Recently I’ve been thinking a lot about the impact that the internet is having on both consumers and constituents (basically all citizens). There is a revolution taking place across the country from the comfort of our own homes. I started to realize this revolution while reading “The Long Tail” by Chris Anderson. I started the boook a few weeks back and it has been weaving it’s way into my thoughts since I began. If you are involved in PR, Marketing, Business, or anything related to the Internet (basically everyone), you should read this book.

There are two areas that I have been thinking about in regards to how the internet is making an impact: 1) the relationship between businesses and consumers, and 2) the relationship between congress people and constituents. I will briefly touch on both these topics, with more elaboration to come in the future.

Businesses and Consumers
Have you ever realized that often times there is a phone number and address on most of the products your purchase, asking for your feedback? Right now I’m looking at a Pop-Secret box of popcorn that holds “The Red Sppon Promise”. According to the box, “The Red Spoon is my promise of great taste, quality, and convenience. This is a product you and your family will enjoy. I guarantee it.” I’ve seen similar statements on other products as well. Have you ever called these numbers? I haven’t. Prior to the internet, this was the only way that consumers could connect with their favorite brands. Nowadays, consumers can get on their computer and blog about their experiences with the companies that are a part of their life. Sometimes they can even access a company’s blog and comment on a specific product. Their voice will be heard immediately.

The changing interaction between consumers and brands is pretty revolutionary. Suddenly, the “free market” has become the most democratic system of all (if it wasn’t already). As they have always been able to, consumers can choose what products to purchase. This is their “vote” in the free market. The only difference now is that consumers have access to a broader product offering as illustrated by “the long tail”. Additionally, consumers now have the ability to mold the products that companies provide to them through direct conversations. These direct conversations are taking place on wikis and blogs across the internet. This is in contrast to before when corporations simply used focus groups to determine where a product would be placed within a market, and then continued to heavily market each of the new products. Now we are experiencing a changing landscape, especially in marketing and PR. In The Long Tail, Chris Anderson states:

We’re entering an era of radical change for marketers. Faith in advertising and the institutions that pay for it is waning, while faith in individuals is on the rise. Peers trust peers. Top-down messaging is losing traction, while bottom-up buzz is gaining power. Dell spends hundreds of millions each year on promoting its quality and customer services, but if you Gooogle “dell hell” you’ll get 55,000 pages of results. Even the word “dell” returns customer complaints by the second page of results. The same inversion of power is now chaning the marketing game for everything from individual products to people. The collective now controls the message.

Similarly, Shel Israel states on his blog:

What is a great matter, if you are in the PR proffesion is that you will not succeed if you focus on smiling and dialing a media list of strangers, if you are intent in inject hubris into what you have to say or write. If you think you can succeed by being just cute or clever, you are living in the wrong Era.

Today, you need to join the conversation. You are part of the news distribution system, not just for your clients, but for the community where your clients would like to flourish.

We are now in conversational era. Suddenly, consumers have been given the majority of control. Slowly, consumers are starting to take advantage of it.

Congress People and Constituents
As you know, the United States is a representative democracy, providing the representatives that we elect with the power to determine what is right for the people. Once elected, the representatives interact with intermediaries, not constituents to determine what decisions should be made on key legislation. According to Utah State Representative, Steve Urquhart:

In politics, intermediaries tightly control information. Those intermediaries are (1) special interest groups, (2) the media, and (3) bureaucrats. There’s nothing wrong with the fact that those three entities exist; they can be quite helpful in proper dosage. The problem is the overwhelming degree to which those intermediaries filter content and control political dialogue.

As a solution to the problem, Rep. Urquhart has helped create Politicopia (thanks for showing this to me Leslie). According to Rep. Urquhart:

Politicopia will improve people’s access to information in my state, Utah, by presenting a wiki-based forum for the compilation and presentation of information on actual bills pending before the Legislature. If a citizen wants to learn about an issue and shape the dialogue, Politicopia will provide a quick and solid handle on the process — without the intermediaries filter. And if a legislator wants to hear unfiltered suggestions from interested citizens — instead of mainly hearing from organized special interests — Politicopia will give him or her a new source of input.

While representatives still have the power to choose where they get their information from, one can hope that over time, more information will come directly from the citizens, rather than biased power players. As I mentioned last week, Hillary Clinton turned to Yahoo answers to get the input of the people. While I’m sure much of this may be a political stunt as she moves toward becoming a Presidential nominee, it is still a good illustration of how new technology can impact the relationship between constituents and their representatives.

In conclusion, new technologies developed for the internet have exploited the internet’s true democratic nature. I believe that this is the beginning of a revolution, and we haven’t begun to see the true impact. As a whole, I am hopeful for what the future brings as people begin to embrace the technologies that are provided to them. Want to learn more about the revolution? I suggest heading over to the Media 2.0 Workgroup to read work from other bloggers that are documenting the phenomena of democratic participation on the web.

Today Forrester released a new report covering the ROI of blogging for companies. Unfortunately, I don’t know much about the content of the report except for the executive summary and a few things that I’ve read on other blogs. According to Steve Rubel, “the most frequently mentioned benefits of corporate blogging were: greater brand visibility in mainstream media on the Web, word of mouth, improved brand perception, instantaneous consumer feedback, increased sales efficiency and fewer ‘customer service-driven PR blowups.’” The executive summary of the report states:

Many large companies stand on the brink of blogging, yet they are unwilling to take the plunge. Others, having dove in early, now face the challenge of managing existing blogs without the ability to show that they effectively support business goals. While blogging’s value can’t be measured precisely, marketers will find that calculating the ROI is easier than it looks. Following a three-step process, marketers can create a concrete picture of the key benefits, costs, and risks that blogging presents and understand how they are likely to impact business goals. This, in turn, enables marketers to answer the key questions, such as whether to blog or not to blog, or to make smart choices about an existing blog.

Great job Forrester, you have successfully whetted my appetite. Now all I need to pay is a mere $379. Damn. Just from the executive summary, I can predict an increased demand for blogs in the corporate world (as if there isn’t already). Get ready Movable Type and Wordpress masters, you are going to be in high demand!

“Our mission is to outdo Google”. If this were the mission statement of any company, I surely would not like to work there. Over the past couple days I’ve been reading a fair number of articles discussing the the race to beat Google. I believe much of the talk in the blogoshpere surrounding the competition to Google was initiated by a New York Times article posted on Dec 29th titled “In Silicon Valley, the Race Is On to Trump Google”. While I respect any entrepreneur that is bold enough to challenge Google, I don’t think they stand much of a chance. On the other hand, there is a high probability that if their teams work fast enough, competitors of Google will get bought out (except for Wikia, who’s owner says their exit strategy is not to get acquired). I believe that the race is not really to beat Google, but is rather to become Google. After seeing the success of Google (and all the millionaires that were created by their IPO) and YouTube, entrepreneurs around the world have become inspired. Some have even become crazy enough to think that they can challenge Google.

To all those who point at better or cooler technologies that are coming out before Google (such as Snap search), I think you will be surprised by new Google search offerings in the near future. Google’s business is the search business, and to think that Google is unaware of competing offerings and not developing new technologies to improve their search offering would be ridiculous. On the other hand, I’m not sure if I agree with froosh’s post suggesting that “no one will beat Google in search, never”. I believe such a proposition is as good as suggesting that a powerful empire will never fall. On the other hand, I do believe that Google will reign as leader for some time to come. Competitors in the search market will only help to provide new ideas to Google who commands a 50% market share in the search realm. Eventually, Google will fall, I’m just not sure if I’ll live to see it.

I’m happy to say that today I registered for the Future of Web Apps conference that will be taking place in London from February 20, 2007 to February 22, 2007. I will be going to represent my new company, Capital Interactive. I’m attending the conference with my friend Jesse Thomas, who’s a great web designer. The conference is featuring such participants as Kevin Rose, Mike Arrington, Bradley Horowitz, Matthew Ogle, and other tech moguls. I will be sure to cover any of the highlights on my blog.

Today the Washington Post published an interesting article stating that the “companies engaging in word-of-mouth marketing, in which people are compensated to promote products to their peers, must disclose those relationships.” Does that mean that we are going to see a significant reduction in splogs and aggressive street marketing schemes? I doubt it. Have you witnessed a reduction in pharmaceutical commercials as a result of the long disclaimers that they have to place at the end of their commercials? Nope.

While this will be a burden to the new wave of guerrilla marketing companies, I seriously doubt that it will prevent this type of marketing completely. Although it will be interesting to see how the FTC plans on monitoring and regulating violations of the new policy. Are there going to be marketing police in online chat rooms (there are marketing companies that pay teenagers to promote products to other teens in the chat rooms), or in the streets of New York (in reference to Sony Ericsson’s “Fake Tourist” campaign)? While some guerrilla marketing programs will continue to exist, I think it will be difficult for programs like Pay Per Post to continue their business. Instead splogs will be forced to go back underground (similar to PR firms that use digg marketing techniques) rather than publicly promoting deceptive marketing.

In the past week YouTube has been releasing one feature after the next. If they keep at this rate they will definitely continue to be the online video market leader. Although the online video market is fairly new and there is plenty of competition, YouTube has the upper hand with a large dedicated community and tons of press to drive new users to the site.

In the past week YouTube launched a new design, released quick capture - a service that allows you to record a video instantly to youtube, and test tube - a similar concept to google labs where you can test out new features that they’re working on adding to the site.

YouTube’s business model is not to keep it simple, but rather to continue developing new features for their expanding community. While many may predict the future of YouTube services (for example expanding into providing regular scheduled programming to viewers on the web), on thing is for sure, YouTube is working hard to keep their status as number one in their industry.

So rumor has it that yahoo is trying to acquire Metacafe for a reported $200 million. TechCrunch has reported $200 to $300 million while GigaOm is reporting that they heard the number is more around $700 million. Now, I gotta be fair, Google paid a whopping $1.65 billion for YouTube (which I’m not quite sure how they came up with that value), but still, do these sites really provide that much value?

I have a better idea for Google and Yahoo. Both companies should create their own venture capital companies. Imagine how much money they could be making with anywhere between $300 million and $1.65 billion. Granted, both companies are buying into websites that already have significant existing traffic but couldn’t they make a fortune investing in new startup concepts, let alone get some new ideas for their companies with the amount of money they both are spending?

Think about it this way: according to InformationWeek, $455 million in venture capital was invested in Web 2.0 in the first 3 quarters of this year. Now imagine, that just between google’s purchase of YouTube, and Yahoo’s rumored purchase of MetaCafe, a whopping $2 billion has been spent combined on only 2 web startups, 4 times the amount spent on all web venture capital. Who’s getting the better deal here? Well, according to a report by the National Venture Capital Association, the average annualized returns on venture capital investments in the first two quarters of 2006 was 17.7%. Perhaps Google and Yahoo will make more on their large acquisitions, but what type of turnaround time will those investments have before earning the same or greater rate of return? Unfortunately, I can’t answer that question. In my opinion investing in a vast array of new ideas is better than making such a large bet on one business, because society will receive greater benefits … but that’s just my opinion. Feel free to let me know what you think.

Thanks to the advent of feed readers and technologies of the like, web content has become more accessible than ever before. Suddenly, you can spend the entire day having fresh content to look at and keep your brain on a content high all day long. What a great world we live in right? Yes, but eventually you are going to have access to more content that you are interested in than you are capable of consuming (if you aren’t already facing that problem). The volume of niche content is increasing rapidly. This phenomenon can be illustrated by the “long-tail theory”.

In his article, “The Long Tail”, Chris Anderson successfully illustrates what the long tail effect is. In an interview with Robbie Vann-Adib, the CEO of Ecast, Chris is asked “What percentage of the top 10,000 titles in any online media store (Netflix, iTunes, Amazon, or any other) will rent or sell at least once a month?”. Vann-Adib proceeds to share the shocking results:

Most people guess 20 percent, and for good reason: We’ve been trained to think that way. The 80-20 rule, also known as Pareto’s principle (after Vilfredo Pareto, an Italian economist who devised the concept in 1906), is all around us. Only 20 percent of major studio films will be hits. Same for TV shows, games, and mass-market books - 20 percent all. The odds are even worse for major-label CDs, where fewer than 10 percent are profitable, according to the Recording Industry Association of America.

But the right answer is 99 percent. There is demand for nearly every one of those top 10,000 tracks. He sees it in his own jukebox statistics; each month, thousands of people put in their dollars for songs that no traditional jukebox anywhere has ever carried.

In short, each individual has their own personal tastes. Before the advent of the internet, local stores had to cater to genric demands, but now stores, product providers, and content distributors can provide niche products to a broad marketplace. Ok, so this long-tail concept isn’t a recent revelation, but what is current is the rapid increase in niche content in recent years. As the volume of niche content on the web booms, consumers are going to become overwhelmed. The solution? Content aggregators.

In his article “The Content Aggregators and the Fat Belly”, Om Malik argues that aggregators are part of an increasing trend that is going to continue; an argument that I support. Additionally, Malik references Robert Young’s article about the “fat belly” which is the area between the hit-driven end and the long-tail end of the power law distribution curve. In his recent report Spencer Wang at Bear Sterns supports the fat belly concept and suggests that this is where entertainment and media companies should be focused.

Ultimately, over the next year you are going to see a rapid growth in content aggregators. If you decide as a business to go after the “fat belly”, you will be up against stiff competition from larger media companies. Alternatively, you can focus on the long-tail (niche markets) and enjoy steady growth and a more diverse competitive landscape.

The other day I was reading an article about Orkut becoming the fastest growing social network ever. I’ve decided to do a basic analysis between Facebook and MySpace.

Why did I decide to write this article? Yesterday, I found myself logging into Facebook, and realized that I rarely log into MySpace anymore. Why? Because I hate it. The design is horrendous and many of the people I’m linked through have no real connection to me; let alone the fact that I am frequently a victim of direct spamming from MySpace members. On Facebook I have connections only to those that I have a real relationship with.

The following graph illustrates the daily reach of the three main social networking sites Myspace, Orkut, and Facebook:

There are other social networking sites such as LinkedIn, but I’m referring to the main 3 non-professional social networking sites. While this graph definitely supports Markus Frind’s article that Orkut is the fastest growing social network, it also illustrates a few other interesting things:

1. It took Orkut 2 solid years before the social network really caught on,
2. Once Orkut caught on, it grew to Myspace’s size in a short amount of time, and
3. Facebook has yet to experience it’s exponential growth.

Both Orkut and Myspace have gone through their tipping points, but Facebook has yet to go through that phase. I believe that once Facebook reaches its critical mass and crosses the “tipping point”, the site will be larger than both MySpace and Orkut. Facebook has organized their content much more effectively in addition to having a much sleeker design than its two main competitors.

Unfortunately, I cannot explain why Facebook has yet to experience their tipping point, but the answer can be found through asking “what caused Orkut’s exponential growth beginning at the start of the second quarter of 2006?” That again is another question I cannot answer, but when Facebook is able to figure that out, I’m confident they will grow to become the largest non-professional social network on the internet. One thing that would help spur rapid growth would be the acquisition of Facebook by a larger corporation. Everone seems to be wondering when that will occur. The main barrier to an acquisition is that Mark Zuckerberg, the creator of Facebook, has been shopping the site around for a reported $2 billion, almost 4 times the amount MySpace was sold to Fox for.

I’m not sure when the Facebook revolution will take place, but be rest assured, it will happen; there is no way that a much better designed site with better features will go overlooked by the social networking community.

Last night I was reading an interesting interview with Mel Karmazin, CEO of Sirius Satellite Radio, that was published in Smart Money magazine. I found it most striking that Karmazin is considering (and possibly heavily pushing for) a merge with XM Satellite radio. Jim Cramer from TheStreet.com (and Mad Money on CNBC) seems to think that the window of opportunity for an XM buyout by Sirius is closing fast.

After seeing third quarter results from both companies earlier this month, it seems like a buyout of XM by Sirius doesn’t seem like the worst idea. Take a look at these numbers:

Sirius Satellite Radio

• Revenue increase year over year: 150%
• Change in subscriber acquisition cost year over year: -23%
• Change in Net Loss year over year: -21%

XM Satellite Radio

• Revenue increase year over year: 57%
• Change in subscriber acquisition cost yar over year: 13%
• Change in Net Loss year over year: -36%

Bottom line: there is fierce competition between the two companies. A buyout by Sirius would eliminate all of it. The biggest accomplishment of Sirius is that they have topped XM satellite radio in new subscribers for four consecutive quarters. I definitely have seen an increase in Sirius subscribers in Washington, D.C. (the home of XM Satellite radio). My roommate just purchased Sirius recently, as well as a friend of a friend. I personally am not a subscriber, but fairly frequently I receive interference while listening to my ipod via an fm transmitter, and 9 times out of 10, I hear Howard Stern talking. This means two things: 1) Sirius has fairly powerful FM transmitters on their satellite radio adapters, and 2) my Monster Ipod FM transmitter does not work well in the metro area.

Following these two companies will definitely be exciting for the next couple years. Keep an eye out for a possible merger in the first quarter of next year.

When I saw Compete.com listed as a Techcrunch party sponsor, I added the company’s blog to my Google Reader feed. Since then I have noticed a bunch of unique charts, popping up on their blog as well as other blogs across the blogosphere. For example, I saw the following chart in today’s Compete.com blog entry on Elmo TMX demand:

I am still trying to figure out how they calculated the above demand, but I have my assumptions. Unfortunately they don’t have any explanation in their blog entry. Compete.com claims to be the Alexa.com killer, and I may have to agree with them (although they still have a major battle). Recently I have noticed Alexa.com takes forever to load. Aside from the fierce competition that is going to continue growing between the two analytics companies, I would like to learn more about how Compete.com is going to provide users with useful access to their massive amount of data. Another interesting graph monitoring the volume of traffic to the Borat MySpace webpage was posted in a previous Compete.com blog entry:

Imagine if a general user, or a premium subscriber had access to such valuable information. As of now, I believe that the only premium information that Alexa sells is the full list of their top 100,000 websites. If Compete.com provided access to a wider array of information, they would definitely win the battle in addition to creating a revolution in online analytics.

There has been a ton of buzz about the “The Peanut Butter Manifesto” written by a Yahoo senior vice president, Brad Garlinghouse. Brad discusses a lack of focus and cohesive vision for Yahoo. In all honesty, is it possible for Google and Yahoo to have any sort of cohesiveness once they have become such online behemoths? Dealing in an industry with an extreme diversity of products and services ranging from the free (open-source) to the large enterprise applications that corporations pay a premium for, is any of this news the littlest bit surprising?

While focus is extremely challenging in a rapidly changing environment, there is definitely validity in Brad’s argument. The only problem is, when did Yahoo ever have a well defined vision? A simple review of the The Wayback Machine to compare a history of Yahoo.com and history of Google.com can provide an interesting perspective on the difference of focus of the two companies. Taking a look at Yahoo! in December of 1996 (way before any bubble burst), you can see that the company was already aiming at being a major web portal. According to Wikipedia.org:

A Web portal is a site on the World Wide Web that typically provides personalized capabilities to its visitors, providing a pathway to other content. It is designed to use distributed applications, different numbers and types of middleware and hardware to provide services from a number of different sources.

So distributed applications and different services from different sources …. not focused. In comparison, Google spent its’ first 5 years perfecting their search engine technologies. While I am confident that Yahoo invested significant resources in such technologies, their strategy could already be potentially described as “spreading peanut butter across the myriad opportunities that continue to evolve in the online world”. I think that much of this talk is a result of the massive success that google continues to experience (let alone the fact that their stock price continues to soar is probably somewhat intimidating to Yahoo executives). They have every right to be concerned about their performance, but can Wall Street truly expect such a massive company to simply redefine their vision (whatever their initial vision may have been)?

I do agree with Garlinghouse’s statement that Yahoo has ended up “with competing initiatives and synergistic opportunities ” within the same organization, and a massive restructuring can help to clear up the mess. My only question is will the company ever be able to define their vision accurately?