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Putting Google’s capitalization in its place

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Cory Doctorow is a brilliant science fiction writer and one of the most eloquent voices on the Net today arguing against corporate lock-downs of intellectual property. But in catching up on my RSS backlog recently I did trip over something of a whopper in the middle of an otherwise typically persuasive rant against an ill-advised digital rights management scheme (in this case, Google’s):

  Google’s really good at adapting to the Internet — that’s why it’s
capitalized at $100 billion while the whole of Hollywood only turns
over $60 billion a year.

This comparison is, as I’m sure Doctorow would admit, pure apples-and-oranges. “Capitalization” is a number you arrive at by taking a company’s current stock price — the last dollar amount that a buyer and seller agreed upon for a block of shares — and multiplying it by the “outstanding shares,” or total number of shares in the company known to exist.

Google is doing quite well, and its high stock price gives it all sorts of advantages, but there is no pile of $100 billion flowing through its coffers. Its revenue — what it “turns over” each year, the number of actual dollars flowing into its operations — is more like $4-5 billion. That’s impressive, but smaller by a factor of 10 than the number Doctorow cites for Hollywood’s gross revenues (I found $63 billion as the global revenue figure for American movie studios).

Capitalization is a purely theoretical number. In the case of companies like Google, much or most of the value of stock that adds up to $100 billion is not being traded. If all or most or even just some significant fraction of the holders of that value decided, “Hey, it’s time to cash in,” and sold at the same time, the share price would begin a quick slide, and the capitalization would evaporate. Revenue streams aren’t permanent either, of course, but they’re a lot more tangible.

Google’s high capitalization essentially means that investors believe its impressive profitability growth will continue. (Or maybe they just believe that it’s 1999 all over again and not buying would mean missing out on a new bubble.) One thing’s for sure: despite the company’s claim not to be focused on short-term results, its management must be acutely conscious of the need to keep that growth charging along.

Which, ironically, is probably why Google is beginning to lose its user-friendly footing and adopt the kind of unpleasant, user-hostile DRM schemes that inspired Doctorow’s wrath in the first place.

Off the petroleum reserve

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It seems there’s an extra dose of right-wing perspectives and conservative punditry on the New York Times op-ed page these days.
Yesterday it was a Heritage Foundation fellow lecturing the Democrats on proper and improper ways to mix religion and politics; today it was conservative legal scholar Charles Fried going to bat for Samuel Alito. But the capper, also today, was a strange essay by a pair of Cato Institute fellows arguing that the U.S. strategic petroleum reserve should be liquidated.

Now, this is something that Big Oil has always dreamed of. From a strict free-market economics perspective, there’s even something to be said for it. The reserve certainly holds the potential for distorting the oil market, and if you live in a dream-world in which that market exists outside of the international political system, with all its unpredictable non-economic dynamics, then you will find this a laudable goal. Certainly, in an ideal world — one in which, say, we had a government that understood how important it was to move us away from an oil economy — who’d want the public sector to waste its resources stockpiling oil?

But the piece, by Cato’s Jerry Taylor and Peter Van Doren, is full of fallacies. It seems that, on the one hand, the reserve is so insignificant in size that it can’t really help the nation in a pinch; yet, on the other hand, the reserve is so vast that it distorts the fundamental economics of the oil industry.

If we just do away with the government reserve, they tell us, private industry will do the job for us. “Economists agree that every barrel of oil we put in the public reserve displaces oil that might otherwise have gone into private inventories,” they tell us, then add: “How much displacement occurs is unclear, but there is little doubt that it’s significant.” But wait, they just said that unnamed “economists” agree that every barrel of oil in the public reserve displaces private inventory. That’s not “unclear” at all. Are they even reading their own words?

What the Cato guys completely miss is the first word in the reserve’s name: strategic. The reserve was created in 1975, and anyone who was of news-consuming age then (as I was, and as I must assume these “senior fellows” were as well) will know why. The reserve was created to help the U.S. avoid being blackmailed by foreign oil suppliers. It should have been accompanied by long-term conservation programs and other measures. But its primary rationale was national security, not good economics.

In the wake of 9/11 you’d think such concerns would be at the forefront of conservative thinkers’ arguments. But corporate free-marketry trumps national defense every time when the likes of Cato and Olin are paying your rent. So Taylor and Van Doren tell us (a) oil embargoes can’t hurt us any more because the market’s so globalized; (b) a real catastrophe, like al-Qaida taking over Saudi Arabia, might be “worrisome,” but the reserve wouldn’t be big enough to help us in such a case (this is really an argument for a bigger reserve, but never mind!); (c) we really shouldn’t worry because even anti-American regimes wouldn’t be stupid enough to bankrupt themselves by refusing to sell their oil.

These writers evidently believe that they have explained all possible futures, and yet every one of their scenarios imagines rational economic actors in every role. Before 9/11, you could write that off as amusing folly; today it constitutes tragic stupidity.

There must be an argument going through someone’s head at the Times that goes like this: Their newspaper is under assault from the right, most recently because of its exposure of the Bush administration’s illegal-wiretap power grab; so it must achieve the impression of “balance” by presenting these op-ed voices from the right. But really, to balance the Cato people you’d have to find some wild-eyed leftist arguing that, say, all oil companies should be nationalized tomorrow.

The greatest achievement of the right over the past decade — oh, setting aside the seizure of “all three branches of government” in the wake of a disputed election, the plundering of the Treasury, and the derailing of the war on al-Qaida — is this: By a wide swath of American opinion-makers, “balance” is understood to mean that the usual welter of mainstream American voices needs to be weighed down by a gang of beady-eyed ideologues on right-wing think-tank payrolls who can barely construct a sensible argument.

Quicken little

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Over the weekend the New York Times business section published a slightly damp kiss for Intuit, the maker of Quicken. I wouldn’t have paid the piece much mind except for two things, one trivial and the other less so.

The photo for the piece showed Intuit execs who were, according to the caption, “working out problems in software.” But if you looked at the picture you actually saw two guys moving Post-it notes around a whiteboard. In previous posts I’ve noted the unexpected value that software developers have found in this low-tech information-management and project-planning tool; I even found my own use for them in outlining my book. More evidence: Stickies rule!

More importantly, I have to say that this paean to Quicken left out one huge problem with the product. I’ve used Quicken for something like 12 years now to manage my finances, carrying my data from an early Quicken for Windows over to Quicken for Mac (in the mid 90s) and then back the Windows in the late 90s. I’ve found that the Windows version has steadily, if slowly, improved since I finally settled on it. I tend to upgrade about once every four years. When I recently upgraded from the 2002 edition to the 2005 version I was thrilled to discover that the helpful but slow-moving wizards at Intuit had finally, after all these years, made it possible for you to merge transaction categories without requiring you to go back and manually reassign each transaction (something no sane person with years of records would ever undertake, making merges effectively impossible). Progress!

My Mac-based wife wants to get her Quicken into better shape and reorganize some of those barnacled categories, so we upgraded her version from 2003 to 2006. Intuit charges twice as much for the Mac version — and, for your extra dough, throws in only half the features. Now there’s a business model. Among other things, the category-merging feature that Windows users enjoy, and that was the whole point of our upgrade, is not available on the Mac. (Macintouch offers a host of other gripes from Mac hands.)

The whole experience has left me disgruntled and eager to explore the variety of Quicken alternatives on the Mac platform. And the Times piece, by praising the company’s revitalization of the Quicken product line without noting how poorly it treats its Mac customers, did a small disservice to this small but passionate and legendarily vocal population of users.

Paint It Black

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In the handful of years since the term came into currency it has always seemed bizarre to me that the day after Thanksgiving might be called “Black Friday.” Supposedly the term arose from grateful shopkeepers and bookkeepers who saw their accounts flow from the red into the black thanks to binge-buying consumers fueled by L-tryptophan hangovers, pre-Christmas compulsivity and the involuntary wallet-opening following from viral bargain rumors. But it has always sounded to me more like the name of an awful disaster movie in which hooded thugs plot to blow up a department store, or something. I mean, what is Black Friday after sundown, anyway? Black Sabbath! (For us Old Testamentarians.)

Anyway, I won’t be shopping on Friday, and I doubt the Republic will collapse if you don’t either. The folks at Adbusters suggest we view the post-turkey moment as Buy Nothing Day, and that sounds pretty sensible to me.

All your Google Base are belong to — whom?

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Like many others, I have been trying to figure out what Google Base is all about. Plainly most of the world sees it as a repository for classified ads, and thereby competition to both old-school businesses (newspapers etc.) and newer Web enterprises like Craigslist.

But it also seems to be intended as a way for people to pump large quantities of any information at all directly into the Google searchstream. Since Google is where so many of us go first when we’re looking for stuff, Google seems to be saying, give us your information directly so others can find it.

In some ways this is the ultimate “Web 2.0” play — just open up the gates to a world of users “information,” see what they put in, and make it accessible.

But I’ve now spent some time on the Google Base Help and FAQ pages and I still can’t really figure out the answers to some basic questions. Like: If I post a whole lot of material and then want to remove it in bulk, can I? Can I export stuff as easily as I import it? How does Google Base know who I am and that I am who I say I am? Is there an open interface that allows other services access to the information in Google Base the way they would have access to it if it were published on my own Web site? And so on. Maybe if I were using Google Base these questions would be easier to answer. But really, this product could have used some better framing, and perhaps some better thinking.

I’m all for experiments in moving the Web forward toward its programmable destiny, and it could be that Google Base’s structure and openness will emerge more clearly and favorably over time. Right now, I am uncomfortable with what Google Base seems to be all about — piling tons of information into containers owned and operated by a company that is less than fully transparent. I’d rather see a world in which a myriad of individual, independent content providers (i.e., Web users, i.e., people) publish stuff, and then mark it up with discoverable tags and XML annotations that allow Google and other third parties to organize and use that stuff in cool ways. In the latter scenario, I remain closer to what I’m publishing, I can reorganize it as necessary and control its fate more easily, and there’s a plainer connection between who I am and what is connected to my name.

Web 2.0 jottings

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Today I had to get some writing done, so I stayed away from the final sessions of Web 2.0 — where apparently, among other things, Google announced a new RSS reader (which was totally slammed and unreachable when I tried to visit earlier). But here are some notes from yesterday’s sessions.

I hadn’t heard of Writely before; it’s another Ajax-style Web app transposing a traditional software function into web-based software — in this case, word-processing. I’m putting it in the “check out when I have time” bin.

By many accounts, Zimbra was the hottest product to launch at the conference’s 13-company “Launchpad,” which featured plenty of other interesting debuts (Jeff Jarvis has good notes on the others). Zimbra is an Ajax-based Outlook replacement (e-mail, calendar, contacts). Its apparent homage to an old Talking Heads song was duly noted by whoever was running the music at Web 2.0; “I Zimbra,” the cryptic lead track from “Fear of Music,” could be heard between panels.

At the open source panel, Sun’s Jonathan Schwartz tried very hard to persuade us that what was really important about open source software isn’t that the code is open or that anyone can improve it but simply that it’s given away free. Mozilla’s Mitchell Baker did an excellent job of debunking this point of view, not by directly disputing it but by explaining exactly what’s so great about Firefox: “Our goal is to make things easy to change,” she said. “It’s easy to try things out. You can try things out quickly. We can try 15 or 20 things at once and see which work.”

And, she added, that “we” there? “It isn’t us.” That is, the people trying out 15 or 20 things aren’t sitting in the offices of the Mozilla Foundation or even part of the core development team; they’re all over the Web. And they can try those things out because, er, the code is open, not because the product costs zero dollars. Sure, most Firefox users aren’t programmers and can’t do anything with the source themselves. But they can benefit from a much broader set of improvements and options made possible by the open source model.

Jeremy Allaire debuted Brightcove, which looked basically like a content management system for video — not that interesting for end-users, but more for video producers or large-site managers looking to integrate more video. Still, pretty impressive as a well-thought-out approach to bringing more commercial video content onto the Web in ways that don’t totally freak out the “content owners” yet are not entirely hostile to the medium.

Jason Fried of 37signals offered a ten-minute rant on the virtues of “less” as a competitive advantage: “It takes three people to build anything online these days: if you have more than three people, you have too many.”

AOL’s Jonathan Miller told an amusing story of how, when he took over the company in the depths of the dot-com doldrums, he handled the resentment he found at various divisions of Time Warner, where employees and execs were disgruntled about how the AOL/Time merger had gone — they felt they’d been snookered by AOL. He told them about having his car towed in Manhattan, and visiting the godforsaken place you go to get your car, and waiting in line forever, and getting angrier and angrier, and finally getting to the front of the line and seeing a sign that read: “The person here did not tow your car. They are here to help you get your car back. If you cooperate, you will get your car back faster.”

That’s what he told the unhappy Time campers: “I did not tow your car.”

Mickey Hart was on stage at the end of the day Thursday, talking about the history of the Dead and the “tapers” the band allowed to record their shows. He pointed out ways in which that community was similar to today’s file-trading hordes, and ways that it was different. But one thing he said stood out for me: The Dead played for pay and they played for free; “we always played better when we played free.”

Diller’s tale

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Barry Diller was the kickoff interview here at Web 2.0 yesterday afternoon, which was more than a little odd, because Barry Diller does not appear to have anything to do with Web 2.0 — if, by Web 2.0, we mean, as conference hosts John Battelle and Tim O’Reilly said, an approach that involves innovation on the Web platform, an “architecture of participation,” lightweight business models, Web services with no lock-in, and so on.

No one has been smarter than Diller about rummaging through the broken and disused parts of old-Web flameouts and using them to assemble money-generating machines in relatively dull markets. And yet he has had no success — maybe even no interest — in creating innovative services or bringing new ideas to the Web. His company is a sort of Night of the Living Dot Com Dead.

Diller does not suffer fools — or interviewers — gladly, and he reserves a special sardonic disdain for tech-industry hype. That can be refreshing. I first heard his digital-skeptic act over a decade ago, at a panel at the old Intermedia conference in 1993, where he shared the stage with Bill Gates, Apple’s John Sculley and cable mogul John Malone. While the other spouted visionary platitudes, Diller simply fumed at their disconnection from his reality. (I wrote about the event for my old paper, here.)

Today, Diller is still wearing his skeptic’s hat; at Web 2.0 he turned it on those among the new wave of Web visionaries who have dared to dream that our new publishing and searching technologies might help bring a wider conversation into being beyond control of the broadcast world’s gatekeepers. “There’s just not that much talent in the world,” Diller says, “and talent almost always outs.”

On the one hand, Diller likes the Web, because it makes it easier for people to strut their stuff, if they have any: “If you have an idea, you can get it up and out, and good ideas resonate.” On the other hand, don’t expect some sort of renaissance of creativity to happen when the Web allows us to tap the talents of a wider swath of humanity: “I think that entertainment — TV, movies, games — I think it’s going to be a relatively few people who do that, simply because there is not enough talent, and it is not hiding out somewhere…”

For Diller, in other words, the Long Tail has no snap. Putting the tools of creation and distribution into the hands of the 99 percent of humanity who have hitherto had no access to them won’t fill a bigger pool of culture; the existing talent scouts of Hollywood and its equivalents have already done perfectly well, thank you, at tapping all the talent that’s there.

I’m sorry, I worked for 15 years as a theater and movie critic, and I know that Diller is wrong. Sure, I did my time working at a theater reading the slush pile of unproduced play submissions; I spent too many hours watching the awful 95 percent of movies that do manage to get produced and released. I don’t have any illusions about repealing Sturgeon’s Law.

But the promise of the Net, still not fulfilled but hanging there hopefully before us, is that a free, open, teeming network can actually provide more opportunity for “talent” to “out” than a handful of overworked script readers, slush-pile combers and A&R men. To think otherwise — to think that the existing corporate cultural system is the most efficient mechanism imaginable for the identification of artistic talent — is pure arrogance.

Based on what he said here, I think Barry Diller believes he is someone who understands the Internet because he knows so well how to make money through it. But I don’t believe he understands the first thing about what makes it anything more than just a money machine.

Pop the bubbly

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John Battelle and Tim O’Reilly opened the second edition of the Web 2.0 conference this afternoon with an exchange along these lines: Battelle said that last year, the mood at the conference was simply, “We made it” — we survived the Internet industry’s dark winter. This year, he said, it’s more like, “Something really important is going on — let’s not screw it up.” O’Reilly added: “We are definitely running the risk of another hype cycle.”

I’d say it’s no longer a risk, it’s a reality. It’s too late in the evening to post too much about what I saw and heard today at Web 2.0 — more tomorrow. But let’s just say that the whiff of bubble-mania that was in the air at the conference’s first edition a year ago has now blossomed into a heady eau de dot-com.

The conference mixes up idealistic developers who have worked themselves half-blind coding the next super-cool but not-quite-usable-yet Web applications with sharp-eyed financiers looking for the next big thing that they can flip fast for a killing. In this regard, Web 2.0 — both the conference and the vague but real thing it is named for — is like the bastard offspring of the O’Reilly Emerging Technology Conference and the tech-investment gatherings of yore.

I do not know what will come of this not-so-holy union, but from the feel of things at the Hotel Argent today, it seems likely that a certain number of people will get rich, a certain amount of money will be wasted, several important new companies and technologies will emerge and some indeterminate number of investors will be fleeced. So that means it’s probably too late, John and Tim — the hype-cycle wheel is already in spin, up, up, up.

Deja vu all over again

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Those of us who lived through successive waves of the media industry’s infatuation with the Internet from 1996 through 2000 or so may have thought we’d seen every possible folly that can arise when people mistake the Web for a broadcast medium. We had Webshows and Netshows and Netcasts and all manner of awfulness from MSN and AOL, Time-Warner and the TV networks and Disney. (I fumed in Salon about this profusion of “channels” on the youthful Web back in 1997.) When the dot-com bubble broke, it seemed we could finally bid farewell to the delusion that you can “program” for the Web just like you program TV. Through all of that nuttiness, Yahoo was one of a small handful of companies that seemed to understand the fundamentally un-TV-ish nature of the Web, and it profited steadily from that understanding.

So I nearly sputtered out a mouthful of coffee Saturday morning when I read the New York Times’ piece about Lloyd Braun, the former TV exec who is now running a big chunk of Yahoo.

  As chairman of ABC’s entertainment group, Mr. Braun had a penchant for big offbeat concepts like “Lost,” which won the Emmy for best drama. At Yahoo, why not create programs in genres that have worked on TV but not really on the Web? Sitcoms, dramas, talk shows, even a short daily humorous take on the news much like Jon Stewart’s “Daily Show” are in the works…. So Mr. Braun’s job is straightforward: invent a medium that unites the showmanship of television with the interactivity of the Internet.

If you read the entirety of Saul Hansell’s piece, it seems clear that Braun and his boss Terry Semel aren’t entirely ignorant of the nature of the medium they’re working in. They know that Net-based video comes in little pieces, gets remixed by the multitude and spreads virally. But I guess they can’t shake off the habits of their professional lifetimes, because it sure sounds like they’re saying something remarkably similar to what we’ve heard from the discredited peddlers of “Net shows” past: Move over, all you amateurs and geeks, and let some real broadcasters teach you how it’s done! They may be publishing material on the Web, but they still think in terms of big-splash Events and boffo shows.

I know that a lot of smart people who deeply understand the way the Net functions work at Yahoo. The company made a savvy move in bringing on Kevin Sites to lead their first real effort in original content — he’s a versatile journalist who’s been living in the online cross-currents for several years now. Maybe Yahoo will prove my skepticism wrong, and its programmers will be the first of the multitude to go down the road labeled “Let’s make the Net more like TV” and find that it’s not a dead end. But it seems more likely to me that we’ll be reading headlines in two or three or four years about Yahoo shutting down a lot of its experiments in this area, just as its predecessors did.

Dell and the megaphone

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Over in Slate, Daniel Gross has this to say about blogger Jeff Jarvis’s now-celebrated chronicle of “Dell Hell”:

  Dell had the bad luck to tick off a very powerful blogger. The company is justly known for its fantastic customer service. But any time you engage in tens of millions of customer contacts, there are bound to be errors. It was Dell’s misfortune that one of those errors affected a person with a huge megaphone, blogger Jeff Jarvis. Jarvis’ blow-by-blow account of his Dell hell has become an Internet phenomenon.

Sorry, I don’t buy it. Set aside the idea that Dell is “justly known” for great service. Known to whom? This sounds like boilerplate from an analyst’s report or the company’s own marketing literature. I’ve never bought a Dell computer. But in my circles and reading — an admittedly totally subjective smattering of hearsay, but what else does “known for” mean? — Dell is known for being a giant corporation that hands over its customer service to bored, ill-treated, underpaid people desperate to move on to better jobs.

Still, that’s not really the point. Maybe you have a circle of friends who have all had peachy-keen customer-support experiences with their Dell boxes. The point is, Jarvis’s experience was not a fluke; if it had been, his tale would never have made waves.

Gross is wrong because what gave Jarvis’s complaint wasn’t the size of the blogger’s megaphone — it was the chord of recognition his message struck with his readers. If Jarvis started bitching about Dell and his experience really represented a statistically insignificant lapse in an otherwise exemplary service record, then Jarvis’s readers would have stepped in and said, “Jeff, stop whining, it’s too bad you had a bad experience but we all love Dell! Dell’s done great by us!”

Instead, a lot of people read Jarvis’s account and said, “You know, that sounds familiar.”