Google, Youtube, Mark Cuban

Mark Cuban makes a great point: that "Gootube" (as he calls Youtube now that it is owned by Google) is forced to be a free bandwidth video hosting/delivery service, rather than a media company, because due to DMCA they can't monetize the content by putting ads around it. How come nobody else is talking about that fact? That's much more fundamental than whatever content deals or lawsuits they are involved in this week.

Still, I think Cuban is too pessimistic about Gootube. It's not like there's no hope for them, quite the contrary. Consider this: instead of monetizing the content, they can enable the monetization, with two features for the content uploader

1) pay-per-view powered by Google Checkout payment services,

2) ads powered by Google Adsense or whatever video ad solution they have, and again the content owner gets the revenue directly

In both cases, the content owner gets the revenue directly and Gootube makes money on fees, like Ebay. These fees can be just as high as the profits from licensing content and monetizing it themselves like a media company (higher if you believe the "long tail" content has more value than big media properties).

Plus they can truly claim to be just the service provider and therefore not liable for copyright violations.

Now throw in a third feature

3) "Gootube Pro" service with no 10-minute limit, where they charge the content owner for bandwidth, a for-pay mass market video content hosting/delivery service, and they can have all the "big" content too.

Why would they try to beat the media companies at their own game when they they have the infrastructure and technology to play a unique and extremely lucrative role as an enabling platform for mass Internet video, for both user-generated content and mainstream media properties?

When everyone thought search technology was just a commodity piece of a portal, Google succeeded by technological strengths in search. Now with everyone thinking about social media and big media monetization of content, maybe they will go with their strengths as a distributed platform for hosting and delivery of content, payment and advertising services.

Blackberry modem!

Sometimes you just have to say: cool! This is one of those times. I am posting this from my laptop using my blackberry as the modem... Yup, it just works, as described here. In fact, mine a 8700 with T-Mobile is not even listed among the ones that work but it still does! Currently, I'm getting 49.9Kbps. How come they don't advertise this?

Cogentco ergo sum

A few years ago, I wrote paper entitled Cogent: Disruptive pricing or disruptive marketing? which showed that Cogent Communication's claim of revolutionizing the economics of Internet bandwidth was a clever marketing ploy, not a revolution in terms of "real" prices, costs or technology. It was just a lower quality network, and their prices were cheaper than the others, but not anywhere near as cheap Cogent made it sound. Nothing wrong with that... unless you don't like the "tragedy of the commons" effect.

Indeed, since then, instead of attracting their ideal customers (following what I called in the paper the "focus on retail" strategy -- get customers that pay $1000 for a 100Mbps and only use 1-2% of it), Cogent got much much more of the opposite -- "wholesale" customers that can really fill up the pipe, while still paying a flat $3,000 for a 100Mbps or $10,000 for 1Gbps pipe. And of course it's a self re-enforcing cycle, because the more that happens, the less attractive it becomes to any other kind of traffic. Now recall that 2-d table showing their profit margin as a function of utilization of the pipes, and transit/peer ratio of the traffic... Thus, basically from 2001 onward, they were going toward the bottom of that table (higher utilization), where it's mostly red. Which can't possibly go on forever right?

In principle it can't, unless they last long enough to move to the left of the table as well, i.e. reducing their transit/peering ratio. In other words, the other solution mentioned in the paper, the "buy their way into Tier-1 status" approach. Well they tried. Naturally the incumbent Tier-1s had no desire to admit them into the club, anymore than Rome would've opened the gates for barbarians. But would it be possible for Cogent to force it's way in? The only way is if you have a large enough customer base that you can go to Level 3, AT&T, Sprint & co and argue: "Hey you need to get to my customers as much as I need to get to yours, so let's be peers." Once you've done that with each one of them, then you are a Tier 1. In recent years only ATDN, the transit backbone of AOL has succesfully completed that series of moves.

Unfortunately for Cogent's hopes of muscling into the Tier-1 club, most of their customers were wholesale buyers that were multi-homed, i.e. had at least one other transit provider. Which is just common sense from the buyer's point of view, you want to shovel as much traffic as possible into the cheap Cogent pipe that has a flat rate, but for sensitive or "premium" customer traffic, you want the option to route through another better quality transit provider where you pay by usage. Given that situation, theoretically if Big Transit Provider X decides to "dis-peer" its network from Cogent's, the main thing that will happen is that Cogent customers will be pissed at Cogent for making them use their expensive other transit to get to those destinations (and to Cogent customers it appears like X is still "up" but Cogent is not giving them full Internet transit).

So guess what ATDN did when they were safely in the Tier-1 club? In Dec 2002, they dis-peered Cogent! (Its one of those clubs where you have to close the door behind you). Meanwhile those red numbers were piling up for our protagonist. By 2003 it was on the verge of going bankrupt and eventually it essentially did go bankrupt (I'm no accountant but I think what happened was they couldn't pay for their vendor-financed routers from Cisco so they gave Cisco a whole bunch of equity instead -- if you have any friends who owned pre-2003 Cogent equity, ask them... Then again, maybe you shouldn't remind them). But even as the company ha done foot in the grave, they kept selling those GigE pipes at $10,000/month, and it was still the cheapest bandwidth around, so their traffic volume continued to grow by leaps and bounds, making them one of the largest backbones in terms of traffic carried. By 2005, Cogent had grown up and was really pushing to the left, on that table. But Level 3 was threatening to de-peer (as was revealed later, negotiations had started in July) and they were big enough that that would push Cogent far over to the right. In an attempt to get more leverage against Level 3, in August 2005, Cogent reps started contacting Level 3 customers and offering them insanely low prices, even lower than their traditional "disruptive pricing", but only for Level 3 customers. Finally, in October, Level 3 called their bluff and before you knew it, Cogent was down, and there was no doubt as to who was Tier-1 and who wasn't. For more on the tactical details of this particular incident here's my opinion on the Level 3/Cogent peering disput of 2005.

So what now? Cogent is still losing money. But, there's one important variable working in their favor. Bandwidth prices have been declining more or less steadily at 30% decline per year for the last 3 decades. So now, typical transit prices went from $150-$200/Mbps/month in 2001 are now in the $15-30 range. So the good news for Cogent is that they may finally start making a profit on bandwidth! But the bad news is the marketing advantage of their "disruptive pricing" has shrunk dramatically. Today Cogent is just another transit provider, a bit cheaper and with a lingering reputation for lower quality among large backbones..

All the money they lost in the past by being cheaper does not seem buy them any competitive advantage today. It simply was a giant exercise in transforming the savings of little old ladies (the shareholders) into sports cars for porn webmasters (the heavy users who managed to get wholesale bandwidth below the true cost for a few years). Oh and Cisco ended up owning one of the major competitors of all their other main customers... Oops!

I think the moral of the story is that IP transit is a commodity, you can compete based on price and quality (or you can bundle it with other services and make it a non-wholesale product, like a CDN, hosting, managed services etc. but that's a whole other story). But there's no point in trying to build market share by selling below market (unlike the case with say software). When it's a commodity, sophisticated buyers (multi-homed, with their own ASN and IP address allocation, and connecting in carrier neutral facilities) will just arbitrage -- enjoy your early losses and leave you if you ever try reap the higher profits.

Nemo propheta in patria sua?

The bible says: No one is a prophet in his homeland (Luke 4:24 , John 4:44). This is one of my favorite proverbs. I first heard it in the Bob Marley song Survival, towards the end he says: A good man is never honored in his own country. In the Latin version (the title of this entry), it says literally: Nemo is a prophet in his own country, hehe... but I digress.

Today that proverb is about to be tested -- for a good man is now seeking honor (in the form of elective office) from the people of his own country. In Bangladesh Muhammad Yunus has entered politics. If I had to draw up a list of people on earth who should be in politics for the benefit of mankind, then this guy would definitely be near the top. Good luck sir!

Rift Valley Fiber Optic Network

Super STAR

Once again, the mainstream media have miserably failed the world. We've patiently waited, but more than 4 months after September 19, 2006, acres of newsprint and billions of bytes have been devoted to Bush's speech at the UN, to the coup in Thailand, even to "the hearty souls around the globe who joined in the fun on Talk Like A Pirate Day 2006" for God's sake... but there has been almost no mention of perhaps the most significant event of that fateful day of September 19, 2006: the awarding of United States patent 7110977.

One exception should be noted, the mighty NYSTAR News. Defying the editorial decisions of such giants as the New York Times and Wall Street Journal, who during that autumn went with the aforementioned stories and more meaningless verbiage about the upcoming 2006 US federal elections, the fearless newsletter of the New York State Office of Science, Technology and Academic Research, uncovered the historic gem of a story: "Nemo Semret and Aurel Lazar were awarded a patent for systems and methods for allocating resources using spot market and derivative market techniques. The patent was assigned to The Trustees of Columbia University in the City of New York", wrote that paragon of prescient journalism. Three cheers for the NYSTAR News: hip hip... hooray! Etc.

1 billion, 100, infinity

Save 1 billion lives, live to be 100 years old, and then die... what a life! Henry Beachell

Google and wisdom of crowds

Google is Putting crowd wisdom to work. Seems like all the great ideas take about 10 years longer than expected. Of course there was Admiral Ponidexter's terrorism prediction market which was suggested after Sept 11... I first heard if as "Idea Futures", way back in the mid-90s, which someone was goingn to commercialize, but somehow it never worked out. Oh wait ... Foresight Exchange

Google is taking all these good ideas lying around. I guess that's the real secret. Innovation is not like a gold rush, the ideas are there in plain sight. You just have to pick them up one by one, when you are ready, and polish them up. Of course it helps if you are very smart, and have an unbelievable cash flow because you were disciplined about your first idea.

So the question now is, why can't Google use the "wisdom of crowds" inherent in the search engine? Of course selling search ads is a form of that. But I mean in the predictive sense. To take a very crude example, if you know the key words searched by people from a particular company, then that could tell you something about what that company is doing. Not in any direct way of course like: the CEO searched for "bankrupcy law". But in a massive way with tiny correlations being detected in mountains of data.... Oh wait how do we know they are not already doing it?

Chaos theory: from A-nuak to Z-end

I just came across this item in Google news: "Anuak Minorities Facing Insecurity and Terror in Ethiopia", an editorial in Al Jazeerah by Keith Harmon Snow. As I read this editorial, I went from genuine dismay at what is going to skepticism. The timing of this editorial is a bit suspect. He wrote this report for UNICEF more than a year ago, why didn't UNICEF publicize it? Probably because it was not objective. The author definitely seems to have an axe to grind. The guy clearly has been researching this issue -- see e.g. http://zmagsite.zmag.org/Jun2004/snow0604.html, and he raises huge issues, and I intend to read up a lot more on this.

But what's really alarming now is that the Anuak story is blending, or actively being blended into the Ethio-Somalia story. So the virus, that started out as just the Islamic Courts Union versus warlords of Mogadishu, morphed into ICU versus the transitional government of Somalia, then became the coming war between Ethiopia and Somalia, now all of a sudden has mutated into a much more ominous disease:

"The Pentagon and Ethiopian military are prosecuting an entirely invisible war in Somalia, and while persistently threatening, arresting and shooting Anuak men, the Ethiopian military has actually tried to conscript some Anuak men to fight for them in Somalia. This is not a war on terror it is a war of terror. Ethiopia's clandestine involvement in Eritrea is equally invisible, and Human Rights Watch has also documented the ongoing repression against the Oromo people in Ethiopia's Oromo State. Other minorities are being forcibly displaced to serve conservation or petroleum interests."

This is the story that is being told on Al Jazeera. SomaliNet.

I believe we may have already entered the chaotic phase. Not necessarily on the ground yet, in terms of full-scale war. But in the chaos theory sense: small actions will be reflected, and propagated in unpredictable manners, and along every ethnic and religious fault line in Ethiopia, amplified, multiplied, echoed, reverberated by the dynamics of the global crusade/jihad. Every time someone dies, their ethnicity or their religion will be tallied up, sliced and diced. How long before this leads to home grown religious death-squads, and ethnic militias?

wikipedia

I just read an article about wikipedia (New Yorker magazine, July 31, 2006. Alongside the usual praise, it captures some pretty good criticisms:

"Wikipedia has gone from a nearly perfect anarchy to an anarchy with gang rules."

"...infested with moonbats."

"...the open-source model is simply inapplicatible to an encyclopedia. For Software, there is an objective standar: either it works or it doesn't. There is no such test for truth."

Hmmmmm. Aren't we forgetting that other pillar of epistomiological virtue? Popper would say there's natural selection, the market, and ... voting.

So why not add voting to Wikipedia? Like Digg, each article would be voted on by users, and therefore have a score. Each reader would get a binary vote, thumbs up (+1) or thumbs down (-1). Uniqueness of votes can be easily enforced by IP address for each article. The article's score is then simply the sum of all the votes (+1 and -1). This score would of course help the reader adopt the appropriate degree of scepticism.

But the score could also be used in a derivative way. One of the problems on Wikipedia is situations where two contributors get into a big battle if repeteadly deleting the other's changes because say the article is on a controversial topic, or simply because whoever is wrong is stubborn or fanatical... Well each contributor could have a an editor rank based on the value they have added to articles they haved edited in the past (which would be something like the average change in score of the articles before and after their edits), and presto, in a dispute, the person with the higher rank, which should the one proven more reliable over time, wins! Truth wins, and Wikipedia lives happily ever after....

Seems simple enough... Why not? Imagime Ebay without the seller rankings... Yaiks.