I dont usually comment on an individual news event unless it has a broader meaning, but i could not help to do so with the acquisition of woot by amazon a few months ago for a reported $110M. especially since we were on the grouponomics topic anyway.
For one - i love woot. I bought my first digital camera from them years ago ("you've seen the best, now try the rest" was the product description). They are a much hipper, quirkier, less sexy version of groupon that pioneered the deal of the day concept. If you have the time, you should read CEO Matt Rutledge's view on the Amazon purchase. Among other things they did the deal "every company that becomes a subsidiary gets two free downloads until the end of July" and that Woot's employees are partnering with Amazon, the "billion-dollar company that could buy and sell each and every one of you like you were office furniture." They headquarter a few miles my place (another plus), and mastered the art of selling junk and "over-witting" most other sites with their beat writing skills. Its too bad groupon built a better business model, but I don't expect the wooters to care too much. They expect to be profitabile in 2043.
But Amazon certainly will. It's early to tell, but i like Amazon's acquisition strategy so far. They are gobbling up highly unique companies with extremely loyal customers (they bought Zappos for $1B and Audible.com for $300M recently). Amazon has mastered the logistics of online commerce - I for one was a huge doubter when they spent hundreds of millions in the early 00s to build distribution centers. But it worked, they executed well. And I think they see the marriage between their operating excellence with great online sales models of the companies they are acquiring.
So i'll give Amazon a "woot" for their strategy - let's see how it plays out. As for woot fans like myself, don't fret about upcoming changes. The site will "continue to be an independently operated company full of horrible, useless products and an untalented jerkface writing staff, same as it ever was."
15 September 2010
03 September 2010
grouponomics - is the search over ?
Its no secret that the advertising landscape is changing. Newspapers are folding one by one. TV content and advertising is moving online. I just got an ESPN magazine offer for 96% off the cover price, and it's still 4% too high for me to pull the trigger. We know where the lion share of the shift is going. Google's run-rate revenue based on its last quarter is a whopping $24B. But has Google's core business peaked ? Is paid search advertising dead ? Already ?
A few weeks ago Groupon featured a fairly innocous deal of the day : "Gap $50 certificate for $25." It got almost 500,000 purchases, before they had to literally turn down the site. Nice way to reach a targeted audience (young, affluent, savvy) for Gap eh? Groupon's take: roughly $7.5M.
Groupon, a primarily local-advertising "deal of the day" website (and others like it) have become increasingly relevant. It charges anywhere from 30-50% of the advertised value per purchaser, with no upfront fees. Smart in my opinion - its the broker's model. Take nothing upfront and charge more than your service is worth on the backend for a product you know will move. It's a work of art - it's simple, scalable, and has tremendous upside when you take into consideration campaigns such as Gap. A pure money grab for Groupon if you ask me.
So was it worth it for Gap ? It cost them $40 a pop or ~$20M when you take into account the 50% discount they offered. Its debatable. Were these existing customers? Either way it came out of their fixed marketing budget. They took it out of tv, print, and perhaps Google search.
Others also see this shift in online advertising. Social marketing sites such as FB or Groupon have more captive eyeballs, higher conversion rates, and are cheaper (right now) than Google's PPC. In the case of Gap, they were guaranteed business (they paid per customer). I personally don't know if i'd trust a friend over google, but the number of users are startling -- FB is at 500 million; even Groupon is at 3M in just a few short years. Yahoo and AOL's search businesses are down sequentially, and Google's growth rates have slowed - so it's still unclear if paid search has already declined. Google could answer that question definitively for us as they use an auction model to price their search ads. If prices came down, so did demand.
I like Groupon's model than others because its easy for traditional advertisers to understand and its far more lucrative per user. Also, its a direct solicitation model (people know they are going to be "sold" something) versus companies like FB, where you have to trick people into being advertised. I read somewhere that a blueberry company paid Zynga to use their brand of blueberries in their Farmville game. That's ridiculous. And more importantly, harder to monetize.
I'll miss the kids jumping in Denim on TV, and i'm certainly not predicting the demise of Google. But Groupon just got $20M of Gap's budget in one day. So perhaps tomorrow's deal might be 50% off Google Ad Words for Organic Blueberries ?
YC6BAVAJTNVE
A few weeks ago Groupon featured a fairly innocous deal of the day : "Gap $50 certificate for $25." It got almost 500,000 purchases, before they had to literally turn down the site. Nice way to reach a targeted audience (young, affluent, savvy) for Gap eh? Groupon's take: roughly $7.5M.
Groupon, a primarily local-advertising "deal of the day" website (and others like it) have become increasingly relevant. It charges anywhere from 30-50% of the advertised value per purchaser, with no upfront fees. Smart in my opinion - its the broker's model. Take nothing upfront and charge more than your service is worth on the backend for a product you know will move. It's a work of art - it's simple, scalable, and has tremendous upside when you take into consideration campaigns such as Gap. A pure money grab for Groupon if you ask me.
So was it worth it for Gap ? It cost them $40 a pop or ~$20M when you take into account the 50% discount they offered. Its debatable. Were these existing customers? Either way it came out of their fixed marketing budget. They took it out of tv, print, and perhaps Google search.
Others also see this shift in online advertising. Social marketing sites such as FB or Groupon have more captive eyeballs, higher conversion rates, and are cheaper (right now) than Google's PPC. In the case of Gap, they were guaranteed business (they paid per customer). I personally don't know if i'd trust a friend over google, but the number of users are startling -- FB is at 500 million; even Groupon is at 3M in just a few short years. Yahoo and AOL's search businesses are down sequentially, and Google's growth rates have slowed - so it's still unclear if paid search has already declined. Google could answer that question definitively for us as they use an auction model to price their search ads. If prices came down, so did demand.
I like Groupon's model than others because its easy for traditional advertisers to understand and its far more lucrative per user. Also, its a direct solicitation model (people know they are going to be "sold" something) versus companies like FB, where you have to trick people into being advertised. I read somewhere that a blueberry company paid Zynga to use their brand of blueberries in their Farmville game. That's ridiculous. And more importantly, harder to monetize.
I'll miss the kids jumping in Denim on TV, and i'm certainly not predicting the demise of Google. But Groupon just got $20M of Gap's budget in one day. So perhaps tomorrow's deal might be 50% off Google Ad Words for Organic Blueberries ?
YC6BAVAJTNVE
24 August 2010
the rise of starbucks and its business philosophy
One of my primary goals on Atma is to write about the intersection of sound philosophical principles with successful emerging business models. Its my core belief that business, grounded by moral values, is the most efficient way to improve society.
Starbucks is prime model of this philosophy. With the rise of the gen-y (and beyond) generation into the business world, you see profit as not the sole motive behind corporate actions (this could also be a cause of the free business model trend). Starbucks has taken the lead in many of the arenas - and they did it earlier than others and in a very old distribution medium.
First - let's commend starbucks on creating an innovative fast food concept. In a world of value menus and homogenous offerings, Starbucks brought the cafes of Verona to Hillsboro, TX (and even adopted it for drive-thrus). Somehow they were able to create a brand new successful fast casual concept that convinced the masses of the "third" place after work and home. Since perhaps Subway or some of the other sandwich chains, many have tried and few have been successful creating a large-scale sustainable business in this arena. They also taught us that a "tall" is really a "small".
Second - They did it right (see caveat below). They kept an uber-focus on quality from raw material sourcing to the end to end customer experience. They successfully balanced an offering that could be replicated throughout the country with an individual customer experience. They didn't compete on price, they made coffee shops cool everywhere, and grew the entire industry. Indepedent coffee shops actually grew 40 percent during 2000-2005 (the starbucks boom period). They never franchised (which would have helped profit), used only cash from operations to open new stores, and grew solely through word of mouth (didn't spend a dime on advertising until recently).
Third - They did good. They instilled the NW vibe throughout their business. They were the first company to offer health care to all employees (including part-time). Although expensive (particularly starting out, VCs didnt like it), they never wavered on this point. All of their beans are bought at prices HIGHER than commodity rates through fair trade (and generally direct from producers); they spend alot of time and effort to help the small plantations throughout the world. They have a foundation thats fairly large in helping the communities they impact.
Overall - I think Howard Schultz did good job of taking care of their employees, community and building a game changing business. CAVEAT: Sure there were issues that people can point to during their expansion years (reports of predatory pricing,etc..), but by in large, the benefits they created far outweigh the negatives. And I know that in the present, from a business standpoint, they face tremendous challenges (over expansion, increased competition). But at the end of the day - they built the business soundly from a business and cultural standpoint, and I think they will endure.
Let's hope Google truly "does no evil" and the next generation of big business embraces the Starbucks way. I think its a model that can work and hope its the rule and not the exception.
Starbucks is prime model of this philosophy. With the rise of the gen-y (and beyond) generation into the business world, you see profit as not the sole motive behind corporate actions (this could also be a cause of the free business model trend). Starbucks has taken the lead in many of the arenas - and they did it earlier than others and in a very old distribution medium.
First - let's commend starbucks on creating an innovative fast food concept. In a world of value menus and homogenous offerings, Starbucks brought the cafes of Verona to Hillsboro, TX (and even adopted it for drive-thrus). Somehow they were able to create a brand new successful fast casual concept that convinced the masses of the "third" place after work and home. Since perhaps Subway or some of the other sandwich chains, many have tried and few have been successful creating a large-scale sustainable business in this arena. They also taught us that a "tall" is really a "small".
Second - They did it right (see caveat below). They kept an uber-focus on quality from raw material sourcing to the end to end customer experience. They successfully balanced an offering that could be replicated throughout the country with an individual customer experience. They didn't compete on price, they made coffee shops cool everywhere, and grew the entire industry. Indepedent coffee shops actually grew 40 percent during 2000-2005 (the starbucks boom period). They never franchised (which would have helped profit), used only cash from operations to open new stores, and grew solely through word of mouth (didn't spend a dime on advertising until recently).
Third - They did good. They instilled the NW vibe throughout their business. They were the first company to offer health care to all employees (including part-time). Although expensive (particularly starting out, VCs didnt like it), they never wavered on this point. All of their beans are bought at prices HIGHER than commodity rates through fair trade (and generally direct from producers); they spend alot of time and effort to help the small plantations throughout the world. They have a foundation thats fairly large in helping the communities they impact.
Overall - I think Howard Schultz did good job of taking care of their employees, community and building a game changing business. CAVEAT: Sure there were issues that people can point to during their expansion years (reports of predatory pricing,etc..), but by in large, the benefits they created far outweigh the negatives. And I know that in the present, from a business standpoint, they face tremendous challenges (over expansion, increased competition). But at the end of the day - they built the business soundly from a business and cultural standpoint, and I think they will endure.
Let's hope Google truly "does no evil" and the next generation of big business embraces the Starbucks way. I think its a model that can work and hope its the rule and not the exception.
06 August 2010
my favorite emerging business model......free
LinkedIn and Facebook are the next blockbuster IPO candidates. LinkedIn's recent equity investment valued them somewhere around $2B an (on reported revenues of $200M). Facebook is worth around $35B based on a recent private transaction on revenues less than $750M. So with eyepopping valuations resembling the late 90's, guess what is most startling to me ?
The fact that LinkedIn has $200M of revenues. Or Facebook makes a dime on the topline. How ? Where does linkedin make money? It's not from me. I dont know anyone that has a premium membership or even knows what services it provides. How many web marketing people that you know pay for advertising on Facebook ? Profiles and chats and most of the useful marketing tools are free. Even for corporations. Really ? $200M?
As i've watched web businesses mature and the market move from internet bubble to web 2.0, i've wondered how all of the things we use most are..well free. As a consumer, its great. Ten years ago, i could never have imagined all of the information and services I have at my fingertips -- all real-time, and all free.
GPS? No need to attach one to your car thanks to Google. Mail ? Gmail and FTP sites. TV ? Justintv. Product Reviews? C-Net. Stock quotes? Name your site. Found my house on zillow. Movies and Music ? Uh - my attorney won't let me answer that one :). Just think of all the tools you use on a recurring basis and how much money you spend on these items. My guess is that you won't need both your hands to count the outflows.
Craigslist was the first to puzzle me. How in the world could they displace the entire classified ad industry (which was actually the only place newspapers made money) for free ? It took down most of the local newspapers and really got nothing in return. Ebay bought a stake years ago, tried to make money, and Craig and company sued them. They actually sued them for trying to make money! EBay backed off.
Wikipedia. I have no idea the level of accuracy that Wiki offers, but I don't think it matters. It's the most used reference source in the world. No need for encyclopedias. No reason to pay for some specialized website to attain what you are looking for.
I love it. It still never ceases to amaze me. But to all my readers out there (because i have so many), this is the best its going to get. Get ready to reach for your wallets. NBC, part-owner of Hulu.com, implied they are going to start charging for content. Google and Verizon are in talks on how to priortize net traffic (see my post on net neutrality). Facebook and LinkedIn will get some serious pressure from either private or public investors to monetize their huge membership base. Google will start charging for some of its services once their near-monoplistic search ad rates come down.
But until then, let's consume as much free content and services we can. If only there were a free site that turned my stock portfolio into something recession-proof...
The fact that LinkedIn has $200M of revenues. Or Facebook makes a dime on the topline. How ? Where does linkedin make money? It's not from me. I dont know anyone that has a premium membership or even knows what services it provides. How many web marketing people that you know pay for advertising on Facebook ? Profiles and chats and most of the useful marketing tools are free. Even for corporations. Really ? $200M?
As i've watched web businesses mature and the market move from internet bubble to web 2.0, i've wondered how all of the things we use most are..well free. As a consumer, its great. Ten years ago, i could never have imagined all of the information and services I have at my fingertips -- all real-time, and all free.
GPS? No need to attach one to your car thanks to Google. Mail ? Gmail and FTP sites. TV ? Justintv. Product Reviews? C-Net. Stock quotes? Name your site. Found my house on zillow. Movies and Music ? Uh - my attorney won't let me answer that one :). Just think of all the tools you use on a recurring basis and how much money you spend on these items. My guess is that you won't need both your hands to count the outflows.
Craigslist was the first to puzzle me. How in the world could they displace the entire classified ad industry (which was actually the only place newspapers made money) for free ? It took down most of the local newspapers and really got nothing in return. Ebay bought a stake years ago, tried to make money, and Craig and company sued them. They actually sued them for trying to make money! EBay backed off.
Wikipedia. I have no idea the level of accuracy that Wiki offers, but I don't think it matters. It's the most used reference source in the world. No need for encyclopedias. No reason to pay for some specialized website to attain what you are looking for.
I love it. It still never ceases to amaze me. But to all my readers out there (because i have so many), this is the best its going to get. Get ready to reach for your wallets. NBC, part-owner of Hulu.com, implied they are going to start charging for content. Google and Verizon are in talks on how to priortize net traffic (see my post on net neutrality). Facebook and LinkedIn will get some serious pressure from either private or public investors to monetize their huge membership base. Google will start charging for some of its services once their near-monoplistic search ad rates come down.
But until then, let's consume as much free content and services we can. If only there were a free site that turned my stock portfolio into something recession-proof...
22 July 2010
The changing of the guard -- Music for the Masses ?
Old problem, but worth analyzing in the context of today's business climate.
Remember when people used to work for IBM for 30 years and get a pension and stability for life. Even before that, during the days of henry ford and standard oil, sons and fathers worked side by side providing sanctuary for multiple generations. But that's all changed now. 401(k)s aren't even matched at most companies now. The US is not even the undisputed economic powerhouse anymore.
Google IPO'd about 5 years ago, and wasn't even around 10 years ago. Now they are the biggest name on the planet. Just as everyone's darling Apple surpassed Microsoft as the world's most valuable tech company, they are falling behind in the mobile and tv content markets. E-books passed hardback sales last quarter for the first time. There are no safe havens anymore. No time clocks.
As a free market technologist - I love it. Big companies must stay on their toes. Thanks to technology, barriers of entry are dissipating. Fledgling startups can transform markets, give consumers what they actually want, and create meaningful jobs in their own right. There are so many david vs. goliath stories that it makes you feel warm inside and it feels like a tribute to what this country was built on. Hard work, entrepreneurism, and a true meritocracy.
The game has changed though. The level of sophistication required to play is so high, that most are kept out. These startups provide good jobs and have great cultures - but have you seen the profiles of who they hire ? High-level, educated engineers, marketeers, and product development guys (i think everyone has heard about google's grueling interview process).
So what about the folks in Detroit that lost their jobs ? Or even the lower to middle class folks that get a decent education, but not a top-notch one? You see this trend highlighted now in an era of ~10% unemployment. There are jobs to be had right now -- its just that most people don't qualify. And companies (rightly so) will not hire suboptimal candidates. They'd rather wait for the perfect one. Unfortunately - this creates a larger divide between the people that have access to education and techonology and those that don't. I believe this trend helps the wealthy and privileged at the expense of the poor and those without access to opportunities.
Also, the uber-Technology and automation today's society demands creates the kind of operating leverage for corporations that require less jobs. The assembly lines are obviously disappearing, but even more so, much of the heavy lifting is done by software/hardware platforms. Especially back office functions like processing, payroll, even picking and delivery in some cases. Just by sheer numbers, the Googles and Facebooks of the world will require less employees than IBM or Standard Oil back in the days. Sure, the US can compete for foreign business - but its just a first mover advantage. Other countries will surely follow suit and look for business here in the US.
So the trend is that the US requires less jobs and are now raising the bar on quality jobs to the elite or those with access. Who's going to fill the void? Obamacare? I want to see the middle class thrive not divide. From a jobs standpoint, isn't technology creating more "have-nots" versus "haves"?
So what's the solution? I want to see upstarts thrive. I hate beauracracy and inefficiency more than most people. But how can these upstarts create the breadth of jobs that fit the demographics of the US population? How will they help the millions that are having difficulty transitioning from the old guard to the new guard?
Remember when people used to work for IBM for 30 years and get a pension and stability for life. Even before that, during the days of henry ford and standard oil, sons and fathers worked side by side providing sanctuary for multiple generations. But that's all changed now. 401(k)s aren't even matched at most companies now. The US is not even the undisputed economic powerhouse anymore.
Google IPO'd about 5 years ago, and wasn't even around 10 years ago. Now they are the biggest name on the planet. Just as everyone's darling Apple surpassed Microsoft as the world's most valuable tech company, they are falling behind in the mobile and tv content markets. E-books passed hardback sales last quarter for the first time. There are no safe havens anymore. No time clocks.
As a free market technologist - I love it. Big companies must stay on their toes. Thanks to technology, barriers of entry are dissipating. Fledgling startups can transform markets, give consumers what they actually want, and create meaningful jobs in their own right. There are so many david vs. goliath stories that it makes you feel warm inside and it feels like a tribute to what this country was built on. Hard work, entrepreneurism, and a true meritocracy.
The game has changed though. The level of sophistication required to play is so high, that most are kept out. These startups provide good jobs and have great cultures - but have you seen the profiles of who they hire ? High-level, educated engineers, marketeers, and product development guys (i think everyone has heard about google's grueling interview process).
So what about the folks in Detroit that lost their jobs ? Or even the lower to middle class folks that get a decent education, but not a top-notch one? You see this trend highlighted now in an era of ~10% unemployment. There are jobs to be had right now -- its just that most people don't qualify. And companies (rightly so) will not hire suboptimal candidates. They'd rather wait for the perfect one. Unfortunately - this creates a larger divide between the people that have access to education and techonology and those that don't. I believe this trend helps the wealthy and privileged at the expense of the poor and those without access to opportunities.
Also, the uber-Technology and automation today's society demands creates the kind of operating leverage for corporations that require less jobs. The assembly lines are obviously disappearing, but even more so, much of the heavy lifting is done by software/hardware platforms. Especially back office functions like processing, payroll, even picking and delivery in some cases. Just by sheer numbers, the Googles and Facebooks of the world will require less employees than IBM or Standard Oil back in the days. Sure, the US can compete for foreign business - but its just a first mover advantage. Other countries will surely follow suit and look for business here in the US.
So the trend is that the US requires less jobs and are now raising the bar on quality jobs to the elite or those with access. Who's going to fill the void? Obamacare? I want to see the middle class thrive not divide. From a jobs standpoint, isn't technology creating more "have-nots" versus "haves"?
So what's the solution? I want to see upstarts thrive. I hate beauracracy and inefficiency more than most people. But how can these upstarts create the breadth of jobs that fit the demographics of the US population? How will they help the millions that are having difficulty transitioning from the old guard to the new guard?
08 July 2010
Keep Fair Trade Fair.
I've always been a huge proponent of capital-based social ventures. Since free-market systems generally result in more efficient allocation of resources, it only makes sense that the same principals would extend to the non-profit/community realm. For years, self-made billionaires have used market based strategies to combat poverty, eradicate diseases, and create world class educational institutions. The Gates Foundation is a perfect example as their lofty goals are being realized utilizing a rigid, corporate-based approach to management (They are also quietly building an elite club to encourage the wealthy to give away their billions). The hope is that business rigor will result in superior results versus traditional non-profit entities.
For years I've been tracking microfinance, social VC's, nonprofits and other social ventures. Something i've been hearing about recently are so-called Fair Trade companies. There are national and international standards that ensure compliance to ensure the production of goods are fair-wage, eco friendly, and a whole host of other goals. There's one I really like called the world of good that recently sold to ebay; the founders spent most of their time traveling the world to buy products directly from local artisans. They helped the poor of the poor with access to worldwide consumers while ensuring the artisan the lion's share of the profit on a sale. From a consumer standpoint, it gives them a clear alternative to mass-produced, homogenized goods.
A win win win.
But i get a bit skeptical when i hear new buzzwords being quoted everywhere. And "fair trade" seems to be the mot du jour. Just this morning I heard a story on NPR about an African born, US raised man go back to Africa to build a factory and sell "fair-trade" t-shirts. Is this becoming just a marketing ploy (vis-a-vis "green" technology) ? Has it become merely a new entrepreneurial opportunity? Will the altruistic focus lose out to an extra $1 of profit per product?? Let's hope not. For the artisan's sake. And for the sake of poverty alleviation.
You are already starting to see this in other social entrepreneurial realms. You hear about usury interest rates and unfair lending practices in microfinance. This sector has now become so profitable, that all big banks are jumping into the fray. The first microfinance IPO took place with SKS in India. When push comes to shove, will a publicly traded company succumb to the demannds of investors or of the small business owners ? I think the answer is obvious.
Let's be optimistic and hope that Fair Trade blows up just like microfinance did. Let's hope millions of small artisans and entrepreneurs around the world gain access to the worldwide consumer. And let's hope the flailing Fair Trade companies do not think profit first, fair trade second. Let's hope they keep Fair Trade Fair. The beauty is the consumer ultimately decides. It should continually demand transparency and rigorous standards.
For years I've been tracking microfinance, social VC's, nonprofits and other social ventures. Something i've been hearing about recently are so-called Fair Trade companies. There are national and international standards that ensure compliance to ensure the production of goods are fair-wage, eco friendly, and a whole host of other goals. There's one I really like called the world of good that recently sold to ebay; the founders spent most of their time traveling the world to buy products directly from local artisans. They helped the poor of the poor with access to worldwide consumers while ensuring the artisan the lion's share of the profit on a sale. From a consumer standpoint, it gives them a clear alternative to mass-produced, homogenized goods.
A win win win.
But i get a bit skeptical when i hear new buzzwords being quoted everywhere. And "fair trade" seems to be the mot du jour. Just this morning I heard a story on NPR about an African born, US raised man go back to Africa to build a factory and sell "fair-trade" t-shirts. Is this becoming just a marketing ploy (vis-a-vis "green" technology) ? Has it become merely a new entrepreneurial opportunity? Will the altruistic focus lose out to an extra $1 of profit per product?? Let's hope not. For the artisan's sake. And for the sake of poverty alleviation.
You are already starting to see this in other social entrepreneurial realms. You hear about usury interest rates and unfair lending practices in microfinance. This sector has now become so profitable, that all big banks are jumping into the fray. The first microfinance IPO took place with SKS in India. When push comes to shove, will a publicly traded company succumb to the demannds of investors or of the small business owners ? I think the answer is obvious.
Let's be optimistic and hope that Fair Trade blows up just like microfinance did. Let's hope millions of small artisans and entrepreneurs around the world gain access to the worldwide consumer. And let's hope the flailing Fair Trade companies do not think profit first, fair trade second. Let's hope they keep Fair Trade Fair. The beauty is the consumer ultimately decides. It should continually demand transparency and rigorous standards.
11 June 2010
Neutral on Net Neutrality
As detailed in my previous entry, I’m an open source guy. I argued that it was the right approach for consumers overall as well as a long-term strategy to maximize profits. It would be logical for me to also support net neutrality. Placing a toll on certain internet traffic (or at a minimum prioritization) seems heavy handed. Particularly since so few companies would benefit (ATT, Comcast) in relation to the thousands that could be adversely impacted.
I worked several years at a competitive telecom service provider, so this issue was always front and center. This hurts smaller companies (particularly service providers) so it was a no brainer. It seems the latest ruling in DC was a big blow for net neutrality supporters, but I think the debate will continue for at least a few more years. Unfortunately, I think the law of deep pockets will probably prevail as they generally do when Washington and politics are involved.
For those that are not familiar with the issue at hand: AT&T and others want to have the right to optimize their networks by potentially reducing speeds and priority on bandwidth-intensive traffic. Opponents think traffic should not be regulated -- They say it’s a moral issue. But lets face it, for people like google, its more than just “do no evil.” Imagine a scenario where the few gatekeepers to the consumer’s internet access (ie. your internet service provider) could actually prioritize traffic, charge users for accessing certain content, or in an extreme situation, filter traffic. Hulu or YouTube would need to forge partnerships (read: pay) the likes of AT&T and Comcast to keep their traffic on par with other traffic. This would be fine for companies like Google or Apple that can afford to do so, but what about the millions of upstarts that don’t have that luxury ? Would users be now charged to access Facebook for example? Does this now seem to sound like that red far east country that the US reprimands for filtering internet traffic?
This puts more power in the hands of fewer companies as consolidation has hit the telecom providers (Ma Bell is back). What’s even worse is that these oligarchs are buying content providers which gives a greater incentive to censor traffic (Comcast is buying NBC). Do you think ESPN.com will be placed in the same light as say MSNBC ? Is that right ? No. We as consumers should choose our content, not our ISPs. The ISP should just be the “dumb” pipes that we pay for to access the internet. Sure they would make ESPN available, but it would be as difficult as using Google on new laptops. You have to go out of your way to disable the “ask” or “bing” toolbar and install the google one. It’s not terribly easy and people really don’t “opt-in” when that is their option. Something about this large telco utopia just doesn’t seem right.
But, from an Atma standpoint, is this the right position to take ? From an ISP perpsective, they have a decent gripe about net neutrality. They are spending billions of dollars upgrading their networks and have the right to optimize their networks since they own them. It would be one thing if the internet pipes were the legacy networks that were laid by the US government, but they are not. Building “always on” robust internet networks to fulfill the needs of our ever increasing bandwidth demands are not cheap. Our $50/mo hardly covers the cost of these capital expenditures.
And they are not getting subsidized by anyone. Why shouldn’t they be allowed to charge what they want? If applications like Napster are putting such a strain on their networks, why can’t they route that traffic differently in order to optimize their network performance?
Moreover, what happened to all the alternative internet sources that were supposed to compete with ATT ? Wireless? Ethernet over power? To a certain extent, wireless (over 3G/4G networks) has become a viable alternative, but this factor hasn’t increased competition. The same companies that provide internet to your home also do so over your mobile (ATT, Verizon). My point is, although I don’t like the idea of having a few providers with this potential power to control our internet experience, they are the ones with skin in the game. Other competitiors have not been viable – why hasn’t any true alternatives surfaced? In a free market system, you follow the flow of money. And unfortunately, the money, in this case, has come from the companies we love to hate.
So where do you stand on net neutrality and why? I’ve been so trained to believe that it is of utter importance for the US to maintain its neutrality stance, but I’m wondering if this has the effect of enabling freeloaders to benefit from others’ investments. I don’t think there is an easy answer. My sense is the optimal position would be that net neutrality be maintained but that the large telcos are allowed to charge more based on bandwidth usage versus a flat fee we enjoy now (ATT just enacted this for thier wireless networks). In the end, I think it will cost us as consumers a bit more, but the current subsidized pricing model is just not sustainable in the long-term anyway. I’m quite surprised that I actually see myself siding with the ATTs of the world a little bit, but perhaps that’s what happens when you stay away too long from an entrepreneurial environment.
I worked several years at a competitive telecom service provider, so this issue was always front and center. This hurts smaller companies (particularly service providers) so it was a no brainer. It seems the latest ruling in DC was a big blow for net neutrality supporters, but I think the debate will continue for at least a few more years. Unfortunately, I think the law of deep pockets will probably prevail as they generally do when Washington and politics are involved.
For those that are not familiar with the issue at hand: AT&T and others want to have the right to optimize their networks by potentially reducing speeds and priority on bandwidth-intensive traffic. Opponents think traffic should not be regulated -- They say it’s a moral issue. But lets face it, for people like google, its more than just “do no evil.” Imagine a scenario where the few gatekeepers to the consumer’s internet access (ie. your internet service provider) could actually prioritize traffic, charge users for accessing certain content, or in an extreme situation, filter traffic. Hulu or YouTube would need to forge partnerships (read: pay) the likes of AT&T and Comcast to keep their traffic on par with other traffic. This would be fine for companies like Google or Apple that can afford to do so, but what about the millions of upstarts that don’t have that luxury ? Would users be now charged to access Facebook for example? Does this now seem to sound like that red far east country that the US reprimands for filtering internet traffic?
This puts more power in the hands of fewer companies as consolidation has hit the telecom providers (Ma Bell is back). What’s even worse is that these oligarchs are buying content providers which gives a greater incentive to censor traffic (Comcast is buying NBC). Do you think ESPN.com will be placed in the same light as say MSNBC ? Is that right ? No. We as consumers should choose our content, not our ISPs. The ISP should just be the “dumb” pipes that we pay for to access the internet. Sure they would make ESPN available, but it would be as difficult as using Google on new laptops. You have to go out of your way to disable the “ask” or “bing” toolbar and install the google one. It’s not terribly easy and people really don’t “opt-in” when that is their option. Something about this large telco utopia just doesn’t seem right.
But, from an Atma standpoint, is this the right position to take ? From an ISP perpsective, they have a decent gripe about net neutrality. They are spending billions of dollars upgrading their networks and have the right to optimize their networks since they own them. It would be one thing if the internet pipes were the legacy networks that were laid by the US government, but they are not. Building “always on” robust internet networks to fulfill the needs of our ever increasing bandwidth demands are not cheap. Our $50/mo hardly covers the cost of these capital expenditures.
And they are not getting subsidized by anyone. Why shouldn’t they be allowed to charge what they want? If applications like Napster are putting such a strain on their networks, why can’t they route that traffic differently in order to optimize their network performance?
Moreover, what happened to all the alternative internet sources that were supposed to compete with ATT ? Wireless? Ethernet over power? To a certain extent, wireless (over 3G/4G networks) has become a viable alternative, but this factor hasn’t increased competition. The same companies that provide internet to your home also do so over your mobile (ATT, Verizon). My point is, although I don’t like the idea of having a few providers with this potential power to control our internet experience, they are the ones with skin in the game. Other competitiors have not been viable – why hasn’t any true alternatives surfaced? In a free market system, you follow the flow of money. And unfortunately, the money, in this case, has come from the companies we love to hate.
So where do you stand on net neutrality and why? I’ve been so trained to believe that it is of utter importance for the US to maintain its neutrality stance, but I’m wondering if this has the effect of enabling freeloaders to benefit from others’ investments. I don’t think there is an easy answer. My sense is the optimal position would be that net neutrality be maintained but that the large telcos are allowed to charge more based on bandwidth usage versus a flat fee we enjoy now (ATT just enacted this for thier wireless networks). In the end, I think it will cost us as consumers a bit more, but the current subsidized pricing model is just not sustainable in the long-term anyway. I’m quite surprised that I actually see myself siding with the ATTs of the world a little bit, but perhaps that’s what happens when you stay away too long from an entrepreneurial environment.
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