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Online Monetization: Beyond Advertising and into Microstransactions

Let me start by saying this: I firmly believe online advertising is and will continue to play an essential role in the economic ecosystem of the internet (so much so, that I am working at Lotame). With that said, is online advertising the only answer?

Arguably No.

Microtransactions: According to learnthat.com

Microtransactions Definition

Microtransactions are small transactions, perhaps of the order of a cent. They are being considered for digital content on the web (a magazine selling an article (unbundled) rather than an entire issue (bundled with additional information that may not be of interest to the consumer). This may then open up additional revenue streams for the content providers.

As new web services, application, or any website for that matter becomes available, the priority typically lies with the user base and generating lots of eyeballs. Once that user base has reached significant mass, the service can leverage the base and monetize.

So if a company like twitter were to offer subscription based premium services, they could, in theory, generate revenue from their loyal users. But what happens if they applied a micro transaction type revenue model? What if they generate revenues based on individual actions (using a feature of the service), or premium actions (using a premium feature of the service), and charge users a fraction of a penny for the action. Granted there would have to be a standardized pay-pal like model behind this type of system, but the amount of volume or interactions that exist online, could yield significant revenue. Make sense?

There are definitley issues surrounding this idea (haven’t though them all through), but the premise is there.

Educating youth with subject matter that matters

A while back I wrote about the relevance (or lack their of) of the systematic approaches taken by the public school systems and large universities. I would argue that practical and relevant hands-on approaches need to be implemented to better educate the youth in such a competitive global economy. In many instances, parents recognize the need for specific types of education. In fact, one of my relatives has a tutor come to his house once a week to teach his son conversational Japanese, as his business realizes economic growth with Japanese based companies. Fred Wilson also recognizes the importance of practical education and so, in his post today he writes:

“But this year we went one step further. We got our son Josh a young teacher who came over in the evening once a week and taught him how to write code and make a rudimentary computer game. We didn’t know of anywhere in the city to send Josh for this kind of class, so we contacted a local company, Blue Tomato, that provides supplemental tutoring and test preparation.”

Imagine a classroom that prepares students for TODAY’s world, for TODAY’s challenges.

I was fortunate enough to have a high school teacher that also recognized the extreme importance of technology in the classroom (I thank him for his role in influencing me to pursue Electrical Engineering). His name is David Peins and his company is Robodyssey. In his high school Robotics class, we were taught math, physics, electronics, and computer programming all while building robots (my robot can be seen below), and this all happened between the 9th and 12th grade. I learned about semiconductor devices, NPN, PNP transistors, tutebot circuits, and more, 3 years before they were even introduced to me in my Semiconductor Devices classes, (my junior year of college).

If America is going to keep up with the ever changing, fast paced global economy, we need these types of teaching mediums. One that provide relevance to today’s technological and societal challenges, while extracting the most value out of a classroom setting.

“I believe in engaged education and I believe in pushing the envelope and trying new things. Things like this.

Our kids are growing up in a different world than we did. We have to teach them using these new tools. Not just the ones that were used on us.“

Fred W. could not be more right.

My Robot (and Chris Murphy) from HIGH SCHOOL: (The robot was a self-navigating, automated fire fighting robot. It autonomously navigated a maze using ultrasound and infrared sensors, found a lit candle in one of the rooms, and blew out the candle)

Autonomous Fire Fighting Robot
Autonomous Fire Fighting Robot
Autonomous Fire Fighting Robot

What do you have to lose…

If you have everything to gain and nothing to lose?

If you have everything to gain and everything to lose?

If you have nothing to gain and nothing to lose?

If you have nothing to gain and everything to lose?

And even if the above applies, what happens if you act “As If..” ?

Today’s Music Label

If Sony BMG, Universal Music, Def Jam, Motown, Warner Brothers, or any of the big music labels were to create their business model today, what would it look like? First, a quick glance at their methodology:

The old model was simple:

  1. Provide the artist with resources to create an album (Studio, equipment, personnel)
  2. Manufacture the Album (CDs)
  3. Distribute the Album (Stores)

Clearly this model has failed while trying to apply it to todays marketplace. Here is why:

  1. Provide the artist with resources to create an album (Studio, equipment, personnel). Artists can download superior programs and can obtain quality hardware.
  2. Manufacture the Album (CDs) Everything is digital. No need for tangible items.
  3. Distribute the Album (Stores) Distribute the Song/Album (iTunes, MySpace, YouTube, etc).

Because these music labels have not completely adapted or changed with the times, they have been resorting to legal action. (Larry Lessig goes into great detail about the issues involving innovation, technology, and law…his blog is definitely worth reading)

If the music labels reinvented themselves or started from scratch, what would their business model look like? I’d first argue that the first three points need to happen. Resources to create the music, making music, distributing the music. With the advent of cheaper hardware, P2P file sharing, and social media, these points can be easily attained.

But where do you go from there?

Social Media Music Label – An organization that can most efficiently and effectively market and distribute songs. An organization that can generate a brand that encompasses a group of artists, while sharing revenue to some capacity. An organization that leverages the brand to obtain revenues outside of direct music sales. A brand that engages the listeners/users on every level from audio, video, blogging and networking.

I don’t know exactly what that model looks like, but we can just take a look a Chamillionaire‘s success and realize the rules have changed. (Below is Pete Cashmore’s interview with Chamillionaire)

[googlevideo=http://video.google.com/googleplayer.swf?docId=-4798499561605779000]

Web mail and web identity

A few months ago I had a very interesting conversation with one of my friends, who was at the time, working for CBS. He told me that media companies are simply missing the mark when it comes to new media.

Since that time, a lot has change and it is clear that the major media outlets are starting to finally get it. More recently, I had the privilege of meeting an extremely accomplished new/media/political veteran, Greta Van Susteren, and she put forth a great topic of debate.

Facebook vs. Blogs & Email.

I have been on Facebook for the past year, and lately, I’ve found myself only using it for the status feature, birthday notifications, and news feeds. It keeps me indirectly connected to my friends. It is my stock ticker of my social life. My social graph.

And while I have this social graph, an easy way to connect to my friends, I still find myself writing on this blog and using traditional email. Why? Sure I also use Facebook messages, but why not email? How do I choose? What are the benefits?

With Facebook, Google, and MySpace, all beginning new initiatives to be social across the web, a lot of interesting things should arise relating to this idea of web identity. A type of web address and web driver’s license that will aggregate my web presence into one location, one application, or one resource.

I look forward to see who will drive this innovation. In the meantime, we can continue this discussion via Facebook, email, comments below, LinkedIn, twitter, MySpace, Meebo, AIM….and so on….

Fred Wilson has some thoughts on this idea as well…he articulates them better than I do…

My version of IBM’s new supercomputing initiative

IBM has recently announced “a next-generation version of its Cell processor, the first specifically geared for computer servers.”

The PowerXCell 8i will drive the Road Runner system now under test at Los Alamos National Labs to see if it can become the world’s first supercomputer to deliver sustained petaflops performance. Besides cracking the petaflops barrier, IBM hopes hundreds of users will decide to plug into their IBM servers a two-socket board housing the new Cell chips to deliver what IBM calls “supercomputing for the masses.”

Instead of servers being plugged into a grid, why not use PCs and gaming consoles?

I find this announcement to be kind of ironic since it was IBM that realized open source (the Apache Web Server) is more valuable than a centralized and closed platform, even if is somewhat open.

If I was IBM, here is what I would do.

The idea: Mixing different kinds of computers into a supercomputing grid to create an infinitely scalable supercomputer for enterprise solutions. Just as SETI and Stanford have created new hybrids of supercomputers for astrological data analyzation and Computational Earth and Environmental Science research respectively, a similar supercomputing hybrid model has yet to be adopted for commercialized use. This idea will allow users to submit their PCs or gaming consoles to the supercomputing grid, where they can be accessed whenever they are not being used, and will contribute to a commercially available supercomputer. By participating in this supercomputing grid, donations will be made to charities on the users’ behalf. These donations will depend on the amount of data processes computed on their machines. On the other end of the business, enterprises will be able to rent, lease, or even purchase data processing bandwidth. This will enable startups, small to medium businesses, and large businesses, to acquire computationally intensive processing power with extremely fast clock cycles which could easily deliver sustained petaflops performance and beyond. This would be the first ever cluster of machines available for commercialized use providing for cheap energy costs and cheap hardware costs. By participating in this grid, users will be members of ongoing charitable donations, and businesses will, for the first time ever, have paralleled computing power to the likes of SETI and Stanford. PCs were once thought of “business or research only”. Today, virtually everyone owns a PC. Supercomputers today are only thought of as “research-only”. This put supercomputers in the commercialized or “business” realm. IBM has just announced a new initiative to delver a supercomputer to the masses, as they predict an $8-$10 Billion market. Instead of creating a centralized supercomputer for the masses, this idea will create a decentralized supercomputer to the masses, that will exceed any one supercomputer.

That is what I would do.

What’s the point of exams?

The industrial revolution created more than just automobiles, factory lines, and blue collar jobs. It created a structured day. The 9 to 5 with allocated time for lunch. Most people experience this routine daily in their own workplaces, and this is all a result of our education system. Just think back to your high school routine.

This same system also builds us for productivity, efficiency, and accuracy (I am writing this post in my college library, watching students do whatever is necessary to get A’s).

And there is nothing wrong with this. We should all strive to do our best. At the end of the day, we should give ourselves the best opportunities possible. The best chance for that great job.

But when it comes to our education, should A’s constitute “the best”? A simple measurement of how right or wrong you were in any given specified topic?

We are now in an era that can not and will not survive of off productivity and efficiency, but can only survive off of innovation and creativity. You cannot turn on the news today without hearing about global warming, dependence on oil, broken education, a looming recession, broken government, broken health care, global competition,….the list goes on.

And as I sit and watch all of these students (still in the library) cramming their brains, striving for that “A”,…is this the generation responsible for fixing all of these problems? A generation that was literally built for that 9 – 5 job? A generation that was rewarded based on the amount of A’s they had on their report card?

We are now in a global economy. American productivity is rivaled by cheaper labor, longer hours, and minimal wages, all taking place over seas in exponentially growing economies such as China and India.

We also face significant local, regional, and global issues on the micro and macro levels.

How does America compete and address these challenges? How does my generation compete and address these challenges?

Innovation. Creativity. (Sir Ken Robinson gives a great talk on this at a TED conference).

Does our current education system encompass these necessary virtues? Are we preparing our citizens for tomorrows society?

I now have to return to my studies so I can try and get that “A”.

Facebook Connect

Facebook is opening up the walled garden and sharing…or are they?

Their new announcement:

“Today we are announcing Facebook Connect. Facebook Connect is the next iteration of Facebook Platform that allows users to “connect” their Facebook identity, friends and privacy to any site. This will now enable third party websites to implement and offer even more features of Facebook Platform off of Facebook – similar to features available to third party applications today on Facebook.”

At a first glance, it might seem as if this is a great move for Facebook and its users. But is it really?

Some initial thoughts.

In an attempt to be the social network across the internet:

  • Users can have one web identity (see sxip) which will eliminate the need for the thousands of logins we have.
  • Facebook will become even more centralized and necessary for warehousing user information. (Federal Reserve : Money :: Facebook : User Data)
  • Third party developers can build much more powerful applications without the restraints of the Facebook platform. No canvas page.
  • What was first an attempt to build a platform or centralized location, has now become an open initiative, encouraging users to engage third party websites ultimately leaving them with less advertising inventory.
  • User data might now become available for third party ad targeting outside of Facebook.com
  • Disrupting their own Facebook App ecosystem
  • New revenue model? Their current one isn’t really working.
  • They are becoming more open
  • They are becoming more closed

 

In the end, I think the real question is whether or not Facebook actually intends on adhering to these fundamentally “open” policies they are trying to replicate from the likes of MySpace, Twitter, Yahoo, and eBay. 

 

Ryan Waggoner states it best here:

“As Kaliya stated, I’m afraid that this is just another strategy for Facebook to “lock-in” their users and attempt to become the central repository of everyone’s social graph. If that’s the case, this is not data portability as I still don’t have full control over my data.

Hopefully, they’re going to be fully supporting open standards, but I doubt it. Facebook strikes me as a company that pretends to be open, but is only open one-way or to the extent that they can control.

Facebook is Microsoft 2.0”

Looks like we will have to wait and see, but something tells me Ryan and Kaliya will be right.

Is M”y” Generation Uniquely Apathetic?

This is the question my friend Mark Korshak is looking to answer in “Project Youthanized.”

[youtube=http://www.youtube.com/watch?v=NNqeEcDp_jg]

But how do we truly compare generations?

Let’s consider a student in college 30 years ago, to the student today (The generation Y student). How would these students engage activism?

Years Ago: pass out fliers   Today:  send out emails

Years Ago: organize a rally  Today: create a Facebook group

Years Ago: collect donations (change in a cup)  Today: collect donations (PayPal)

Years Ago: attend a rally   Today: watch a speech on YouTube

Years Ago: start a magazine  Today: start a Blog

Technology must be considered in any cross generational comparison.

Although it may seem as if students today are indeed “apathetic”, I can’t help but wonder, is that really the case? If you’ve ever joined a facebook group, if you’ve ever commented on an article, if you’ve ever published ANYTHING to the web, then you have engaged some form of activism.  You have made your voice heard. The extent of that activism however, is still unknown.

I wish Mark the best of luck in determining, how, if at all, “uniquely apathetic” our generation is, and how he goes about measuring the extent of this apathy.

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