A rant from a Googler comparing Amazon’s focus on a platform vs Google’s focus on products. Fundamental.
Photo by The Rocketeer on Flickr
Remember the bad old days of blog networks. Like when I was at b5media championing the idea of content as the great savior of the Internet, the bellwether of future journalism, the dawn of an era of online advertising as the dominant (and only) truly valuable means of creating revenue online?
Yeah… so about that.
I was wrong.
I was wrong about the idea of wide adoption of online advertising as a primary revenue source for the long tail. I was wrong about content not being a commodity. I was wrong to think that successful online startups could have successful advertising models. I was just wrong.
As recently as this week, AOL laid off it’s “freelance writer” staff as part of the recent Huffington Post acquisition and subsequent roll-up of AOL properties.
All you people thinking you can make money online using the standard advertising/content model… well, think again. You’re not.
Advertising is a commodity. Commodities, by definition, are resources that flood the marketplace, diluting the individual value of each resource. Advertising online is dominated by “remnant” advertising, which is cheap commodity advertising that costs the buyer little to purchase in bulk (think Adsense) and results in little payout to the publisher. There’s very little real money in commodity advertising. The real players are getting paid on direct sales advertising targeting big sites with high payouts (Think Apple taking out prominent advertising space on the New York Times for tens of thousands of dollars).
Content is a commodity. There are millions of bloggers. Millions of publishers. Hell, just this week, I migrated a site to WP Engine that had 11k+ sports blogs. Content is a commodity and, by definition, not valuable.
But if you want to keep thinking it’s valuable, go for it. You keep writing blog posts and giving yourself some sense of value. While you’re at it, take a look at the sky and convince yourself it’s actually orange.
Content companies are not likely to generate enough value in today’s economy. Certainly not for any kind of acquisition or exit.
I was wrong. I’m man enough to admit it.
In today’s internet economy, the real value and, in my opinion, the only viable model for successful online business is in product. Products. Real, tangible products. An iPhone app. A digital goods marketplace. A software product. A social network, perhaps. Something that has measurable customer acquisition and a real exchange of monetary value. You know, like the good old days where I pay you for something that I can, with certainty, validate receipt. I give you $30, you give me a text editor application for my Mac. I pay you $15/mo, I get an online invoicing service. I pay $0.99 and get a car locator app for my phone.
Content commoditization strategy says, I do something for you, Mr. Advertiser (put some code on my site), and you may pay me something if anything productive (click, action, impression) comes from it and, oh yeah, there’s no real measurements or guarantees for said exchange. Keep churning out content and page views will pay me.
No. That’s not how it works anymore. Why do you think Netflix built their model on a pay-for-service concept instead of intro/outro/in-video advertising? Why do you think Amazon continues to diversify their product offering with no real advertisement and certainly no content? Need a server? You can have 10 for cheap. Need music? We’ve got that covered at a competitive rate and now you can play it from anywhere. Need toilet paper? We’re partnered with retailers across the country to provide any essential product you might need and you can even have it shipped free if you pay for this other service we call Prime…
See? It’s product… not content. Content is becoming significantly less valuable.
Time to pivot.
Our world today is diluted. The lines have blurred. Everyone has bought into this concept of community – that everyone has something for everyone and we’re one big happy family. Specifically, the concept of the “technology community” which is a term that has come to mean anyone who has a blog, uses social media or Twitter and engages online in some way or another.
Though this has been a trend that is akin to the frog happily boiling in an ever increasing pot of hot water, the reality struck me today as I saw this Wall Street Journal article about how Facebook and Zappos approach hiring. Facebook, of course, is the social networking platform that has become the largest social network on the planet and Zappos, the sexy company that was just acquired by Amazon and has made its name, not on selling shoes – its core business – but in its company culture and parties.
In the WSJ article, the writer begins with the statement, “For fast-growing technology start-ups, there are many approaches to employee hiring and retention.”
While Zappos is a great company, and their acquisition by Amazon (which is a technology company) certainly places them in the ranks of great Internet success stories, they are a glorified shoe store, using eCommerce, web marketing and buzz to execute on their core business. They are not a technology company.
This is not a pissing match over labels. If calling a company a technology company when they are not was harmless, I wouldn’t care. The reality is that it is a harmful trend that is hurting the real tech community. This is not about Zappos. This is about the hundreds of people who hang out on the social networks, using the technologies built by real technology companies and technologists, and who call themselves technologists because they use the tools.
These are the people who go for job interviews that they are not qualified for hanging their hats on social media experience.
Being in social media does not make you part of the technology community.
The real technology community is made up of developers, I.T. architects, and even highly trained engineers with C.S. degrees. For the record, I have neither a C.S. degree or any degree at all. However, I have been slinging code for 10 years now and it continues to be my primary business, despite public speaking, book writing and social media engagements. I am a technologist. A marketer or a salesperson may be highly trained marketers or sales people, but they are not technologists in most cases.
Here are some thoughts. These are common. I’m not simply being a little over the top.
- The most you know about memory leaks is when Firefox crashes. Do you know why? Can you debug it? Do you understand the concept of a memory leak and why it happens?
- You don’t know how or why an API is important. If you have to ask what an API is, you’re not a technologist. You don’t have to know how to use it, but know what it is. If you don’t know why an API might be important, you’re also not a technologist.
- Your evaluation of a good website is based on the UI and layout. Great design is important and great designers are hard to find. That doesn’t make them technologists. Though there are some who straddle both worlds extremely well. A website is not just a website because of the appearance. It’s about how data is used. Remember this video?
- It doesn’t matter if a site is built in a compiled language (Compiled PHP, .NET, etc) or not. Yes it does. Why?
- Your approach to business does not include principles of Object Orientation as understood by developers. OOP is huge with developers. Ask any Java, Ruby or Python developer. Can you apply these principles to business too? They do apply…
- The most exposure you’ve had to XML is RSS. And at that, the most you’ve had is adding a feed to Google Reader.
- Your idea of working for a web startup is as ‘community manager’. Yeah, there are some great community managers. They are people people, not technology people. Additionally, community managers are meant to be liaisons between users and developers. Stop calling yourself a tech person if you’re a glorified PR person.
Again, if this was simply a matter of labels, it would be no big deal. Social media expert? Go for it… Everyone is a social media expert. Entrepreneur? Unless you’re building the product yourself, you’re probably not a technologist. Businessperson? Sure. CEO material? Quite possibly. Don’t call yourself a technologist.
You’re HURTING us. This market is filled with people looking for work right now. And recruiters are out in force looking for the one person who can fill the role of two people and save their client money. So by you walking in the door and taking jobs you’re not qualified for simply because you can do some marketing, strategy and you know how to hack on a website, you’re hurting this industry of highly qualified, professional people.
Stop carpet-bagging on our industry and call yourself what you are. You are highly qualified marketers. You are highly qualified journalists. You are highly qualified business development people. You are not technologists.
Several years ago, a new buzzword entered the fray of internet speak: The Cloud. In the past, I’ve written critically about cloud computing, and my reservations originally outlined remain. However, there is real value in the cloud as well.
Known for applications that are considered “Software as a Service”, or SaaS, The Cloud represents the idea that data processing and storage exists, not on physical hardware maintained by an organization or their designated controlled environment data center, but literally out on the internet. The data and processing is harnessed by the power of distributed computing across grids and data centers. The power of multiple hundreds of thousands of server farms can much more effectively manage the processing power of a service, application or company far better than a single server or node of servers. In fact, economically, cloud computing is far cheaper than traditional computing paradigms.
In an enterprise sense, cloud computing is often handled by Content Delivery Networks (CDNs) such as Limelight, Panther or Akamai. These enterprise solutions run as cheap as $0.25/Gb of bandwidth/transfer to $1.00/Gb. Other lower cost solutions include Amazon’s EC2 or Google AppEngine (which now supports Java in addition to it’s longstanding Python commitment).
Companies looking to expand their offerings with web apps, downloadable materials or provide a service relying heavily on rich media (images, video [especially HD video], or streaming audio) might consider the Cloud as a viable scaling solution. In my opinion, based on my experiences, there are benefits and drawbacks to the Cloud.
Benefits of the Cloud
Cloud computing is cheap. Dirt cheap. If you’re scaling up an application – that is active growth projections and model, not simply a prototype – Amazon EC2 will give you computing power for as little as 10 cents an hour, and time is measured only when the cloud is actually working on behalf of a user, so if it’s idling you’re in the clear. In addition, at 10 cents per gigabyte of bandwidth, it’s extremely cheap to begin a large scale growth projection.
A secondary benefit of using the cloud is your ability to fire your IT staff. Within reason, of course. The absence of physical hardware and infrastructure security requirements allows your company to devote more resources to the development of your technology product, as opposed to positioning watchmen on the wall, so to speak.
Thirdly, the cloud is infinitely scalable. It is not necessary to worry about clustering, nodes, GeoIP content serving (that is, serving content from a UK-based data center to a user in Germany as opposed to serving from Southeast Asia, as an example). Simply put, the Cloud allows you to build as much capacity and bandwidth as you’re willing to pay for.
Drawbacks of the Cloud
Of course, since there is no such thing as a free lunch, there are also detractors to leveraging the cloud. In a siloed environment of physical hardware and CAT-5 cabling across server closets, it is possible to scale by diversifying the vendors and hardware and data centers. From a business perspective, this means you can work one vendor against another and possibly incite a bidding war. You could use all or none of the vendors that might show interest. In the cloud, it is difficult, if not impossible, to choose 2 different CDN providers in addition to Amazon EC2, for instance. Tim Bray wrote a piece about this last year and raises significant, yet important, questions.
Secondarily, especially for cheaper solutions like Amazon S3 (different from EC2 in that it is simply a storage facility in the cloud), you have a high chance of latency. Simply put, the network connection is not fast enough to be able to rely on to serve rich media at scale. Many services out there, including WordPress.com opt to use Amazon S3 as a “cold cache” – that is, the last place that content is served from and then only if needed. The latency of the network makes it prohibitive, depending on the application, to do it on every page load.
Finally, Cloud reliance can cause significant problems if the control of downtime and outages is removed from your control. Over the past year, Amazon has had significant downtime incidents (8 hours in one case!). Reliance on the cloud can cause real problems when time is money.
In the past, we have advocated for a hybrid solution to cloud computing. It is perfectly okay and reasonable (even expected!) for companies to leverage the cloud. Economically, it allows them to go crazy at building the business and focusing resources. In a down economy, the economics behind the Cloud over physical hardware is a no-brainer. However, we continue to advocate for a failover plan that will help an agile company dodge the effects of downtime. A hybrid environment is also attractive as well, allowing companies to directly manage and control critical operational systems and benefit from the infinite possibilities of scale.
Sometimes I think I might be the only one who retains commons sense. Really. At least in the area of I.T. Management. Though we had our share of growing pains at b5media, the knowledge gained from working in an enterprise environment at Northrop Grumman was only accentuated by my tenure as the Director of Technology at b5media.
Unfortunately, some common best-use practices in developing infrastructure are often put aside by those with shiny object syndrome surrounding “cloud computing“.
Let me explain.
You may have noticed a severe hampering of many internet services over the weekend. The culprit was a rare, but yet heavy-duty outage of Amazon S3 (Simple Storage Service) cloud storage. S3 is used by many companies including Twitter, WordPress.com, FriendFeed, and SmugMug to name a few. Even more individuals are using S3 for online data backup or for small projects requiring always-on virtual disk space. Startups often use S3 due to the “always on” storage, defacto CDN and the inexpensive nature of the service… it really is cheap!
And that’s good. I’m a fan of using the cheapest, most reliable service for anything. Whatever gets you to the next level quickest and with as little output of dollars is good in my book, for the same reason I’m a fan of prototyping ideas in Ruby on Rails (but to be clear, after the prototype, build on something more reliable and capable of handling multi-threaded processes, kthxbai.)
However, sound I.T. management practice says that there should never be a single point of failure. Ever. Take a step back and map out the infrastructure. If you see anyplace where there’s only one of those connecting lines between major resource A and major resource B – start looking there for bottlenecks and potential company-sinking aggravation.
Thus was the case for many companies using S3. Depending on the use of S3, and if the companies had failover to other caches, some companies were affected more than others. Twitter for instance, uses S3 for avatar storage but had no other “cold cache” for that data rendering a service without user images – bad, but not deathly.
SmugMug shrugged the whole thing off (which is a far cry from the disastrous admission that “hot cache” was used very little when Amazon went down back in February), which I thought was a bit odd. Their entire company revolves around hosted photos on Amazon S3 and they simply shrugged off an 8 hour outage as “ok because everyone goes down once in awhile”. Yeah, and occasionally people get mugged in dark city streets, but as long as it’s not me it’s okay! Maybe it was the fact that the outage occurred on a Sunday. Who knows? To me, this sort of outage rages as a 9.5/10 on the critical scale. Their entire business is wrapped up in S3 storage with no failover. For perspective, one 8 hour outage in July constitutes 98.9% uptime – a far cry from five 9’s (99.999%) which is minimal mitigation of risk in enterprise, mission-critical services.
WordPress.com, as always, comes through as a shining example of a company who economically benefits from the use of S3 as a cold cache and not primary access or “warm cache”.
Let me stop and provide some definition. Warm (or hot) cache is always preferable to cold cache. It is data that has been loaded into memory or a more reasonably accessible location – but typically memory. Cold cache is a file based storage of cached data. It is less frequently accessed because access only occurs if warm cache data has expired or doesn’t exist.
WordPress.com has multiple levels of caching because they are smart and understand the basic premise of eliminating single point of failure. Image data is primarily accessed over their server cluster via a CDN, however S3 is used as a cold cache. With the collapse of S3 over the weekend, WordPress.com, from my checking, remained unaffected.
This is the basic principle of I.T. enterprise computing that is lost on so much of the “web world”. If companies have built and scaled (particularly if they have scaled!) and rely on S3 with no failover, shame on them. Does it give Amazon a black eye? Absolutely. however, at the end of the day SmugMug, WordPress.com, Friendfeed, Twitter and all the other companies utilizing S3 answer to their customers and do not have the luxury of pointing the finger at Amazon. If their business is negatively affected, they have no one to blame but themselves. The companies who understood this planned accordingly and were not negatively affected by the S3 outage. Those who weren’t were left, well, holding the bag.
Added: GNIP gets it, and they are new to the game. Even startups have no excuse.
We are early adopters. We use. We try. We evangelize. We bury. We filter.
That’s what we think anyway.
In reality, we are pretty useless.
Late last year, Amazon released the Kindle to the joy and enthusiasm of many early adopters. Robert Scoble, the poster child for early adopters, gleefully got his Kindle on the first day and wrote about how beautiful it was and how it brought him great pleasure. One week later, he hated the Kindle listing aÂ laundryÂ list of problems from usability to the inability to send gifts to other Kindle owners.
Increasingly, I’m seeing common people (read: non-tech early adopters) who own and love the Kindle. And the numbers bear that out, if we’re to believe TechCrunch’s statement that by 2010, Amazon will have sold $750M in Kindles or 1-3% of the company’s total revenue. (Update: For clarity, the TechCrunch article cites a CitiGroup analyst and is not the authoritative assessment of TechCrunch. My point is, that’s where I heard the number in the first place – regardless of the original source.)
Brad Feld, a few years ago, wrote an amazing article titled The First 25,000 Users are Irrelevant which talks about the effect of early adopters on companies and products. As the oh-too-typical scenario goes, TechCrunch or Mashable covers a new product, there is a surge of traffic, registration or sign-ups for private beta invites from early adopters, or “tire kickers” then they go away. Some remain and become “evangelists” for the company or product, but most people don’t even care. Later on, if the company has mainstream staying power, the real buy-in will happen organically and without the say-so of the early adopters who largely came and went.
See, we like to tell people we are filters. We like to think we are influencers and powerful. We like to think we have an inside angle on what works and what doesn’t work, but we are just smallÂ insignificantÂ people in the grand scheme of things, and largely irrelevant.
Amazon knows this. They don’t really care about us. And that’s why they might hit the $750M mark by 2010 and completely bypass the early adopters, placing their Kindle directly in the hands of mainstream commuters and book lovers.
Update: Corvida at SheGeeks thinks this is generational and writes a thoughtful and intelligent argument about this. However, I’m not convinced that everything is generational. I think early adoption is also a result of personalities.