I went the other day to check ou The Onion, a satirical online newspaper that I haven’t read in a while. After leafing thru a few stories I was surprised to be prompted with thiw message:

You have arrived at your 30-day allowance of 5 free premium pages from America’s Finest News Source. If you enjoy our probing and analytical journalism and want full access, we ask that you support our hardworking reporters by purchasing a subscription for as low as $2.95/ month or $29.95/ year.

I was surprised that The Onion would ask you for paid membership after reaching a certain number of articles per month despite the fact that The Economist, New Times, Financial Times and other online newspapers have been using it for a while. A while ago, during the time that paid membership was written off to be replaced with advertising revenues, I alluded to the fact that the disappearance of prices was a temporary phenomenon which simply indicated an imbalance between the supply and demand of news.

The current price signals are indicating a rebalancing of supply and demand, a lot faster that I thought it is possible. The newspapers which managed to go thru this process will emerge with much greater strength. With the competition gone they will be able to operate at a scale which before was hard to imagine in order to become the first truly global newspapers.

P.S. The title is a tongue-in-cheek reference to Web 2.0 and whatever it was supposed to mean.

I got a feeling that out of the current companies which shape the way people use the internet (Apple, Google, Facebook and Amazon) Google and Amazon have the highest odds to continue do so in the future. Apple seems too concentrated on making devices and Facebook seems trapped into social media, for better or for worse. Google and Amazon lack a specific purpose, purpose which ultimately acts as a constraint, and as such have a much higher degree of freedom to adapt to the future.

This is not to say that Apple or Facebook are not profitable enterprises, or that their products are fads approaching their expiry date, only that they are bound by the very field they choose to dominate. Just a feeling…

I just read this article on highscalability.com and I have to say that I really like the idea of delegating the mining of your data to a another party specialized in handling huge data volumes which can in turn make it available to smaller players.

All the best to the DataSift team, they are building a terrific product!!

“Growth now depended more on the operation of markets, something that sits uneasily with the institutional inheritance. Innovation-based growth  is risky, uncomfortably so for security-oriented European societies. It responds to financial incentives, which is difficult to reconcile with the value Europeans assign to earnings equality. It requires continous reallocation of labor resources, which is at odds with the importance they attach to job security”.
Barry Eichengreen - The European Economy since 1945: Coordinated capitalism and beyond.

A pretty good picture of the difficult terrain that Europe has to navigate.

Decidedly, this is the acquisition season. After Oracle buying BEA it is now the time for VMWare to acquire SpringSource. I wonder what VMWare gets from this acquisition and different from a partnership with SpringSource and the only thing that I can think of is the exclusivity of selling certain types of higher-value virtual machines.
To make this more clear: VMWare probably has a cloud offering, similar to Amazon Elastic Compute Cloud offering. EC2 has started by selling bare-bones images and moved onto selling higher-value images, also known as Amazon Machine Images (the idea is that you could sell/make available your software - application server, database, content management server, etc… - as an Amazon image and charge per usage for the use of the original Amazon image + the use of your application). It is possible that VMWare will move onto selling higher-value virtual machines thru its cloud offering as well. Now that VMWare has acquired SpringSource it is very likely that they will start selling enterprise virtual machines equiped with all the packages present in SpringSource’s portfolio (which also includes some higher-value packages such as Spring Batch, Spring Integration, etc…). As SpringSource is now under VMWare I would not be very surprised if VMWare will get the exclusivity of providing enterprise, Spring-enabled, higher-value virtual machines (apparently this is not the case, check below). Not sure if it is feasible, but VMWare could even adapt Spring’s higher-value packages into specialized virtual machines (for example , a virtual machine running Spring Batch fine-tuned for batching needs).

If this happens it could happen that VMWare will become the premier hosting service for cloud-deployed enterprise Java applications and for specialized, Java-powered, cloud-deployed enterprise services. If the cloud is the future of application hosting (frankly, I would not bet the farm on it) then VMWare will be the hub where Java applications will be hosted (the difference between hosting a Spring application with VMWare and with a different cloud provider would be the difference between a virtual machine specialized for running Spring applications and an all-purpose virtual machine. This difference in the efficiency of hosting a Spring application would drive more users to VMWare’s clouds).

Still, 420 million dollars is a pretty big sum of money, especially in the current economic climate, and we will have to see if VMWare and SpringSource will find the synergies which will make them pairing together more than the sum of their parts.

Congratulations to Rod Johnson, Adrian Colyer, Juergen Hoeller and the rest of the Spring team and all the best to VMWare and SpringSource!!

Later edit: It looks like you can buy Spring-images on Amazon’s Cloud thru a company called Cloud Foundry which was acquired by SpringSource. I am still trying to figure out why VMWare bought Spring Source rather than entering a licensing agreement with them. I guess we have to wait and see.

Later edit: According to Adrian Colyer this is the future of how Java applications will be deployed. Still, I don’t buy into the cloud hype, I think that for the near future cloud adoption will be determined mostly by prices for different pieces of hardware. Maybe at one point there will be a difference in the efficiency of managing applications deployed in a cloud versus the ones deployed outside which would compensate for the differences in price of hosting an instance locally or on the cloud, but I don’t think we are near this point.

I have been reading lately A History of Economics: The Past as the Present by John Kenneth Galbraith and one of its main ideas, namely that economic concepts are the product of the times and societies they are born rather than the other way around, made me look at the concept of copyright from a different perspective.

The copyright concept is tied to the ability to make copies: when this ability did not exist (such as prior to the phonograph) or was severely impaired (such as during the vinyl era) the concept of copyright did not exist because there was no need for it. Copyright appeared when music recording moved to a medium which allowed for music to be copied easily enough for music buyers to make their own copies (roughly around the introduction of the compact cassette), hence the introduction of the right to copy. In the current environment characterized by very low copy costs and very inefficient means of enforcing rights to owning a copy you could say that the concept of copyright is living its last moments.

Copyright may appear to future historians as a concept which lasted for a period of time during which the ability to copy content was both developed enough to worry content creators and distributors about people getting content without paying for it and at the same time it was under-developed enough to allow the content creators and distributors to develop mechanisms for controlling content copies. Once the ability to copy and share content became  utiquitous the right to a copy of content ceased to exist as the means of enforcing this right started to weaken.

The question that is posed quite frequently is what will happen to musicians since they will not be able to profit from copyright due anymore? I would say that you could compare their fate to the fate of musicians before the concept of copyright started to exist; which means looking at music before the introduction of the compact cassette ( whose low copying costs allowed for easier manufacture of copies, which in turn allowed for greater diversity in music): musicians would either attain the status of Enrico Caruso and make their living by selling music copies or would rely on gigs building a more or less devoted following. The main difference between a musician relying on gigs in 1910 and 2010 would be that the musician living in the 2010’s would act at a global scale (in terms of distributing and marketing his music, of setting up a tour, of building a fanbase, etc…) while the musician living in the 1910’s would probably have acted at a local scale.

For the past 2 weeks I have been staying at home without a computer and without cable TV. I took this opportunity to try to see how my grand-parents would get their news and read newspapers all thru-out this period. When I went back to work and back to a computer I saw that I have not missed much, the newspapers covered all the major events of this small period: ethnic unrest in China, a continous drop in equity markets and the subsequent re-bound, etc… The number of news that got to me thru this channel was a lot smaller than the usual number of news that I get, but I found that the coverage was way better and the subjects were treated in depth.

I think that the main difference between the old media and the new media is that the old media is delivered thru a vastly more narrow channel than the new media, and that the width of this delivery channel pretty much dictates the format and the news that reach you.

Your typical daily is a newspaper with a limited number of pages. The number of pages is both large enough so that it allows the daily to cover more sections, but at the same time small enough to keep the number of sections in check. A typical daily ends up having Local, National, International, Business and Sports sections.
The limited number of pages means that the stories are competing with each other in order to get printed. The result is that a daily covers only the issues which are the most important to its readership. Some print dailies try to compensate for the limited amount of articles that they make available by the quality of these articles (this partly supports the case of print media moving into the luxury goods category because of the scarcity of items its format can deliver when compared with new media).
The limited number of pages also means that there is competition between the journalists wanting to  get published, and this further enhances the quality of the news paper, typically print media which has a large supply  of journalists (New York Times, Washington Post, Los Angeles Times, etc…) tends to print articles of very good quality as only the best journalists get published.

New media changes all this: the very wide channel along which content gets pushed to readers increases the diversity of the content and while it dimishes its quality. The only constraint that I see on content consumption in new media is not the scarcity of supplied content, but rather the opportunity cost which comes with consuming a particular piece of content: when you are consuming some content you are forgoing consuming some other content.
I think that opportunity cost will define the way content gets consumed in the new media and that the organizations operating in the new media will have to dedicate a bigger amount of resources to marketing themselves because the competition between new media organizations will be far fiercer as the typical boundaries between content sources disappear (*).

* One example of a boundary between content sources which disappears and generates competition is spatial distribution of news papers: New York Times and Los Angeles Times which were not competing with one another previously (each being distributed in different cities they were competing only with local newspapers)  are now competing with each other when they are both distributed via the web.

I was reading Malcom Gladwell review of Free by Chris Anderson and I was left with the impression that both of them got pretty wrong the issue of information distribution in the current era of low prices for computing power.
I think that Malcom Gladwell makes a mistake when he compares the information required for creating a bio-tech medecine (Myozyme) with the information found in a newspaper: one big difference between them being the penalties associated with copyright infrigement: huge in the case of Myozyme and small (and disappearing) in the case of the newspaper. Another difference between the information necessary for creating a medecine and the information stored in a newspaper is the difference between the costs of producing it and the related difference in supply: high costs in the case of a bio-tech company and low in the case of newspaper.

I think that Chris Anderson also makes a mistake when believing that the main costs which define how information is consumed are the costs of distributing information, distributional costs are just one part of the story, one other important cost would be the cost generating the content. Given that in the current period the distributional costs are very low, it would follow that the costs of generating the content would be the bulk of the costs of consuming information (i.e. the cost of consuming information would be identical or very close to the costs of creating the content). Basically what happens right now is that the supply for content is dwarfing the demand for it, we are simply swamped in content. Well, this mismatch between supply and demand drives down the revenues of content sources. In addition to this,  one side-effect of low distribution costs is that various content sources are put in pure and un-distorted competition and it is this competition that is driving even lower the revenues of various content providers.
It appears that the content sources that are not experiencing reduced revenues are the ones for which the content supply is very small when compared to demand (and which creates the scarcity which could allow a content source to charge for usage) and which are not experiencing heavy competition (some financial newspapers being a very good example). If anything these content sources have found in the web a new channel thru which to distributed their small supply of content. I would say that content sources which exhibit both a small supply (small enough to create scarcity), a reasonable demand and not a lot of competition will be the content sources which will be economically viable in the coming years (*).

The near future will be very challenging for the traditional newspapers, because the tremendous amount of excess capacity in this space will have to be reduced thru various means (**). Once reduced, the remaining capacity will probably be small enough to match the demand for the content it produces, and at that point various revenue models will appear. And charging for usage will be part of those revenue models, regardless of what various luminaries think about it.

To sum this post up I would say that the newspapers are in a pretty currently bad corner: the new low distribution costs have put them in fierce competition which resulted in massive excess capacity (***). The excess capacity will be dealt with one way or another and at the end of this process the remaining newspapers will come back to health.

Later edit: If you have read enough material on the changes currently affecting newspapers it is very likely that you have come across the concept of “economics of abundance”, a term used in science-fiction before the Web2.0 “revolution”. In the context of current changes in media “economics of abundance” is just another synonim of over-capacity.

* Incidentally, niche content sources fit this description pretty well.

** The excess capacity could be reduced by differentiation. One example would be New York Times rising the price for its street paper, which some argue that it pushes NYT into the category of luxury goods, differentiating it from the other news papers. Specializing in a new field is another way to direct excess capacity towards more productive uses.

*** The increased competition between newspapers comes from the fact that while previously the competition was mostly local between local newspapers because content distribution was mostly local in the current period the distribution is global, therefore more newspapers, from any conceivable place, are now competing for the same pairs of eyeballs. Right now the same news item can reach you thru a very large number of channels, while previously it could reach you only thru a few.
I don’t include the dozens of millions or so of blogs into the excess capacity mentioned above because blogs are not in the same league as newspapers, the differences in quality between a typical blog and a newspaper separate these 2 types of content.

You probably have read about how GMail added a new feature that lets you read messages written in a different language, language that you may not understand, by having them translated into your language. This is a pretty interesting feature that will not get much adoption outside Google labs, the main reason for this being not the quality of the translation (not great) but rather the fact most people need to initiate some sort of contact in order to start exchanging emails.

All this aside, it is a pretty interesting proposition from Google and leaves you wondering about how would a group of persons that communicate with one another by using the translator package just added to GMail outside GMail, let’s say in a face-to-face environment (let’s say a group of experts from various places , all speaking a different language attending the same conference). Would they be emailing each other while seated at the same table, given that they do not speak a common language (*)?
A pretty weird feeling is setting in: you may end up having relationships with people only thru this virtual medium which negates all other forms of communication. The language barrier will be replaced by an expressiveness barrier: many things will not be able to be expressed thru this medium and will be left-out.

* BTW, the message used in the TechCrunch example is a very good example of a message that would never get translated because it would never be written in a different language: if you want to invite a hiking buddy out for a walk you would probably want to be able to communicate with him/her in a commonlanguage, not thru the GMail translator… I wonder what a walk thru a park is like when you need to drag along GMail (preferably deployed on your iPhone) in order to talk to someone. Surreal…

I was reading this article on the Experimentia blog and I have to agree with its conclusion: internet applications are turning computing devices from platforms where applications are run into interfaces into various applications deployed remotely. As applications are moved off to the internet it follows that they are accessible to a larger audience as the cost of running those applications shifts from hosting the applications locally (as with desktop applications) to connecting to the applications.

There is one big difference between ordinary desktops and mobile phones, though, the ergonomics. As the feature set of an application increases so increase the demand for a larger interface in order to interact with that richer feature set (which could be deployed remotely, BTW). This would mean that third world consumers will first interact with an application thru a cheap mobile phone, and access a reduced feature set, and as they grow richer they could afford a tool which would allow them to access the same application thru a different, more expensive and graphically more expressive interface (the same application accessed thru a netbook).

The difference in income would drive the difference in access to the very same application. This could allow for identifying customers with higher incomes by the way they access the same free resources…