. Current XM CEO, Hugh Panero, is expected to step down after the deal is finalized. This is probably a good call as he has received bad press as of late, amid allegations he provided positive outlook knowing full well the targets would not be met. This doesn’t sound all that bad until you hear that he also sold millions of dollars worth of shares during that time.

As you can imagine, the merger is expected to create economies of scale, hence cost savings. I would expect big lay-offs to come. The most important number for both companies up until this point has been the user acquisition cost. This deal is expected to cut that expense significantly. Furthermore, the union will produce a greater variety of subscriber products and flexibility within packages.

As both players accumulate bigger losses on their balance sheets, it was only a matter of time before they banded together to do what had to be done. Some call it a last ditch attempt. The companies call is a strategic move.

But wait. Stop the press. Will the deal actually go through? I HIGHLY doubt it.

The satellite radio industry is quite interesting. Why? Because they’re are only two players. Forget market share or niches. There are only two players in the industry, period. What other special-case industries can lay the same claim. Very few… only the soft drink and airline manufacturing industries off the top of my head.

Now if Pepsi and Coca-Cola were to merge, I’m sure all hell would break lose. Conspiracies theories would run amok and regulators would absolutely not let such a deal pass. The same is true of Boeing and Airbus. Collaboration as such eliminates competition completely and provides the opportunity for inflated pricing, as no other alternatives. Just take a look at Microsoft Windows…

To say the two companies face regulatory hurdles is the understatement of the year. In order for the merger to pass, FCC chairman Kevin Martin says “the companies would need to demonstrate that consumers would clearly be better off with both more choice and affordable prices.” Hmmm… it could happen. But I bet it would unfold like any government candidate platform. Short-term lies to attain long-term gains.

In any case, knowing the state of ethics in corporate America nowadays, the merger will pass with little or no scrutiny. 

Pandora – Revolutionary Music Discovery Tool

Tuesday, February 20th, 2007

Pandora logoI had heard a lot of hype and fuss surrounding Pandora, but I hadn’t taken the opportunity to check it out in detail. I had simply browsed the homepage a couple times and absorbed the gist of the system. But a couple weeks ago, a suggestion by a friend to delve further into the service provided me with a whole new appreciation for the system and music…

A typical scenario works like this: I like artist A, but I’ve listened to most of their music. In other words, I want to find new artists with a similar music style. This is epitome of a Pandora user.

Upon visiting the site, you are prompted to type in your favourite artist or song. The system then creates a ‘station’ tailored to your music preferences and tastes. Although not perfect, it does a pretty damn good job at discovering new music that you can appreciate.

Pandora was created by the Music Genome Project. Started in early 2000, “a group of musicians and music-loving technologists came together with the idea of creating the most comprehensive analysis of music ever.”

The founders go on to say:

“Together we set out to capture the essence of music at the most fundamental level. We ended up assembling literally hundreds of musical attributes or “genes” into a very large Music Genome. Taken together these genes capture the unique and magical musical identity of a song – everything from melody, harmony and rhythm, to instrumentation, orchestration, arrangement, lyrics, and of course the rich world of singing and vocal harmony. It’s not about what a band looks like, or what genre they supposedly belong to, or about who buys their records – it’s about what each individual song sounds like.

Over the past 6 years, we’ve carefully listened to the songs of over 10,000 different artists – ranging from popular to obscure – and analyzed the musical qualities of each song one attribute at a time. This work continues each and every day as we endeavor to include all the great new stuff coming out of studios, clubs and garages around the world.”

In other words, the system gives you a taste of music, similar to the style you currently enjoy. You are able to discover new artists and further expand your listening repertoire. Powerful stuff.

In my case, I created ‘stations’ for the following artist: Tiesto, ATB, BT. Note that I am a big techno/trance fan, so these DJs fit the bill nicely. Subsequently, I had created three unique listening experiences, which enabled me to discover new trance DJs and tracks with little or no effort. In addition, I went on to give most of the suggested tracks a ‘thumbs up’ or ‘thumbs down’ dependent on whether I enjoyed the tune. This paved the way for deeper system analysis and eliminated undesired tracks from being replayed on my station.

This business model is completely new to me, but very refreshing. It ressembles nothing I have seen before… which leads me to the financial model. Pandora pays royalties to all artists whose music gets played, albeit probably not a large sum though. This is for a specific reason and caveats are abound. For one, stations are assorted and random, meaning there is no order to the tracks being played (so you never know what comes next). Secondly, you cannot play a certain track or artist on demand. You can tailor a station to their music type and they will eventually show up, but specific requests are prohibited. Finally, you are only allowed to skip 6 tracks during the course of an hour. All of these nit-picky details allow the company the ability to stream the top artists’ music at a fraction of the cost without being sued.

Pandora achieves revenues by placing ads beside the player. There is a subscription service at a cost of $36/year or $12/3 months. This will eliminate the ads and support additional features. Furthermore, the company also generates revenues via affiliate music sales through Amazon and iTunes.

Check the Pandora FAQ for the answers to the myriad of questions you may still be asking (I know I did not answer them all). And as the system and model is so unique, I found myself combing the FAQ for answers as well.

Last but not least, the interface is so incredibly simple to use. All in all, the simple design masks the complexity of the system. I think that’s the best way to put it.

The 37signals Way

Friday, February 16th, 2007

37signals logoLet me tell you about a small Chicago company named 37signals. Not only have they created some of the most functional apps on the net (Backpack, Campfire, Basecamp, Ta-da List, Writeboard), but they’ve also managed to produce one of the most successful tech job boards and a corporate blog. Oh, did I mention they also pioneered Ruby On Rails, a highly popular, widely-touted, open-source web-application framework?

Why are they so successful at doing so many different things? It’s simple. The answer is… they’re simple.

They run a lean operation, both in terms of manpower and product specifications. This is not to say the products lack functionality or sophistication. It simply states that the interfaces and designs are clean, and that only the necessary features are included – nothing over the top or extraneous.

So how come no-one else is taking a similar approaching to web applications? Beats me…

Their simple, easy-to-use apps are setting the industry standard in an industry that doesn’t exist. Obviously, other companies are pitching their project management, collaborative writing, real-time chat, and organizational tools, but none seem to be competing on the same level. Or maybe 37signals has simply created a niche and taken 100% ownership of it.

Moving along…

Their revenue model is ingenious. They actually CHARGE people. Unlike many web 2.0 outfits that are monetized via Google AdSense and run-of-the-mill ads, 37signals actually charges users once they’ve tried the product and determined that the basic feature set is insufficient. In other words, no financial commitment is made until the user determines that the given product has a basic level of functionality, but that the premium version is the optimal choice. Only then, does 37signals achieve a transaction. Surprisingly, people WILL pay for a good product – even for software, in this day and age.

As I have said, I am still unsure as to why another company hasn’t come along and tried to accomplish the same thing as 37signals. Eventually, others will clue in. But in the short term, I think there is a very real opportunity for a small, lean start-up to step in and create simple web-based apps that are not only clean, but functional. Competing in a different realm than 37signals may be a good option, but there are countless other small niches to be conquered. In doing so, the venture may be able to achieve the web 2.0 unthinkable… revenues. Or in a utopian world… profits.