What Should Ireland’s Data Centre Strategy Be?

August 14, 2020 in Essays

Last week TikTok announced it would be investing €420m in new Data Centres in Ireland, and creating up to 100 jobs in the process.

The IDA announced this as a big win for Ireland, but the announcement sparked a bit of pushback and public debate, with many questioning the wisdom of our industrial strategy that encourages Data Centres to locate here.

The main concern with Data Centres is their power usage. Eirgrid, which manages our national electricity grid, predicts that Data Centres alone will account for 29% of our total energy demand in 8 years time.

“The demand forecast in Ireland continues to be heavily influenced by the expected growth of large energy users, primarily Data Centres. These need a lot of power and can require the same amount of energy as a large town.”

We have signed up to aggressive carbon emission reduction targets, which we’re already at risk of missing, so an ever increasing number of power hungry Data Centres will surely worsen our performance, costing us both financially and ecologically.

Is it fair that we are giving our beef farmers grief one day, but celebrating new Data Centres the next?

The other main critique is that, given all of the power Data Centres demand, they give back very little in terms of jobs. The initial build creates a flurry of construction work, but after that the maintenance is minimal.

The Government’s policy on the benefit of Data Centres also feels weak. The Government ‘Statement on The Role of Data Centres in Ireland’s Enterprise Strategy’ says:

“Data centre presence in Ireland raises its visibility internationally as a technology-rich, innovative economy. In turn, this places Ireland on the map as a location of choice for a range of sectors and activities that are increasingly reliant on digital capabilities including manufacturing, financial services, animation, retail and global business services.”

But does that really hold up? Just because your Data Centre is in Athlone, does that make you more likely to locate your UX design team in Grand Canal Dock? I’m always skeptical of any strategy that has “raising awareness” as it’s main KPI.

TikTok’s dual announcement of HQ and Data Centre jobs this week adds weight to their claim, but overall I’m still skeptical.

Taking this all into account, however, I still think a strong case can be made for Data Centres in our strategic industrial policy.

They don’t create many jobs, sure, but that shouldn’t be entirely negative. They create a large amount of economic value, but don’t take much human intervention. So we need to ensure that we capture that value for our wider society. This means ensuring the Corporate Tax rate is enforced and paid in full.

An important factor of their energy consumption is that it is all Electricity, and every year more and more of our Electricity is generated by renewables. We’re approaching 40% in 2020, the vast majority of which is Wind.

You can’t plug a cow into a windmill, but you can a data centre.

It’s also worth asking “if not here, then where?” Due to our cool climate, Ireland could be one of the most carbon efficient places to host data centres. We’re not going to stop watching Netflix and making Zoom calls, so are we just pushing the servers behind those activities to a more carbon intensive environment?

In a simplistic view, one can imagine each new Data Centre built here being connected to a state owned Wind Farm, financed by zero interest bonds, paying large amounts of recurring revenue for its energy and paying its corporate taxes each year.

This would take a courageous industrial policy, attracting Data Centres because we know Ireland is a great place for them, and charging and regulating them accordingly.

The current Government strategy doesn’t do this. It’s far too optimistic on the positive externalities, talking about Data Centres as if they’re akin to University R&D Labs, rather than warehouses full of servers, and it’s too light on the measures we need to counter the negative externalities and push for net-zero carbon emissions. The only concrete proposals it contains are about removing local communities from the planning process, to streamline it.

I do think a stronger, more ambitious policy is possible, which continues to pitch Ireland as the home of Data Centres in Europe, but mandates a goal net-zero carbon emissions, ties in a strategy of state owned renewable generation and ensures that local communities have a say in how they benefit from these businesses.

In this model wind and cold weather can become Ireland’s new natural resource. It’s our new gold and Data Centres are how we mine them.

Peter’s Newsletter 11 – How do we decide which ads to ban?

July 30, 2020 in Essays, Weekly Newsletter

There wasn’t much important news in the world of tech this week, so this week’s newsletter is a deeper piece of analysis on the ASAI’s decision to remove the Tampax commercial, the role of self-regulation and the Facebook Supreme Court which will set up later this year and make lots of decisions like these.

The “Tampons & Tea” Ad

This week the Advertising Standards Authority for Ireland upheld complaints about a tampon commercial which Tampax have been running on Irish TV.

The decision to recommend the ad be removed from air has caused quite a bit of backlash, not least because many saw the ad as genuinely educational. You don’t read this newsletter to hear a tech nerd express opinions on tampon commercials, so I won’t, but I do think it’s interesting to consider how the ASAI made their decision and to ask the more important question… who even are the ASAI?

A total of 84 complaints were made about the advertisement, under 4 broad headings. Under three of the headings, the ASAI didn’t find the complaints adequate. These were “Sexual Innuendo”, “Suitability for Children” and being “Demeaning to Women”.

The only complaints that were upheld were under the heading of “General Offence” and even here the reasoning is peculiar. From my reading of their findings, it seems that, while the ASAU didn’t find it to be offensive, enough people complained that they considered the ad to be breaking the code that “A marketing communication should not bring advertising into disrepute.”

To paraphrase, ‘We didn’t find it offensive, but enough people did, and the rules say not to be offensive’.

In defence of the position, ASAI Chief Executive Orla Twomey said in the last four-and-a-half years there have been only seven adverts that have had 60 or more complaints.

So I guess we know the magic number now. If you want any ad you dislike taken off the air, just get 60 people to fill in an online form.

Who are the ASAI?

Despite what you might first guess, the ASAI is not a government body or publicly funded. It is an industry group which has a self-regulatory code of conduct for all advertisers.

The optimistic view of this setup is that all industry players have a vested interest in keeping the standards in advertising high. If one advertiser tries something crass and eye-grabbing which opportunistically works for them in the short term, but degrades the efficacy of advertising in the long term, this is bad for everybody.

Also, not being defined in legislation gives self-regulatory bodies a bit of nimbleness to adapt as methods and trends change.

The more pessimistic view is that they do “just enough” to keep the worst behaviour at bay, but give government no impetus to setup a public regulator or enforce stricter rules. The main motive of a body like the ASAI is to keep advertising a profitable enterprise over the long term by setting code of conduct for advertisers. Sometimes this profit motive overlaps with the wider goals of society, but sometimes it does not.

This week’s decision is a good example of when those interests can come into conflict. If you’re an industry body charged with keeping a medium profitable, why wouldn’t you ban the one ad a year that generates too much controversy? Assessing it complexly is difficult and erring on the side of conservatism makes sense.

Where as a statutory (non-industry) regulator may have to weigh up a decision more complexly, considering the educational benefit, the wider context of gendered “offence” and the importance of free expression.

This decision is also another great example of how difficult it will be to regulate “political” and “commercial” advertisements as if they are always distinct and separate. Is Always’ “Run Like A Girl” ad commerical or political? Nike’s Colin Kapernick ads? What about Monsanto running ads about the benefits of fertiliser?

This isn’t the ASAI’s first difficulty with this distinction either. In 2018, they refused to hear any complaints about any advertisements in the abortion referendum, which left the digital ads in an un-regulated limbo. In 2016, they found the ads for Eircode to be misleading, it said they were outside its remit because they’re “public broadcasts.” (Which is probably fair – you can’t have an industry body regulating the government?)

Facebook’s Supreme Court

While we’re on the topic of self-regulation, the new Facebook “supreme court” has been established this summer and will soon start hearing cases.

The Facebook Oversight Board, as it’s officially called, will play an interesting role for the company and is an experiment worth watching for anyone interested in the ongoing debate around how we moderate content online. It is made up of some pretty impressive people, mostly former judges and human rights lawyers, and the intention is that it sits separate to Facebook (although funded by it).

Characterizing the FOB is tricky, as Evelyn Douek notes – “It is court-like in that it will hear appeals from and act as a check on Facebook’s policy-formation and enforcement processes and provide public reasons for its decisions. But it will also give policy recommendations, and neither its members nor those who appear before it will be lawyers applying the law. It is a private institution fully of Facebook’s own creation, but it has reasonably robust mechanisms to ensure independence from Facebook, which has put $130 million into a trust intended to fund the FOB for at least two three-year terms. It is a global body, but it would be naïve to think that it will be able to settle global speech norms when different jurisdictions have clashed about these for many decades.”

Facebook currently employees about 35,000 content moderators globally, who make decisions every minute of every day to remove content from the platform based on an ever growing set of company policies. If the removal of an individual piece of content, or a certain type of content, proves very controversial, Facebook can escalate this to the FOB for deliberation.

People who are hoping this might act like the US Supreme Court, handing down binding rulings and setting precedent for Facebook, will be disappointed. This Oversight Board won’t act in that way, and it would probably be naïve to trust that such a system could always work – Facebook can always just choose to ignore a body that it established, if it wishes.

But Evelyn Douek argues, quite compellingly, that this isn’t what optimists should hope for from a body like this. Instead, the benefit should come from the act of public deliberation itself, rather than just the final ruling. Forcing Facebook to explain why they removed content, and defend the logic publicly, should greatly enhance the public debate around these issues and also cause Facebook to more carefully consider each internal policy they implement, knowing that they may one day have to defend it publicly.

The hope is that the dialogue between the FOB and Facebook, through being forced to make arguments in cases and publicly respond to FOB recommendations, will finally ventilate the reasons behind why Facebook makes the decisions that it does by forcing Facebook to justify them. This process itself will hopefully improve decision-making, but at the very least it will provide a level of transparency and accountability that is currently sorely lacking. To those from the United States, the paradigm “strong-form” judicial review jurisdiction, this might seem feeble. But many other jurisdictions have a version of this dialogic “weak-form” review, and it often turns out to be much stronger in practice than it appears in theory.

As we’ve seen this week here in Ireland, self-regulation has its own problems. As Douek notes, “it is unsatisfactory for private, profit-driven platforms to be making these decisions unilaterally and without any accountability.

“On the other hand, heavy-handed government involvement in speech regulation is always suspect, and the cure to our current woes should not be worse than the disease. The FOB is therefore an effort to find a third, least-worst option.”

Similar to the industry that the ASAI represents, much of Facebook’s business model would just be simpler if it was an uncontroversial space to sell people’s attention to advertisers, so why not delegate some of these decisions away?

These are issues that will only become more and more prevalent in the coming decade, as the public sphere shifts from broadcast and print to digital, so every new experiment is worth watching closely. I’ll be watching with skepticism and a dash of hope.

The HSE’s New Covid Tracking App

July 2, 2020 in Essays

Update: Since publishing this post, the HSE app has been released. You can download it here.

The HSE have released the details of their new public facing app “Covid Tracker“. They released a very comprehensive overview, access to the app’s source code, and their detailed Data Protection Impact Assessment.

With the details of app now public, journalists, policy makers and citizens will want to start analysing and appraising the app. So what are the questions we should be asking? What constitutes a good app or a bad one? What are the trade-offs other countries had been considering, and how have they been handled here?

I’ve sketched out a series of questions which I hope are a useful framework for analysing this, or any other app that is used in the fight against Covid-19.

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Overview – A “Touchpoint” for the Wider Regime

We couldn’t assess a restaurant’s new app for food delivery, without the wider context of the restaurant business itself. Is an app good if it’s always accessible, but the kitchen is only open and making food in the mornings?

Here too it’s worth a quick recap on contact tracing as a wider programme of activity before we assess how an individual app fits within that.

A contact tracing regime is a prediction exercise that takes in data from infected patients (cases), makes predictions about others they may have infected (contacts) and then takes action on those predictions. Here’s an example:

Data: A person gets diagnosed with Covid at a hospital. A staff member at the hospital asks them for all the names and phone numbers of all the people they’ve seen in the last week.

Prediction: Their contacts are predicted to have an increased likelihood of infection.

Action: Somebody calls them to recommend they self-isolate or come in for testing.

An app is a tool that can play a part in this wider regime. Most countries are looking at an app to a) help gather more data to make infection predictions and b) take action by notifying people they are at risk. Some countries, mostly Asian, are also adding proactive testing as an action, deploying resources to schools, workplaces, churches etc. where infection is predicted.

Key Questions

With this in mind, here are some of the key questions we can ask about an app, to assess its role in the wider trace & test regime, the data and privacy implications of the data it gathers and the actions it will enable our health service to take.

I’ve discussed each question in more detail below, but here’s the cheatsheet to get started:

Key Question Answer Implications
Use Bluetooth? Yes Uncertainty around the accuracy of a “contact” prediction with bluetooth
Apple/Google Framework Yes International standard. Better than any alternative bluetooth option. Anonymised solution.
Using GPS? No No sense of “place” for the virus. Can’t use location for contact prediction. Can’t show where outbreaks are occurring
Contact Notification Yes Alerts users to potential infection. Introduces spoofing risk.
Self-Diagnosis No Only allows confirmed diagnoses from HSE. Removes risk of fake activity.
Symptom Tracking Yes Anonymous information passed to HSE, but “probably” positive people are encouraged to isolate and test
Behaviour Change Yes Goes beyond “news” seen in other apps. Encourages people to “check in” every day and shows country-wide stats on app downloads, check-ins and symptom reporting.

Let’s dig into each of these here in detail.

The Apple/Google Bluetooth Exposure Notification Service

This is one of the core functionality choices within the app. They have chosen to use bluetooth to measure proximity and predict a contact.

Generally, a contact is defined someone you share a pocket of air with for a period of time. This app will endeavour to record anyone you’ve been near for a while (within 2 metres or less, for 15 minutes or more) in the 14 days leading up to either of you getting diagnosed with covid. This is the European CDC definition of a close contact.

The Apple/Google exposure notification framework sits “always on” in the background on your phone. It gives your phone an anonymised id. When your phone comes near another person with the app installed, your phones swap ids via bluetooth. Later, if one of you get diagnosed with Covid, you’ll be asked if you have the app installed.

If you do, then the HSE will ask if you’re willing to upload your contact history, which is a list of all the anonymised ids you came in contact within the previous 14 days. If you say yes, the HSE send you a code by SMS. You input this into your app and it uploads a list of all the IDs of contacts on your phone.

The HSE servers will send this list to every single app. Each app will scan through the list, and if one of the IDs matches that person’s phone, the person gets an alert.

 

GPS and Location Data

This app does not ask the users to automatically share location data. This was a big choice by the HSE, which alleviates many privacy concerns, but removes any sense of “place” from the data the app gathers.

This means that bluetooth will be the only measure of proximity when determining a contact. The app will know if a likely contact took place, but not where in the country that was, or who the people involved were.

This will surely calm the concerns of many privacy experts and advocates. It helps the HSE avoid the risk of headlines that read “HSE app tracks your location data” which could severely hamper adoption and public trust in the app.

On the flip-side, it means the app gives the HSE less information about where the virus is in Ireland, but I think they have made some clever prompts and additions in other parts of the app and system which will capture much of this information in different ways, but without the attention-grabbing headlines of location tracking.

Contact Notification

Because the contact predictions are all being done anonymously, the HSE cannot text, call or visit anyone who might have the virus, they can just send them an anonymous push notification.

The app will alert a contact with a push and with a persistent in-app message. It will then show them a list of recommendations for keeping safe and self-isolating.

Most interestingly, it will also ask if they would like to share their phone number and get a call from the HSE. This will allow for more traditional contact tracing to take place. It will be really interesting to see what the uptake rate on this option is.

Proactive Testing

One feature of successful contact tracing regimes, like Singapore and South Korea, is proactive testing. Reaching out to people and groups of people (like workplaces) where contacts might have occurred and proactively test as many of them as you can.

At first glance, with anonymised bluetooth and no GPS, it would seem that this app wouldn’t support such activity, but digging a bit deeper it looks like it might?

The first way it does this is by offering users the ability to request a phone call from the HSE once they get a contact notification. On that phone call, there’s every possibility that the person can be asked some extra information, if they wish to share it, about where in the country they live. They could be also be encouraged to take a test, at which point their details could be taken, including where they live and a verbal contact history recorded, as happens today without the app.

The other place some additional personal data can be captured is in the app’s symptom tracking section.

Symptom Tracking

This is, to my mind, the most unique part of the Irish app, which I haven’t seen in any other country’s apps. The app will encourage people to “Check In” every day, and report how they’re feeling.

 

One of the motivators to do this is the nationwide stats that will be shared within the app – how many tens of thousands “checked-in” today. Sort of like an Operation Transformation, but for Covid fighting.

This is really hard to assess before launch. You can see the potential if it goes well, but also the risk of how publicly and visibly it could fail. Those aren’t the kind of risks usually taken by the civil service, so fair play to them on that front.

If it works, a large portion of the country will be recording their symptoms. Without any extra information, there isn’t much action that can be taken based on that data, but the app does prompt users to enter their sex, age range and location. So the HSE can get some self-reported data on location and demographics of users who are reporting symptoms. They also keep capturing extra data on confirmed cases outside the app, like they do today.

 

Conclusion

You can see the balance they’re trying to strike here. Removing any functionality that is greedy for user data, or could even be perceived as a privacy concern, will help build trust and get adoption. Using the Apple/Google exposure notification system is the most privacy conscious route to allow for contact notification, but it doesn’t really support “contact tracing”.

They then layer in some behavioural nudges in the form of “join the fight” daily check ins and “would you like a phone call?” notifications, which capture just a small amount of actionable data, and from only the most interesting users (probable infections) and in a manual way that doesn’t feel invasive. In that way they bring in some contact tracing elements, but just the minimum effective dose.

There are probably 3 key risks they need to overcome with the launch:

  1. That the Apple/Google bluetooth system proves effective enough at recording contacts accurately
  2. That people trust the app and download it
  3. That people check it regularly enough to make the data capture from check-ins meaningful

It seems like a very well intentioned, good faith effort at balancing all the competing concerns and I hope, for all of our sakes, that the bets they’ve made pay off.

 

How to Start Thinking About “Artificial Intelligence”

February 21, 2019 in Essays

Is Blockchain the future for Government Services? (Hint: No)

December 9, 2018 in Essays

Faux Metrics

April 17, 2016 in Essays, Uncategorized

 

Vanity Metrics

Faux Metrics

Singular Focus

How To Build A Massively Scalable Social Network - Start With a Tool

August 4, 2015 in Essays

One of the most popular posts we wrote for the SparkPage blog was a profile of 5 big social networks that started life as a tool.

It’s a long read, but worth checking out. I thought it would be useful here to summarise the key business insights that entrepreneurs can take from those case studies and apply them to their startup.

Utility First, Network Later

Instagram, Spotify and Imgur were three of the companies we profiled. They all have massive communities and social networks now, but very few of them started with any “social networking” functionality.

Instagram was mostly a tool for adding cool filters to make your amateur photos look professional.

Instagram's reputation system - added years after launch

Instagram’s reputation system - added years after launch

Imgur had no comments, no upvotes, no profiles. But when the founder launched he said that it had “neat things like crop, resize, rotate, and compression from 10–100″

What they did first was offer a tool with a clear value proposition in “single player mode”.

Spotify offered any song in the world at your fingertips and that value was the same whether you were the 1st or the 100th of your friends to sign up.

Piggyback On Existing Networks

But there’s obviously huge advantage in having social elements in your app. What’s the point in taking an awesome food selfie if my friends can’t see it! (“food selfie” is a thing, right?)

So Instagram had “Share on Facebook” “Share on Twitter” options, and they were the key growth drivers. Imgur was built as an image sharing site for Reddit (see “My Gift to Reddit”). Airbnb hijacked the Craigslist network.

Instagram's explosive early growth

Instagram’s explosive early growth

There’s an obvious advantage to leveraging massive social networks, which is the reach they give you. But there’s a less obvious benefit you get in the focus it allows you:

  • It gives you clarity in your targeting. “We are building this tool for audience x” can help focus a lot of your decision making.
  • It lets you focus your resources on building an awesome tool, instead of trying to build a network at the same time.

Heck, even the actual social networks did this. Facebook piggybacked on real life social networks (college campuses) and Linkedin on companies and professional networks.

That’s why you often see so many “social networks for plumbers” type businesses fail, because there’s no underlying social network (whether digital or physical) for them to piggyback on.

Come For The Tool, Stay For The Network

This strategy isn’t just good to get you started, the tool is actually a lasting value proposition for most of these companies.

As Instagram’s Kevin Systrom said:

Photo sharing as a concept is relatively uninteresting as a sell. But processors are so fast now that we can do really cool things to your photos with the tap of a button. We can take that beautiful 5MP camera and turn it into a panoramic camera or a lofi 1980’s Polaroid.

Spotify say that social features like collaborative playlists and following friends are the features that deepen a user’s relationship with the app, but they still use the “tool” as the compelling proposition for new users.

The ability to stream unlimited music is always the thin end of the wedge.

Spotify user growth

Spotify acquires with a tool, upsells with a network

What’s Your Single Player Mode?

Hopefully that’s some good food for thought for those of you trying to build the next massive social platform:

  1. Focus on a single-player tool first
  2. Leverage existing networks
  3. Keep the single-player tool as the lasting value proposition

 

Keep Your Content Simple, Stupid

January 10, 2011 in Essays, Marketing

Gerard O’Neill recently pointed us to the ‘reading level’ feature in Google’s advanced search.

You can now use Google’s Advanced Search option to determine whether the content of a given blog or site has a reading level that is basic, intermediate or advanced. In the Reading Level menu select ‘annotate results with reading level’ and then enter the url of your preferred site in the ‘search within a site or domain’ box.

His post, titled “Where The Smart People Go,” showed a comparison of some of the reading levels of various Irish websites and the results were obvious – the more “high brow” or “niche intellectual” sites had a more advanced reading level than the sites with a more “mass market” audience.

Gerard found this search tool from Christopher Mims, who reviewed even more sites with varying reading levels.

Wired.com is “decidedly middlebrow”, but ieee.org is the “Smartest” of the lot.

The consensus seemed to be that an Advanced reading level made for a “smarter” blog.

I think the opposite is true. If you want to write posts that spread, surely a simpler writing style is better.

I did a few quick searches and the results for Seth Godin confirmed my hunch.

His blog is one of the most popular on the web. He riffs on very intelligent concepts and shares groundbreaking ideas, but less than 1% is at an “advanced” reading level.

He packages powerful ideas in simple, readable and share-able posts.

The lesson from Seth is that simpler content spreads.

And, as we all know – ideas that spread, win.

Charging Extra For 3D Is A Mistake

August 11, 2010 in Business, Economics, Essays

We all know that the music and movie industries have been crippled by the digital revolution of the last 10 years. Some blame piracy and filesharing, others (including me) blame the economics. Regardless of the cause, we can all still agree that these are two giant industries brought to their knees by the internet… right?

Wrong, actually! The recorded music industry has been decimated in the last five years, there’s no doubt about that, but the film industry has actually been booming. Despite all their complaining about piracy (you wouldn’t rob a car, would you?) the industry has been growing remarkably. Take a look at these figures published by the UK Film Council (found via TechDirt):

  • The core UK film industry has grown 50% over the last 10 years
  • UK box office takings at record levels, with growth of over 60% over 10 years
  • They have had a 500% return on their investments in film
  • More films are being released, up over 30% in the last decade
  • Independent films are performing quite well, taking in nearly half the revenue of major studio films

So why has the recorded music industry been decimated while the movie industry is thriving? The answer lies in the economics at work – specifically the economics of scarcity and abundance.

The internet has transformed the distribution of film and music. They were once both limited in supply (there’s only so many plastic discs in the world) but they are now in infinite supply online. One copy of a song or a film can be replicated (copied and pasted) a million times over at practically no cost. When supply becomes abundant like this, price will plummet towards zero.

This has happened across both industries. Independent musicians find it very hard to command any price for an MP3, so too do YouTube with their videos. Larger monopolies (Record labels and Film Studios) are struggling to maintain high prices on mainstream products, but the market is finding ways of bringing the price to it’s natural equilibrium (think Napster, Limwire et al).

So both of these industries have had core products – relatively scarce CDs and DVDs – transformed into infinite, digital goods. The important difference between the two has come from what they’ve done with the remaining scarce products in their arsenal.

If you’ve noticed me using the term “recorded music” instead of just “music industry” it’s for a reason. The music industry as a whole has been booming too, boosted mostly by live performances. Tickets to see your favorite musician live in concert are limited and scarce – so they can still command a price. The experience isn’t something easily replicated and it’s not something you can download on a filesharing network. Better still, the abundance of freely available music online has created more fans listening to more music made by more musicians than ever before, which in turn is creating more demand for live concerts.

I know this seems hard to believe, given all the sky-is-falling talk we hear from the industry – but even the PRS in the UK recently reported (PDF) that 2009 saw a 4.7% rise in the industry’s total revenue.

As for the movie industry, I don’t have any supporting data, but my guess is that this is the same effect we’re seeing in their record numbers. The internet is enabling more film makers to make more movies to be watched by more fans than ever before. The cinema is still providing a scarce, difficult-to-replicate service (big screen & popcorn and all that), and so it’s reaping the rewards of a population more “into” movies than ever before.

And It’s Egg Shaped

So maybe the future is bright for these two industries that seemed doomed since the advent of file sharing? Don’t bet on it!

The music industry, instead of recognizing the value of a scarce concert ticket and nurturing it as a growth industry, are crippling it. They’re treating it as a replacement for CD sales and hiking ticket prices to plug the gap in the numbers. This, it seems, is starting to have pretty disasterous effects. I won’t go into it in much detail, but there are plenty of reports this summer of hundreds of cancelled shows, of a dismal Live Nation investor presentation, and the Ticketmaster CEO blaming piracy for driving up ticket prices.

The movie industry are also faced with the same opportunity. With home theatres becoming more and more affordable, they risk loosing out on a major source of income as the theater experience becomes easily replicated at home. This is why so many people view innovations like 3D and IMAX as important parts of the future of the movie industry – because they help enhance the cinema’s attraction and stop the experience drifting into abundance.

So what are they doing to make sure 3D is as appealing as possible to keep people coming back to the theaters? Jacking up the prices on the tickets AND charging for the glasses, of course!

Eejits.

(P.S. I love terrible puns, so I really wanted to end the post by saying “If only 3D glasses helped stop such short-sitedness”)

Facebook Is Evil

April 6, 2010 in Business, Essays

Anyone who knows me knows that I’m a fan of Google. This isn’t a post to describe my personal affection for a corporate entity, but it is an attempt to describe one element that I find particularly appealing.

Don’t Be Evil

This phrase is Google’s infamous, informal corporate motto. I love it. Not only does it help reinforce my romantic, naive teenage dreams that I could become the next Richard Branson or Bill Gates just by doing good in the world, but it also helps prove that in the new business world, evil is bad for business.

A small bit of history on the origins of the motto: At the start of the last decade, in the company’s early days, they had reached a pivotal point in their growth. Google was starting to expand beyond a small team of like-minded individuals and so the founders felt there was need to somehow define the company’s core values. Equipped with the new set of values any potential new-comer, when faced with a decision in their job, could instinctively know what “Google would do”.

John Battelle’s book on Google, The Search, tells the story like this:

On July 19, 2001, about a dozen early employees met to mull over the founders’ directive [to elucidate Google’s core values] … The meeting soon became cluttered with the kind of easy and safe corporate clichés that everyone can support, but that carry little impact: Treat Everyone with Respect, for example, or Be on Time for Meetings.

The engineers in the room were rolling their eyes. [Amit] Patel recalls: “Some of us were very anticorporate, and we didn’t like the idea of all these specific rules.”

That’s when Paul Buchheit, another engineer in the group, blurted out what would become the most important three words in Google’s corporate history. “Paul said, ‘All of these things can be covered by just saying, Don’t Be Evil,'” Patel recalls. “And it just kind of stuck.”

The message spread, and it was embraced, especially by Page and Brin… “I think it’s much better than Be Good or something,” Page jokes. “When you are making decisions, it causes you to think. I think that’s good.”

And that’s what “Don’t be evil” came to mean within the company. It was their way of reminding every member of staff that the user comes first. It informs their design, marketing, advertising and strategic decisions. Yahoo used to sell the top spot in it’s search results as paid placements, but Google decided confusing it’s users into clicking ads was “evil” and so it kept it’s search results separated from it’s sponsored links. Almost anything that taxed or exploited or inconvenienced a user was considered evil and avoided, even if it meant losing revenue in the short term. Even though this was borne out of a sense of moral obligation, it has since become an incredibly powerful driver of business success.

Facebook Is Unstoppable

I don’t know how many news articles and blog posts I’ve read that proclaim Facebook’s current position to be unbeatable, but I do know that I agreed with most of them. There were many reasons that Facebook overtook and usurped the user bases of MySpace, Bebo, Orkut, Hi5 and all the rest, but today these reasons are somewhat unimportant. Facebook has emerged as the victor from the early social networking free-for-all, and with it’s massive userbase (400 million and counting), open APIs and top class design, there really is no need for a competitor. When it comes to main-stream social networks, where the user’s utility and enjoyment comes from the fact all their friends are on the same network, the world only really needs one.

For this reason alone, I found it very difficult to imagine what features a new would-be contender to the throne might have, or how anybody could hope to gain a network effect stronger than Facebook’s own. But last week I read two separate articles that stopped me wondering how Facebook might eventually be toppled. “This is it for Facebook,” I thought. ” This is the beginning of the end.” (dun dun dun!)

The Love Of Money…

If I could alter this bible quote above, I would change it to “earning no money is the root of all evil.” Facebook has over 400 million users, but has only recently been cash flow positive. While they might be on track to earn $1 billion this year, the length of time it has taken for investors to start getting a return has got to be a huge weight on Mark Zuckerberg’s shoulders.

So let’s imagine we are Mark Zuckerberg, CEO of Facebook. (This scenario will probably be applicable to Twitter pretty soon too). Since founding Facebook in 2004, people have given you over $700m of their own money and are counting on you to earn them a large return on that investment. So how does your business make money? In 2009 you probably earned between $600m-$700m, and almost all of that came from advertising. Like the TV, Radio and Newspapers before you, you’re in the business of selling a captive audience to marketers. So what do you do to make more money in 2010?

This is the key cross roads that all companies reach if they are in the business of selling an audience to advertisers. If they mistreat their audience to earn extra revenue in the short term, their business suffers in the long term. This is why newspapers separate their sales teams from the editorial teams and this is why Google doesn’t like to be evil.

Facebook, it would seem, has bowed to the pressure. Here are the two headlines from last week that I mentioned:

Facebook Is Evil

Both of these moves are very evil, in the Google sense of the word.

The first article describes Facebook’s potential plan to take the benefits of Facebook connect, but to remove the pesky “user’s permission” element – “Imagine visiting a website and finding that it already knows who you are, where you live, how old you are and who your Facebook friends are, without your ever having given it permission to access that information,” wrote Marshal Kirkpatrick. Facebook, on the other hand, described it as a nice user experience and a way of making Facebook connect “more seamless” – how thoughtful of them!

The second article describes a new change in the language used on Facebook advertisements. Users can currently “like” an update on Facebook, just to express the fact that they enjoyed it, or they can “become a fan” of a brand or company to connect with them and receive regular updates from them. Facebook has realised that users are far more likely to “like” something than “become a fan” (presumably because there is no commitment in the first one) and so they decided to change the language on their advertisements. Now a user will be presented with an option to “like” an advertisement, but it will have the functionality of “becoming a fan.” In essence, Facebook are tricking their users into opting into communications from advertisers. Or as they like to put it “This lighter-weight action for connection to a Page on Facebook means that users will be making more connections across the site, including your Facebook Page.”

Good Vs. Evil

These two stories, to me, represent the first clearly visible chink in Facebook’s armour. I can now see the unique feature that the next big social network will have – an overt respect for it’s users’ privacy, a desire not to be evil. Or maybe it’s more basic than that. Maybe the business that overtakes Facebook won’t just have a desire to be good, but they’ll have a business model that doesn’t force them to be evil. I can’t help but believe that had Mark Zuckerberg thought of a better business model than “just throw some ads on the site,” he never would have felt compelled to claim that a disregard for privacy is the new “social norm.”

This may not be the stuff that Hollywood scripts are made of, but for me the next 2-3 years will as good as any epic Good vs. Evil battle. Not only will it reignite my romantic beliefs in the power of good, but it will prove that building a business model around “doing good” will be the most successful strategy for the 21st century.

The Google way vs. The Facebook way, let the battle commence!