Our Home Town

Steve Gillmor

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About noon Friday here in California, I happened to click on a Summize tab substituting for Twitter’s Track functionality and monitoring the use of my Twitter screen name. Someone named Scrabo had tweeted “Rumor here at NBC is that Tim Russert passed away”. A minute later another: “@stevegillmor Brokaw getting ready to go on air.”

Turning on NBC, then MSNBC, then CNN, I found nothing: reports on flooding in the Midwest, breaking news about a bomb attack in an Afghan prison, a strange obliviousness on the NBC outlets. Something about the first tweet resonated - “here at NBC” - and I went back to the computer and Summize, finding another tweet directed at me that said Wikipedia was already updated with the news. Jumping to the New York Times, a single line at the top of the home page. Finally, at 12:33 Tom Brokaw broke into programming with the news.

Today Summize has “Tim Russert” at the top of the Trending Topics list, with “Russert” third. The tweets continue to roll in 20 hours after the fact, even now at 9am Pacific at some 200 per hour. Twitter’s international audience lets the story follow the sun, but Russert’s fame is largely U.S. centric. Clearly we have lost what many consider the soul or conscience of our political process at the head of the stretch leading to November.

That same presidential race is the likely culprit in Twitter’s recent collapse and partitioning into minimal services. As the company scrambled to get some coherent strategy in place to keep users from tipping into a stampede away from the service, Twitter’s API was gated, the Web UI was dynamically stripped of pagination, @replies, and sometimes even the array of follow icons as event swarms stressed the servers. Most significantly, IM services over XMPP were the first to disappear and not yet fully restored, and with that the service known as Track that I was emulating with the third party Summize client when Russert collapsed.

We may look back at Monday’s Steve Jobs keynote at the WWDC as the point where Twitter stabilized enough to survive. Because of the intense developer interest in creating applications for the iPhone 3G product, the conference was sold out and, like Twitter services, the media gated to only a certain number from each outlet, whether blogger or mainstream. Missing the cut, I went to Plan B as I’ve often done when trips took me away to New York or CES during Apple rollouts.

As the event began, I followed Qik reports from Mike Arrington, page refreshes of photos and text from EnGadget, Techcrunch, Gizmodo, and Cnet, and a live video aggregation of various Ustreams and commentary from Leo Laporte’s TwiT Live. As Jobs took the stage, a video stream captured a murky view of the stage from too many rows back, but the audio proved unmanageable. Laporte’s chat stream produced a URL to a more stable audio feed that held up throughout the rest of the keynote. Arrington produced two short Qik videos of key sections that surfaced as Qik servers restabilized.

The net effect was exhilarating; a bootstrapped symphony of virtualized Steve Reality Distortion Field funneled through the MacBook AIR that I route every bit of my real time digital life through. Throughout, Twitter remained up except for a ten minute period when Jobs announced the 3G device’s price, and as the event retreated into the past Twitter services unseen for weeks began to reemerge.

Much has been made of the fanaticism spurred by social media events and seminal products such as the iPhone - the swarming of the early adopters, the trivialization of Twitter as a toy, you know the drill and the comments on this post will likely personalize the pushback. But an event such as Russert’s death and the emotional shock wave it produced put the lie to the notion that this stuff is echo chamber or A-List or whatever. 30 minutes before the world knew about this tragedy, someone I don’t know reached out and established a connection based on mutual affinity.

The magic of Twitter, and Ustream, and Qik, and all the social tools just now emerging, is this incredible, subtle, hacked, user-controlled information network, that in a million ways and micro-communities, performs as efficiently and professionally as the greatest media empires on Earth. In fact, the two have merged as we gain access to the tools of the trade while the trade gains access to our hearts and minds. Track will return, and with it a flowering of this new media revolution where the new boss is the same as the old boss: Us. And you’ll see Tim there in the

Hey Microsoft, How ’bout We Do That First Deal You Offered?

Michael Arrington

72 comments »

The devil is in the details, and the details of the Yahoo-Google search advertising deal reveal the desperate, possibly neurotic state of Yahoo these days. Quite simply, it looks to me like Yahoo is effectively paying Google off to step in and (1) keep Jerry Yang, Sue Decker and the current board of directors in power, and (2) avoid a desperation deal with Microsoft for as long as possible, or longer. It’s not even clear to me that Google wants this deal, based on the terms. It almost looks like they’re just doing Yahoo a favor, and trying to keep them out of Microsoft’s hands.

My guess is, Yahoo is wondering exactly why they didn’t take that Microsoft acquisition offer back when it was on the table. Those were the days that Yahoo was a key asset in the Microsoft/Google war, and most of their best employees hadn’t bailed. Of course, that was $15 billion ago, and that offer appears to be long gone.

I’ll get more specific below, but the combination of a basically non-binding agreement combined with a complex termination clause and associated termination fee to Google, suggest that the deal is little more than a favor to Yahoo, with a payoff to Google for their trouble. And there are some other agreement oddities mixed in that are probably driven by both companies strong suspicion that at least a few politicians intend to make hay by trying to kill this deal. The Department of Justice, which will review the agreement for compliance with Antitrust laws, is going to have massive commercial (Microsoft) and governmental (Congressional members up for reelection) pressure to find things to object over.

I’m not going to quote language in the half dozen press releases, leaked internal memos and blog posts that all parties have now published. The actual language of the agreement Yahoo signed with Google tells me everything I need to know about why both sides did the deal, and what they think is likely to happen next.

Microsoft’s Last Offer

Microsoft last offered Yahoo a combination stock, asset and business deal that sources with knowledge of the situation summarize as follows:

• Microsoft to acquire 16% of Yahoo’s outstanding stock from existing stockholders for $8 billion, or $35/share.
• Microsoft to acquire all of Yahoo’s search and search marketing assets - servers, code, advertisers, third party publishers, intellectual property and employees (perhaps 3,000 of them) for $1 billion in cash plus a guaranteed CPC rate that is higher than what Yahoo can generate itself.
• Yahoo gets increased search revenue from the deal over what they generate now, and get to remove people and operational costs of search.
• Yahoo agrees not to touch the search or search marketing businesses directly ever again. All their searches are controlled by Microsoft.

Here’s what I think of this deal - it stinks. Microsoft isn’t marrying Yahoo, they’re just getting her pregnant, setting her up in a nice apartment and telling her not to talk to any other guys.

But either way, Microsoft is signaling that their offer remains open. And Yahoo can probably pick and choose parts of it to accept, within reason.

The Google Deal

Forget the flowerly language about how this deal “strengthens Yahoo’s competitive position” (Yahoo press release) or “is good for competition” (Google blog post). Both are flat out lies. The deal crushes any notion of a competitive search advertising market and turns Yahoo’s search and search marketing efforts into the undead.

The deal allows Yahoo to put Google ads along side their own, presumably to maximize revenue to Yahoo. Google’s good at the top search terms (probably 80% or so of revenue potential), but Yahoo thinks they do fine in the long tail. The problem, of course, is that they’ll show Google ads for all the good stuff - and advertisers will go to Google to bid for those ads. More advertisers will leave the platform, further degrading Yahoo’s core search economics.

The four year deal (which Yahoo can extend to ten years) seems great on the surface. It’s non-exclusive and doesn’t require Yahoo to place any ads.

But the non-exclusivity isn’t real, because there’s no one else out there that can compete with Google’s search ad rates anyway. And while there is not requirement for Yahoo to place any number of ads, if they don’t generate at least $83 million in revenue to Google every four months Google can terminate the deal.

And then there’s the matter of the extremely complicated $250 million (minus any net revenues Google received from running advertisements) termination fee should Yahoo merge with anyone else (with easier triggers for mergers with Time Warner, News Corp. or Microsoft). If Yahoo merges with anyone Google can terminate the agreement and force Yahoo to pay them $250 million. Time Warner, News Corp and Microsoft only have to acquire 35% of Yahoo’s stock to trigger this position.

But then things get a little neurotic. If Microsoft acquires between 15% and 35% of Yahoo, Google can terminate but not collect the $250 million fee. Over 35%, Google gets the fee.

I’m calling this the “If our shareholders or the government kill this deal, as is highly likely, then we get to try things with Microsoft and don’t have to pay you off” fee.

If you want to wade through the language yourself, the summary is here.

Bottom Line

Yahoo has pissed off shareholders and a looming meeting - they can’t ignore reality much longer. And reality says Yahoo’s future is bleak. They continue to lose market share, they have serious brain drain and morale has never been lower.

The Microsoft search deal seals their fate permanently, and I can understand why they didn’t want to do it. This Google deal is their only alternative at this point. They can get out of it at any time, simply by not serving Google’s ads. But as long as it’s live they’ll see their advertisers flow to Google instead of their own search platform, and they have to pay a hefty fine if they end up selling themselves to a third party.

Microsoft may yet get their hands on Yahoo, or at least the parts of Yahoo they want, simply by default as shareholders continue their revolt and/or the government puts a stop to the madness. Or not, and Google gets a long term pass to transition Yahoo’s remaining advertisers over to their own platform plus a hefty termination fee if Yahoo gets sold off at some point.

Either way, Google wins. Or Microsoft wins.

Orgoo To Offer True Webmail To Existing Social Networks

Mark Hendrickson

13 comments »

Social networks are, first and foremost, vehicles for personal expression and interaction. But for all the wall posts, direct messages and pokes, one means of communication is conspicuously missing: email (Yahoo understands this, if little else). Apart possibly from the phone numbers you keep on your mobile phone, there is no better electronic indication of your social graph than your email address book.

Aside from emailing out notifications to lure users back, however, social networks opt for their own proprietary messaging systems. Unfortunately, these systems are much less powerful than email, and they’re certainly not as ubiquitous. Virtually everyone on the internet has an email account, but only a fraction of the digital populace happens to be part of the same social network as you.

Orgoo, a startup that has built an email-centric web interface for communications (see our coverage from 2007), thinks it can bridge the divide between email and social networking by pulling them together into a unified experience.

They will offer a white label solution to their webmail product marketed specifically to social networks looking to keep users on their sites for even longer periods of time. The result: Gmail and Facebook in one (or Hotmail and Friendster, if you’d prefer).

Orgoo integration into a social network would basically bestow upon that network webmail functionality. Users could send and receive email messages from any POP or IMAP-enabled account just a page away from their friends’ profiles and favorite social apps.

A range of synergies is also possible. When you receive an email from a friend in your network, you could see their current status message or recently added pictures. If the sender isn’t your friend but is part of the social network, you could be presented with an option to add them as a friend or view commonly shared friends.

There’s been talk that email is the true social network, since the people you email most must be the most important to you. That’s rubbish, of course. How are you going to check out that cute girl in class using email? Or share your favorite music and photos with several friends without annoying the hell out of them?

No. Email - no matter how advanced it gets - isn’t going to supplant Facebook, MySpace, and Orkut. But that doesn’t mean the social networks shouldn’t embrace email more tightly. Imagine the page view increases if users began checking their email messages along with their friends’ profiles. And the development cycles that would be saved by social networks that would otherwise need to replicate email functionality with their own messaging systems.

The benefits of integrating something like Orgoo wouldn’t necessarily stop at email. Orgoo would like to white label its instant messaging and video chat capabilities as well. The former would be particularly appealing to networks other than Facebook, which already has on-site instant messaging. None of the networks, however, has really embrace video communication yet.

Despite the potential mutual benefits of Orgoo integration (Orgoo itself would enjoy access to large, well-established user bases), the startup has a tough sell to make. Social networks will only reluctantly put so much of their users’ experience into the hands of a separate company. I imagine we’ll see smaller networks in the long tail implement Orgoo before any of the big players, such as MySpace, which was hypothetically mocked up in the shots accompanying this post.

Check out Zenbe and Xobni for two other attempts to blur the lines between email and social networking.