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"The best minds of my generation are thinking about how to make people click ads," says Facebook research scientist Jeff Hammerbacher. "That sucks."
Online ads have been around since the dawn of the Web, but only in recent years have they become the rapturous life dream of Silicon Valley. Arriving on the heels of Facebook have been blockbusters such as the game maker Zynga and coupon peddler Groupon. These companies have engaged in a frenetic, costly war to hire the best executives and engineers they can find. Investors have joined in, throwing money at the Web stars and sending valuations into the stratosphere. Inevitably, copycats have arrived, and investors are pushing and shoving to get in early on that action, too. Once again, 11 years after the dot-com-era peak of the Nasdaq, Silicon Valley is reaching the saturation point with business plans that hinge on crossed fingers as much as anything else. "We are certainly in another bubble," says Matthew Cowan, co-founder of the tech investment firm Bridgescale Partners. "And it's being driven by social media and consumer-oriented applications." There's always someone out there crying bubble, it seems; the trick is figuring out when it's easy money -- and when it's a shell game. Some bubbles actually do some good, even if they don't end happily. This time, the hype centers on more precise ways to sell. So if this tech bubble is about getting shoppers to buy, what's left if and when it pops? "My fear is that Silicon Valley has become more like Hollywood," says Glenn Kelman, chief executive officer of online real estate brokerage Redfin, who has been a software executive for 20 years. "An entertainment-oriented, hit-driven business that doesn't fundamentally increase American competitiveness."
This Tech Bubble Is Different
US advertising sales will increase 1.8 percent in 2011, less than last year’s 3.2 percent, reflecting a slow recovery in the overall economy, according to MagnaGlobal, a unit of Interpublic Group. Excluding 2010 spending for the Olympic Games and political races, sales this year will rise 3.1 percent. Large advertisers will continue to shift spending to cable television networks from broadcast channels during the year, MagnaGlobal said. Cable spending will increase 10.8 percent, compared with 2.4 percent growth for broadcast networks.
US Advertising Sales to Grow by 1.8% This Year, MagnaGlobal Forecasts
The Federal Communications Commission is seeking public comment on the rates and compensation for video relay service (VRS) for the 2011-12 Interstate Telecommunications Relay Services (TRS) Fund (Fund) year. Specifically, the FCC seeks further comment on VRS market structure and compensation method proposals initially raised in a 2010 Notice of Inquiry related to the structure and practices of the VRS program. In addition, in the event the FCC is unable to fully resolve these issues prior to the beginning of the 2011-12 Fund year, it tentatively concludes that extending the current interim rates and compensation structure provides the best means to ensure stability and certainty for VRS while the FCC continues to evaluate the issues and the substantial record developed in response to this proceeding.
FCC Seeks Public Input on Video Relay Service
Sirius XM has implemented its merger condition to lease channels on a long term basis to entities not affiliated with the company. The leases, which represent four percent of the full-time audio channels on both the Sirius and XM platforms, help ensure consumers have programming options available to them on issues unique to their communities.
The lessees and their planned programming include:
Howard University (licensee of WHUR-FM and WHUT-TV)
- One channel each on Sirius and XM - Music and talk programming for the African American community
- One channel each on Sirius and XM - Music and talk programming for the African American community, with programs from Historically Black Colleges and Universities
BYU Radio (licensee of KBYU-FM and KBYU-TV)
- One channel each on Sirius and XM - Music and talk programming for the Mormon community
Eventus/National Latino Broadcasting
- One channel each on Sirius and XM - Spanish language talk programming
- One channel each on Sirius XM - Spanish language music programming
WorldBand Media
- One channel each on Sirius and XM - Spanish language talk programming
KTV Radio
- One channel on XM - Korean language music and talk programming
Sirius XM Delivers on Merger Condition Statement (Commissioner Clyburn) Sirius XM leases channels to minority communities (The Hill)
The New America Foundation, in cooperation with the Consumers Union, gathered representatives from the leading wireless services providers and consumers groups to discuss how requiring mobile broadband service providers to interoperate would affect consumer choice and pricing.
Currently, most mobile phones work with only a single network provider. After consumers end their contracts with a network provider, they are unable to use the phone on competing networks, even if the competitor uses the same mobile technology. “As the mobile industry becomes increasingly consolidated, interoperability between technologies will allow consumers to more freely move amongst the providers,” said Parul Desai, Communications Policy Counsel at the Consumers Union. Desai cited a recent survey conducted by the Consumers Union that found more than 80 percent of respondents wanted to be able to change their networks but keep their devices. Consumer groups, along with the wireless company Sprint have urged the Federal Communications Commission to mandate fourth generation wireless devices, which use the same band of spectrum to broadcast, be interoperable with each other. This would allow consumers to use a single device across different carriers as long as they use the same transmission technology, be it Long Term Evolution (LTE) or WiMax.
New America Foundation and Consumers Union Discuss Wireless Interoperability
Verizon Communications is trying to reverse DSL declines by eliminating early-termination fees and simplifying pricing for bundles that include DirecTV service -- although cancellation fees will still apply to the satellite TV operator's piece of the bundle. The telco said the new DSL strategy "represents a changed approach to structuring Verizon's copper-based bundles" rather than a limited-time promotion. The company lost almost 1.5 million digital subscriber line customers in 2010. Previously Verizon charged DSL subscribers early termination fees of $165 per year, prorated at $15 per month. However, customers who add DirecTV services to a Verizon bundle must sign a two-year agreement and early cancellation fees apply.
Verizon Eliminates Early Termination Fees For DSL
Although advertising industry groups are predictably resistant to any kind of regulation, their initial reactions to privacy legislations proposed by Sens John Kerry (D-MA) and John McCain (R-AZ) seem more muted than concerns they had prior to the bill’s introduction.
Big tech companies like Facebook, Microsoft, eBay, Hewlett-Packard and Intel expressed support for the bill. The trade groups are probably relieved about the absence of Do Not Track, which they fear encourages users to block all cookies and customization indiscriminately, and requires potentially costly support from ad servers, ad networks and sites. Apple is the latest browser maker to experiment with Do Not Track support, after Mozilla and Microsoft; Google favors an alternative approach that maintains user opt-outs.
Passage of the Kerry-McCain bill or something similar will have the following effects on the online media landscape:
- Online content sites: Don't call me a conspiracy theorist, but some traditional publishers like the Wall Street Journal might be perfectly happy without web-wide behavioral targeting. They could tout the value of their online/offline audience and promote contextual targeting and sponsorships. As noted, publishers would able to follow and target a user within their own site, which would benefit portals like Yahoo and AOL, which have huge audiences and broad variety of content.
- Online advertising ecosystem: The bill’s restrictive approach to behavioral targeting favors search advertising over display ad formats. It also weakens industry efforts to deliver attribution, i.e., understanding and valuing the longer-term effects of seeing brand advertising. The data sharing guidelines could force data miners (Experian, Audience Science, BlueKai) and ad networks (DoubleClick, ValueClick, 24/7 Real Media) to secure more formal contractual relationships with content sites that have registered users. And the legislation seems to leave room for third parties to take user info and create anonymized groups of targetable customer “types” based on demographics and behavior.
- Social targeting: Today, most third-party social targeters (Lotame, 33Across, Media6Degrees, Rapleaf) base their analysis on tracking user behavior with their own cookies, rather than getting access to API data from Facebook or Twitter. Legislation may make them pay for access, and even then, Facebook to-date has been stingy about data sharing. Likely it’s saving that targeting opportunity for itself.
Privacy Legislation’s Potential Impact on Online Media
With its plans to bring gigabit broadband to Kansas City, Kansas, Google is changing the fate of that city, but it’s also setting out to build a new generation of Internet Service Provider, one designed for the type of world where connectivity drives innovation, and is an irrefutable aspect of our lives.
Milo Medin, the head of Google’s fiber efforts, explained his goal is nothing short of causing a revolution — a revolution that may spread to other towns. “As I said, we’re still having conversations with other markets, and will try to build out in other areas in [Kansas City],” Medin said. So maybe Austin, Texas — which was passed over — shouldn't lose hope yet? When he formed the company that became Excite@home Medin helped take the web from dial-up speeds to speeds of 4 Mbps to 5 Mbps, and he draws a similar parallel between his efforts there and what Google is trying to do. “It’s a little bit like first days of @home, when the web was all optimized for dial-up, and no one had always-on connections,” he said. “Back then, people asked why would we need that, but the need for bandwidth seems to be insatiable … and there are business like Netflix that exist today because of it.”
Google Fiber and Creating the Next Generation ISP
Reportedly, LightSquared, the company trying to create a wholesale, fourth-generation, wireless network, is thinking about an initial public offering. While part of me loves the idea of reading the details behind the network operator that doesn't yet have a network in the S-1 filing, there’s a huge part of me that says the company is planning to take investors for a ride using the current spectrum crisis as cover for a questionable business plan. Because, at the end of the day, what LightSquared has right now is 53 MHz of spectrum, an interference problem with GPS in some of that spectrum, and lots of plans. Yes, back in the days of the bubble, IPOs were built on less, but I think LightSquared may be milking the spectrum crisis. The rallying cry of that crisis claims the U.S. will run out of spectrum by 2013 and the demand for mobile broadband will overtake the nation’s cellular networks and grind them to a halt.
Welcome to a New Era of Spectrum Speculation
The federal government released an incredible amount of data about where broadband Internet is available and where it isn't. The data is confusing and hard to work with, but it does tend to show major gaps in broadband coverage.
To start, the data released by the National Telecommunications and Information Administration shows that somewhere between five and ten percent of Americans lack any kind of broadband connection. Major institutions have inadequate connections. Two-thirds of schools have connections with capacities less than what they need. Only four percent of libraries report having optimum broadband connections. Our interest, however, is in rural broadband. NTIA reports that a gap remains between rural and urban residents in their adoption of broadband, but the gap is narrowing. In 2010, 66% of urban residents and 54% of rural residents had broadband connections. This year, the rates are 70% and 60% respectively. In rural areas, 9.4 percent of residents told NTIA that they didn't have broadband because it was unavailable. In urban areas, that reason was given by only 1% of those asked.
The Broadband Speed Divide