Michael Rogers
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I guess journalism schools should teach it: whenever you're doing a story about anything, take a look and see what's happening on eBay.  I didn't do that when I wrote last week's post Click Fraud Worsening?, which noted that a recent study found that more merchants were pulling back on their keyword advertising out of concerns over click fraud.  But a Blogging Stocks reader named Joe did take a look around eBay, and what he found is quite remarkable.

See for yourself. Head over to eBay, search for "Adsense clicks", and as of this morning you'll find more than a dozen auctions offering everything from "5 Google Adsense Ads Clicks Hits Each day for 5 Days" (BuyItNow for $1.99) to  "1000 Adsense hits clicks website marketing traffic.  Adsense clicks delivered within 10 days. Different IP's" (12 bids, up to $31) to "Unique: Guaranteed Unlimited Legal Adsense Clicks - Extremely Simple" ($9.99). 

The lawsuit by Kinderstart against Google, while an interesting issue, is small potatoes compared to what many consider to be the real elephant in the room: click fraud.  Both Yahoo and Google have already run into legal trouble -- resulting in relatively small monetary settlements -- regarding such allegations.  Today the San Francisco Chronicle discusses a new report by Burlingame market researcher Outsell Inc. suggesting that click fraud cost merchants $800 million last year and is a signficant enough threat that 27% of merchants are cutting back on click-based advertising.

Coincidentally, over on ZDnet, Digital Micro-markets blogger Donna Bogatin has recently been discussing both Microsoft's and Yahoo's assessments of and attempts to thwart click fraud, concluding that click fraud prevention could be the next great search engine differentiator.  She also suggests that Google has lagged behind its competitors in facing this issue publically. 

Now this is hardly a new problem. It has been around long enough to have spawned a whole set of start-ups aimed at prevention.  But the fact that it won't go away -- and if the Outsell report is accurate, may actually be getting worse, at least from the merchants' perspective (and who else counts?) -- may suggest that cost-per-click needs an upgrade.  The next step, of course, is the cost-per-action model that some analysts and customers are pressing for.  Some sites already offer this and Google is reportedly experimenting with it as well. 

But CPA is a very slippery slope.  The issue goes back to why online publishers traditionally resist cost-per-click pricing for display advertising: your revenue becomes dependent on the advertiser's creative.  A good ad is going to get more clicks than a poorly executed one.  CPA action takes that dependency a step further: the search engine's revenue depends on both a well-designed pitch after the click plus an enticing offer.  If the advertiser fails on either of those points, you're not going to get paid and your inventory isn't generating revenue.

If I ran a search engine, I'd be spending a lot of time and energy trying to maintain the credibility of my cost-per-click business. If the market really does turn to cost-per-action, we may end up looking back on these as the Golden Days of search engine advertising, when the money just fell from the sky. 

While many commentators are busy burying Microsoft because Google has a better search engine and cooler offices, it's worth keeping in mind that Microsoft still has, uh, a few other other lines of business that bring in a buck or two once in a while. One of those is powering massive enterprise-wide computing networks, the kind of operations that aren't likely to start using Google Spreadsheet and Writely anytime in the next few quarters.

Thus it's interesting to note that this week's Infoworld, a long-time must-read for enterprise IT managers, has several stories under the heading "Longhorn: More than Just Hype," subtitled "For Windows IT managers, Longhorn is a must-have upgrade."  Infoworld is generally not a mouthpiece for Redmond -- the magazine's editors follow and recommend open source solutions very astutely and there's also a regular Mac presence in the magazine (laudable when you consider how small Mac penetration is in the enterprise market.)  And Infoworld writers have been merciless in pounding MSFT over the past few years regarding the Longhorn/Vista delays and spec changes. So I was surprised to find (in fact, I checked to make sure I hadn't picked up the April 1 issue by mistake) that the experts at Infoworld found a great deal to like in Vista, from an enterprise point of view (with the caveat, of course, that they're still looking at a beta).

The idea of user-generated, ranked and organized content is the obsession d'jour among both start-ups and incumbent portal sites. Digg goes mainstream; Netscape clones Digg; Yahoo does a Wikipedia twist with Answers; social bookmarking site del.icio.us spawns sites like Kaboodle, Plum and Prefound.  All of these functionalities will clearly soon find themselves embedded into mainstream portals, but how important will they be in the long-term?

Jaron Lanier (father of virtual reality, Discover magazine columnist, technology philosopher nonpareil) had an interesting essay in the online magazine Edge last month: Digital Maoism: The Hazards of the New Online Collectivism.  He begins with an amusing anecdote about how someone kept adding "filmmaker" to his Wikipedia biography; as Jaron made exactly one small film long ago and doesn't consider himself to be a filmmaker, he took it out -- but the well-meaning contributor kept putting it back in. (Now that Jaron has written about it, "filmmaker" finally seems to be removed from the bio.)

He goes on from this to challenge some of the "wisdom of crowds" thinking that underlies many of the social ranking, tagging and pointing sites, ultimately suggesting that without some sort of evaluative, value-driven framework, many of these systems end up producing the lowest-common-denominator output.   It's a far too complex argument to summarize here, and the Edge site also includes some very thoughtful rebuttal, so it's worth a serious read.

What does this mean for the current Web 2.0 goldrush and the portals?  Continue reading....

Everyone's talking about Bill Gates. Business Week leads its story on the retirement by noting that yesterday's announcement is part of a long-term and carefullly-orchestrated succession plan meant to keep both employees and investors calm.  That emphasis is an interesting counterpoint to those who would have preferred that the press conference featured Steve Ballmer's head on a platter as a way to juice the stock, and it reflects the somewhat bipolar way MSFT is viewed by stock-watchers. 

In the minds of many, its performance is still being compared to newcomers like Google, when in fact MSFT (like Intel) has become something closer to a classic widow-and-orphan stock. That was the phrase used in years past for utility company stocks, or AT&T pre-deregulation: dull, uneventful stocks that paid good dividends and were very, very safe. 

Microsoft and Intel certainly provide the dull performance part, although both currently fall a bit short on the dividend side.  But they're also relatively safe for their sector: how many other technology stocks could you have held from 1999 until today without taking a hair-raising ride?  

Microsoft can't take Google's coy attitude about its future directions; hence yesterday's almost courtly ceremony of succession.  And all in all, it probably happened at a good time.  The stock is depressed and nothing is going to change the market's opinion of Microsoft until we see some action on both the Vista and Web services front somewhere out in 2007.  So why not get out the potentially scary news now, instead of spoiling the party in a year when something might actually be going right? 

PS: I've known and written about Gates since he was selling software on cassette tapes, so here's a slightly more personal look at the announcement.

Today's Newsweek has a piece on eBay and Skype, noting that this week "At its annual 'eBay Live' convention, the company will announce plans to integrate Skype into its U.S. marketplace for the first time. Sellers can choose to include Skype buttons in their auctions for a few carefully chosen product categories, such as cars, real estate and diamond solitaire rings."

The article begins with an optimistic anecdote suggesting that adding Skype functionality improves the results of big-ticket item sales--although the article also cautions that introducing direct voice connections raises new possibilities for buyers and sellers to conclude their transaction off eBay and avoid fees.  Meg Whitman repeats that she sees the big pay-off in the Skype acquisition as synergies with eBay and PayPal.

Over the weekend I had lunch with a long-time professional photographer and Mac user who is also a beta tester for Adobe's next-generation photo editing program, Lightroom. I asked for a comparison to Apple's high-end photo program Aperture and he said "There's no comparison. I don't understand why Apple shipped Aperture.  There was a hole in the market for Final Cut, because Adobe let Premiere slip, but nobody was really looking for a Photoshop alternative." 

The explanation for Aperture is simply that it's in Apple's (and Steve Jobs') DNA to want to do everything themselves.  Sure, there's a big ecology of add-on Apple software and hardware, but when it comes to the core products, Apple wants to control it all.  Clearly, photo editing software won't make or break the company (already some of the Aperture technology is seeping into iPhoto, which is good for everyone).  But the Must Invent It Here attitude is a broader concern--especially in the world of media playback.

Wednesday will see the launch of MTV's Urge network and thus the official public debut of Windows Media Player 11, and both analyst and hobbyist early notices are positive. WMP 11 and the MTV collaboration are both very important for the future of Microsoft's media plans. Thus far, Media Player-based music sites have not gained serious traction against iTunes and the MTV brand, with a wide variety of music available at comparable prices, may help. More importantly, though, this is going to be a major test of how well Microsoft can collaborate with a content partner, and that's key to Redmond's media future.   

Dependable but not draconian digital rights management is the core issue for all content providers going forward and it will be the gating factor on how quickly distribution moves to the Internet. Both Microsoft and Apple have spent a lot of time courting and consulting content owners on this topic, both with some success. So far, however, Apple's tightly closed iPod ecosystem (and the elegant and simple software that allows) has given them a tremendous marketing advantage over Redmond. But in the long run, neither content owners nor the consumer electronics industry are terribly inclined toward closed hardware ecosystems. The next phase in DRM is creating true cross-platform, multi-device solutions, and this is where Microsoft has a significant advantage. 

Consumers want to be able to buy media once and then play it back on various devices -- they may decide to start watching a movie on the big screen at home and then finish it on the handheld on the way to work. Thus all of a user's media devices need to be able to recognize that the owner has the rights to view given content, even when both the content and the playback hardware may come from different vendors. That's an enormous technical challenge, but it's the sort of thing that Microsoft has done for years, while Apple has opted for very tight hardware control. 

While both the market and the digerati are focused on Redmond's competition with Google and the future of software as a service, it's worth keeping in mind that there's still a huge collection of digital devices coming down the pike that will use localized media playback software.  It's an enormous market up for grabs and one in which MSFT has only begun to compete. 

Photo Credit: AP/MTV

The announcement that Warner will sell not only TV but film content via BitTorrent is really quite remarkable.  BitTorrent technology is currently the number one way that Hollywood content is pirated online, which makes it both an obvious threat but also a long-term opportunity. 

It's a different strategy than the other current Hollywood efforts, Movielink and CinemaNow, which initially looked like a somewhat half-hearted effort to say "See, we offer legal downloading, so do the right thing."  Both sites have improved their technology and usability this year, but still involve changing the habits of an audience that's already downloading feature-length content someplace else.  Working with BitTorrent is a gutsy but logical step: go where the potential customers already are.  While some commentators contend that Warner has still set its pricing and DRM restrictions too high, I think that's inevitable: lowering prices and reducing restrictions, once you have your feet wet, is much easier than trying to go the other direction.  (Just ask the print world how well they're doing charging for newspaper and magazine content on the Web.)

What's in it for Hollywood?  First, they've learned from the recording industry: if you don't get in front of illegal downloading, you'll face a really, really tough catchup game.  Legal music downloads are growing fast, but they're still nowhere near the volume of the illegal file-sharing that had years to gain momentum before legal alternatives appeared. 

But past that, selling direct to the consumer could ultimately cut out all the other folks who take a slice of the profits in film distribution: theater owners, Blockbuster, Netflix, cable, satellite.  The metric to watch here is the theatrical window: what's the time period before movies appear on DVD, pay-per-view and soon, the Internet?  The window is getting shorter and shorter, and some producers suggest it will ultimately become no more than thirty days, even for the biggest titles. 

None of this will happen overnight, of course, but fitting nicely into this pattern is the fact that older moviegoers are increasingly building their own theaters at home.  I've spent time recently with some of the mass-market homebuilders--the people who build more than a thousand homes a year--and many feel that the media room will soon become a standard expectation in new homes.  It will be years before the Internet can easily deliver a top-quality home theater experience, but it's none too soon for Hollywood to explore the best and cheapest way to reach that audience. 

In the midst of all the bad Microsoft news and yesterday's four-year low, it's worth asking the somewhat theoretical question: what premium does Microsoft's laudable and long-term commitment to basic research add to the long-term value of the stock? 

There's little question that MSFT has created a research establishment that's much in the mold of the early Bell Labs and Xerox PARC (more in a moment as to whether that's a good or bad thing): lots of pure academics hired from top universities who apparently have quite a bit of freedom to select research topics and to publish.  Here's a quote from a recent speech by Rick Rashid, the well-respected Microsoft head of research: "...we started investing in basic research at Microsoft 14 years ago...today we’ve grown to over 700 researchers worldwide. And to put that in perspective, that’s the equivalent of growing a major computer science department, like a Berkeley computer science faculty, a year every year for 14 years. And we’re expecting to double that rate of growth over the next two years. We believe that investing in basic research in Computer Science is critically important at this juncture."

But is it critically important to the value of the company?

The recent speculation, launched by Cringely and followed here, over Apple’s long-term strategy re Windows compatibility, strikes me as a tad over-reaching.  Years ago, I remember standing in a Las Vegas hotel suite at one of the early Comdexes, watching IBM PC software running on an Apple II (yes, children, this was when there was still a horserace between those boxes, and dinosaurs walked the earth).  Someone had introduced an emulator card for the Apple II with an x86 processor, and I still recall a Major PC Magazine Publisher telling me “This changes everything.” 

Of course it changed nothing. Generally speaking only the digerati get all excited about running different flavors of software on the same machine; for the great mass of consumers, learning the ins and outs of one OS is plenty enough challenge, thank you.

For me, the most intriguing unknown in Apple’s strategy is on the media side:

We've asked each of our bloggers to introduce themselves and talk a little about why they love the market and what positions they call their own. We encourage our bloggers to own common stock and abide by a common code of conduct.

Hello all: without further adieu, here's a bit of bio:

One of the nation's leading experts on how business and society adapt to the future, Michael Rogers is an interactive media pioneer, novelist and journalist, who now writes the Practical Futurist column for MSNBC.

For ten years he was vice president of The Washington Post Company's new media division, helping guide both the newspaper and its sister publication Newsweek into the new century, as well as serving as editor and general manager of Newsweek.com.

Now his New York-based consultancy, Practical Futurist, works with both startups and major media companies.  Rogers is also a best-selling novelist whose fiction explores the human impact of technology.  His five books have been published worldwide, optioned for film and television, and chosen by the Book of the Month Club.