The rise of video streaming is dramatically affecting the Internet, according to a two-year study of Internet traffic trends that Arbor Networks recently presented to the North American Network Operators Group. Two years ago, Internet traffic was distributed evenly among a dozen Tier-1 network providers, but today the majority of traffic flows through direct peering agreements among large content providers, content delivery networks and ISPs. Consequently, Tier-1 networks have shifted their business models from simple packet delivery to richer cloud computing and content hosting services, and new players Google and Comcast have joined the top 10 list of Internet traffic producers — and the more traffic they put on the Internet, the more control it gives them over your online experience.

Traffic is growing much faster than the 50 percent year-to-year rate found by studies such as the Minnesota Internet Traffic Study; yet the “exaflood” of video traffic hasn’t drowned the Internet because network operators have found more efficient paths. The dramatic shift in traffic patterns has to do with the rise of what Arbor calls “the Hyper Giants,” 30 large companies that contribute 30 percent of Internet traffic. Thanks to YouTube, Google alone is responsible for 7 percent of all the traffic on today’s Internet, which puts it in the privileged position of prioritizing its VoIP and video calling services over YouTube without FCC permission.

The onslaught of video is also changing the nature of peering agreements. Traditionally, peering and so-called transit were very distinct from a revenue perspective: Peering agreements were “settlement free” arrangements in which packets changed hands between networks of roughly equal size and scope, but money didn’t. Fee-based network interconnects were confined to “transit agreements” in which a large network operator connected a small player to the entire Internet for a fee; peering is also strictly a “one network to one other network” arrangement. The new wrinkle is “paid peering” agreements in which a large operator permits direct connection for a small fee. Paid peering replaces transit fees that run $2-9 per Mbps with direct connection at $1-3, and enhances service, according to an article on Bill Norton’s “Ask Dr. Peering” web site which explains the value of Comcast’s paid peering and its potential collision with net neutrality regulations:

Paid peering provides better performance than transit, since the traffic takes a less circuitous route. Paid peering allows Google competitors to more easily compete with Google on performance and price without having to reach Google scale.

But paid peering may be forbidden by Question 106 of the FCC’s proposed Open Internet rules because it’s essentially two-tiered network access, Norton points out.

Paid peering illustrates how hard it is to write an anti-discrimination rule for the Internet that doesn’t have harmful side effects for all but the largest content networks. Paid peering is a better level of access to an ISP’s customers for a fee, but the fee is less than the price of generic access to the ISP via a transit network. The practice of paid peering also reduces the load on the Internet core, so what’s not to like? Paid peering agreements should be offered for sale on a non-discriminatory basis, but they certainly shouldn’t be banned.

Video is rising on the Internet, with more of it coming from legal sources such as content delivery networks and less from piracy-oriented systems like eDonkey and BitTorrent. Regulators need to look before they leap into wholesale bans on practices like paid peering that enable the Internet to carry increasing volumes of traffic. The FCC’s last net neutrality order (issued against Comcast in 2008) was an unintentional gift to purveyors of pirated content because it banned P2P throttling; going forward, the FCC should be at least as kind to network operators coping with the rise of video traffic by creative means.

Richard Bennett is a research fellow with the ITIF with 30 years of network architecture experience.

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Posted by Richard Bennett on GigaOM  |  Permalink  |  104 Comments
Tags: internet, paid peering, Tier-1, Video

What are cloud services uniquely good for and why? After all, CIOs aren’t going to leverage online services offered on demand just because they’re available, but for compelling business reasons. There are helpful compilations of use cases (PDF) from a technical viewpoint; here I’ve identified key cloud rationales from a strategic perspective.

Different people have different definitions of the term “cloud,” but I’m referring to common and flexible services, applications, platforms, content and resources delivered from a public provider. The lion’s share of the reasons I list below apply to most of those definitions, as well as other online/web services. Communication: Whether email, IM, tweets, plain old telephone service or video over IP, utilizing a cloud service for communication provides economic benefits over private solutions because it’s cheaper to connect to a hub or network once rather than have multiple point-to-point connections. Think about how the airline industry uses a hub-and-spoke model to optimize flying routes.

Collaboration, Community, and Commerce: Web-based networks and commerce platforms offer people the chance to share, conduct business and collaborate within a trusted third-party-provided environment. The cloud, therefore, allows communities and social networks to foster ongoing relationships around shared values, goals and interests.

Commons and Collections: Sharing partially or intermittently used resources provides more for less. Be it the public library, the Magritte Museum, or an online encyclopedia, providing collections of information or apps are a natural cloud function.

Continuous Cross-Device Access: Information that’s on an unshared or occasionally offline device may be inaccessible to anyone, including the owner. But information in the cloud can be securely accessible to any authorized user — or to a user’s multiple devices — over any network. CapEx and Cash: Cloud services may be more cost-effective because consumers and even large enterprises may not have sufficient economies or statistics of scale compared to large service providers. But even if cloud services aren’t comparatively cheaper, they can help reduce capital expenditures. And while using cash for capital expenditures by itself isn’t bad, it’s a poor choice if the firm then doesn’t have sufficient cash on hand for daily operations, or if purchased assets are either insufficient to handle demand or underutilized — which is often the case. Like a broken watch that has the correct time only twice a day, fixed computing assets rarely have the right capacity.

Complementary Capacity: Hybrid clouds that augment owned resources with on-demand pay-per-use resources can achieve a sweet spot of minimal cost with maximal flexibility. Much in the way that retailers complement employees with temps prior to holiday shopping,  enterprises can cloudburst their applications or leverage cloud storage across a variety of data networks into service provider clouds.

Continuity and Center Migration: As a special case of capacity augmentation, consider a smoking hole disaster at an enterprise data center. Just like staying in a hotel if your house burns down, cloud capacity can provide temporary capacity until full restoration has been achieved. Or, just as you might stay in a hotel after selling your old house while waiting to move into your new one, clouds can support data center migration, temporarily housing data, applications or services.

Checkpoints and Chokepoints for Congestion Control: Filtering out invalid transactions at the perimeter is a key function of security in the cloud. Network-based firewalls and anti-DDoS are like a coast guard or border patrol. They provide scale to repel attacks and reduce transport costs by dropping invalid traffic at the earliest point possible: ingress at a perimeter. Reducing congestion is also a cloud-based edge function; traffic management of IP packets helps to ensure that the system doesn’t experience a traffic jam.

Context and Capabilities: To better focus on core, mission-critical tasks — such as program trading platforms for brokers or drug discovery for pharmaceuticals — IT shops can benefit by outsourcing non-core functions such as HR and CRM. Celerity: Cloud services can accelerate the speed of development via platform-as-a service and the speed of testing and production deployment via rapid provisioning of on-demand resources.

Consistency, Currency and Control: Information must be accurate, consistent, and timely. Applying corrections once to a master document or file in the cloud eliminates conflicting versions across multiple locations. Applying software updates once in the cloud beats distributing patches to 100,000 desktops.

Combinations: Of course, the options above are not mutually exclusive, but can be used in combination. For example, a microblogging site that provides a foundation for connection and communications also fosters a community and creates a collection of information. If that site also has access to on-demand computing capacity in the cloud, it can stay up through a popular event that would normally overwhelm its own servers. Joe Weinman is Strategy and Business Development VP for AT&T Business Solutions.

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Posted by Joe Weinman on GigaOM  |  Permalink  |  8 Comments
Tags: cloud, Cloud Computing

Maybe we should chalk it up to the upcoming season of jolly, but lately it seems like everyone wants to give away free Wi-Fi access to travelers. Well, free as long as you watch an ad or a promo for whichever company is sponsoring it, such as Yahoo, Microsoft and now Google. But while we might roll our eyes at what looks like just another way to serve up ads, the idea of free WiFi-based marketing is actually pretty smart. Among the current offers:

• Starting today, visitors to Times Square in New York City will be able to get free Wi-Fi on their computers and mobile phones, courtesy of Yahoo. If you log in from your mobile phone, it is going to take you to http://m.yahoo.com. On a computer, you end up at a Yahoo page filled with ads.
• Google is offering free Wi-Fi access on Virgin America through Jan 15, 2010.
• eBay is sponsoring free Wi-Fi on 250 flights on Delta Airlines during the week of Thanksgiving. Wi-Fi users will get access to the eBay home page and an invitation to shop there.
• Microsoft is working with JiWire to give away free Wi-Fi in premium hotspots in hotels and airports as long as they use Bing for search via their connection.
• Google is giving away free Wi-Fi in 47 airports across the U.S., including hubs such as Miami, Seattle, Houston and San Jose, Calif. The promotions will last through Jan. 15, 2010.

Google, from the looks of it, is using Boingo Wireless’ network. The Los Angeles-based hotspot operator today announced a new sponsored access program that will allow brand advertisers to engage with Wi-Fi users.

Wi-Fi usage has been on the upswing recently, thanks to the rise of smartphones, especially the iPhone. Whether it is airports or cafes, people are increasingly logging onto Wi-Fi networks. “People are creatures of habit and one of the goals of this campaign is to open people up to new ways of finding what they are looking for on the Internet,” said Jeff Bernstein, senior vice president at UM (the agency formerly known as Universal McCann). “JiWire’s media channel serves our goal because it gives people an incentive to try Bing and let the engine speak for itself.”

Given that many of the estimated 100 million travelers who will spend time in airports with Google-sponsored Wi-Fi will at some point in time encounter Google ads, the decision is more than a nice gesture. Google providing access to free Wi-Fi is kind of like publishing those free magazines littering coffeehouses. It’s all about the ad revenue.

A typical free Wi-Fi campaign from Boingo offers travelers 15-20 minutes of complimentary Internet access in exchange for watching a 30-second video, by which the user is engaged directly with the brand. Other opportunities to engage consumers include lead generation, product and service trials, social media applications, location-based searches, customer surveys and downloadable content, Boingo noted in a press release.

Giving users something in return for their attention is a smart way to engage with an audience, which increasingly glosses over display advertising. It’s a welcome development, one that strikes a better balance between the needs of a marketeer and the end user (and potential customer).

It’s also a recognition of how important Wi-Fi is in the quest for constant connectivity, especially as more and more folks tote around WiFi-enabled smartphones. With 70 minutes spent behind the security gates at airports on average, everyone from business travelers to harried parents looking for a kid-friendly diversion can now find something online. That’s all good, but one can imagine it’s going to get a lot harder to find an empty power outlet this season.

Photo courtesy of Yahoo

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Posted by Om Malik & Stacey Higginbotham on GigaOM  |  Permalink  |  15 Comments
Tags: Boingo Wireless, eBay, google, Microsoft, WiFi, Wireless Broadband, Yahoo

In a clear sign that mobile advertising has arrived and become a major revenue opportunity, Google today announced that it is buying AdMob, the upstart mobile advertising company based in Mountain View, Calif., for $750 million in stock. On AdMob’s blog, Google’s Susan Wojcicki, VP of product management, and Vic Gundotra, VP of engineering, write:

For publishers of mobile websites and applications, this deal will mean better products and tools and more effective monetization of their content — allowing them to focus more on their users and less on how to generate revenue. For advertisers who want to reach users when they are engaged with mobile content, this deal will bring better, more relevant ads and greater reach. It will also mean more interesting, engaging ad formats.

AdMob has long been the dominant pure-play ad company in mobile, gaining traction as a kind of automated ad clearinghouse for inventory on the mobile web. The company has also expanded into mobile app advertising, which has exploded thanks to uptake of superphones such as the iPhone and Android handsets. Google, meanwhile, has primarily focused its mobile ad business on search.

As Google pointed out, the deal follows a handful of similar acquisitions by traditional online companies looking to move into mobile: AOL bought Third Screen Media more than two years ago, Yahoo picked up Actionality several months later and Microsoft bought its way onto the field with the pickup of ScreenTonic. But Google’s move raises the stakes for all the players in the game, and fires a warning shot across the bow of smaller mobile startups. Expect Google to move quickly to integrate AdMob’s business with its own mobile ad division as the company’s Android platform picks up steam.

While Google certainly paid a premium for not buying in earlier — or for establishing a thriving mobile ad placement business of its own — the tie-up appears to be a good fit. UBS analyst Brian J. Pitz speculated that Google is likely to integrate AdMob’s technology, clients and publishers into its AdSense network, which launched a mobile component two years ago. And J.P. Morgan said the acquisition “makes perfect strategic sense,” allowing Google to leverage AdMob’s technology to serve and analyze emerging ad formats:

“In our opinion, Google has invested heavily in growing the mobile Internet business through its development of Android and inclusion of mobile ads on AdWords,” the firm wrote in a research note. “The acquisition of AdMob should allow Google to monetize its support of the development and use of mobile Internet content further.”

AdMob doesn’t disclose revenues, but J.P. Morgan estimates the company generates between $45 million and $60 million in revenue on an annual basis. The company has raised $47.2 million in venture capital from Accel Partners, Draper Fisher Jurvetson and Sequoia Partners, and it has seen its number of monthly ad requests increase sixfold over the last two years, reaching 10.2 billion in September.

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Posted by Om Malik & Colin Gibbs on GigaOM  |  Permalink  |  23 Comments
Tags: AdMob

Location is a core element in mobile applications and smartphones. We take our mobile devices with us everywhere we go. Their location, and the context in which we use them, changes constantly. In the next two years, location will become central to user experience and performance on hundreds of millions of handsets and applications.

We most commonly think of location within traditional mobile applications. Navigation apps were the first to use it. Local search results and social-networking apps are more relevant when mapped to a person’s current location. But location can do more than simply drive people to places where they can shop, eat or meet friends. Soon, all mobile applications will need to be tied to location if they want to stay relevant.

Applications that we currently do not think of as location-relevant, such as books, sports, reference, music and cooking all become more interesting when a user’s location is taken into account. Home cooks will be able to check out the most popular recipes in their neighborhoods. Music lovers will see where others are listening to their favorite artists around the country. Sports fans will be able to interact with other spectators in the same stadium, and book enthusiasts will be able to search for books written about their neighborhood, or find nearby book clubs to join.

Some apps are already beginning to experiment with location in unusual ways. Sportacular, a top iPhone sports app, allows users to vote for which team they predict will win an upcoming game. The votes are tallied and categorized by region and state. Three days before a recent Red Sox v. Angels baseball game, we saw that every state in the country thought the Red Sox would win except for the Angels’ home state of California. In the end, the Angels dominated, but the voting process encouraged debate and banter among users, fostering a deeper sense of community.

TuneWiki takes over a mobile device’s music player and offers a more compelling user experience by displaying song lyrics and adding community features. The app also ties in location with TuneWiki music maps, which displays the songs that are currently playing around a user’s current location. The community feature lets people see what songs are popular in their area for the current hour, day, week, month or year.

Over 3 billion mobile applications like Sportacular and TuneWiki will be downloaded in 2009. This market will explode to 7 billion applications in 2013 alone, The Yankee Group projects. These apps will make already-powerful mobile devices more functional, social and customizable to a person’s interests and style. Neither Sportacular nor TuneWiki need location. But serving up music and sports content within the context of location makes the information more relevant, engaging, and socially connected.

Data represents location apps from the iPhone App Store, Android Market, Ovi Store, Palm App Catalog, and BlackBerry App World.

The developers of these applications are driving the mobile marketplace. Some are generating millions of dollars in revenue, and are becoming hot acquisition targets. Amazon acquired Lexcycle’s Stanza, an iPhone eBook reader, in April 2009, and SnapTell, a location-based image recognition and shopping application in June. Also in April, IAC purchased Urbanspoon, a location-based restaurant search app. In July, Blackboard, an educational software provider, purchased TerriblyClever, developers of the location-based MobileEdu applications for college campuses, for $4 million. The location-based TomTom iPhone navigation app generated $4.8 million in the third quarter, Distmo estimates, while the location-aware I Am T Pain app from Smule is projected to generate $3 million alone in 2009.

The applications generating real revenue and that have been targeted for acquisition are not simple, gimmicky apps. They are highly functional and take full advantage of device capability, like location, accelerometers and graphics. Millions of dollars in revenue and high-profile acquisitions are classic early signs of a lucrative tech investment sector. As these trends continue, the size of the mobile application market will continue to accelerate.

Massive growth in these types of rich and context-relevant mobile applications will change the way consumers purchase and interact with mobile devices. Ultimately, the growth of mobile apps will help drive the device market. And while apps get even cooler over the next five years, mobile devices and data will get more accessible. Handset prices will fall, and hot devices like the iPhone, Palm Pre and netbooks will capture even more consumer attention. 3G networks will get more powerful; the demand for mobile data and connectivity will increase; and operator subscription fees will get more affordable worldwide.

We’re seeing a shift in the market away from feature phones (voice and SMS-only) to smartphones. An estimated 63 million mobile phone users upgraded to smartphones from feature phones in 2008, from approximately 15 million upgrades in 2005. We will see massive growth of the market over the next four years with 503 million smartphones projected to ship in 2013, RBC Capital Markets projects. The netbook market will also expand — 50 million netbooks will ship in 2012 alone, Gartner projects. Consumer demand for location-aware applications will help drive the distribution boom of these devices.

Developers of today’s most lucrative applications are applying location to their apps in compelling, new ways, and there’s every reason to expect this trend to continue — and to open up new revenue models in the future.

Kate Imbach is the head of marketing at Skyhook Wireless and co-founder and organizer at Mobile Monday Americas. You can follow her on Twitter @Kate8.

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Posted by Kate Imbach on GigaOM  |  Permalink  |  13 Comments
Tags: location, mobile applications, navigation, Sportacular, Tunewiki

I can’t play poker, but I do enjoy watching it on TV. We’re in the middle of the 2009 World Series of Poker, an event that draws thousands of professional and amateur players to Las Vegas every year. The grand finale is the Main Event, a massive Texas Hold ’Em tournament with thousands of players and millions of dollars for the winner.

Tournament poker used to be the province of professionals. But starting a few years ago, a huge wave of amateurs has invaded the game. As a result, of the thousands of entrants into the Main Event, only a few hundred are real pros.

To my surprise, I’ve actually learned a lot about entrepreneurship from watching the World Series of Poker. But it shouldn’t be too surprising. Both rely on acting strategically under conditions of extreme uncertainty. And, in both, small changes in your odds of winning can have a big impact on the final outcome. In fact, I now routinely use the Main Event to help entrepreneurs cope with a frustrating paradox.

Why are some terrible entrepreneurs so successful?

Because the structural barriers to creating a high-tech startup have been lowered dramatically in the past few years, we’re experiencing a huge influx of entrepreneurs. This is a great thing. But it’s meant that there are an awful lot of startup stories floating around. When those stories take on the status of myths, they create tremendous confusion. Naturally, we want to emulate those that have been successful. But that’s not always a good idea.

In the World Series of Poker, no professional has won the Main Event in seven years. When you think about it, this is very surprising. Professional players are so much better than amateurs that they can make a living – in many cases, becoming very very rich – by exploiting the difference between their level of skill and the level of the people they play with. The best of the best win many tournaments each year. By any objective measure, they are much better players than the amateurs. Yet the Main Event has been won year in and year out by a complete unknown player. Some of those amateurs go on to become semi-pro players. But most have never won another tournament after their big win. Why?

The reason is that being a professional player shifts the odds of winning a given poker hand in the professional’s favor, just a little bit. Over the course of a year, a given pro will play thousands of poker hands, and so this shift in probabilities adds up to dramatic winnings. But on any given hand, they still have a significant probability of losing — even if their play is perfect.

Similarly, given enough amateurs in the field, the law of large numbers means that at least some of them will get lucky enough times to outperform even the best pros. That’s why I can say with some certainty that an amateur will win the Main Event this year, even though I have absolutely no idea which of the six thousand entrants it will be.

Entrepreneurship is similar. So much of what makes a startup successful is totally out of our control: the timing of the market, the behavior of competitors, the IPO or M&A window, underlying technology trends and, of course, the human factors of investors, co-founders and employees. Truly successful startup methodologies like customer development or the lean startup can only hope to increase our odds of success — they can’t guarantee it. The converse is also true: even entrepreneurs who do everything wrong sometimes get lucky and make a lot of money anyway. Some even do it repeatedly.

That’s why, for any tactic or strategy — no matter how hare-brained — you can find some “proof” that it works in some company somewhere. That’s what makes processing startup advice so hard. Just because someone has had a success doesn’t necessarily mean they understand why they were successful at all.

Which brings me to the second thing I’ve learned from the WSOP. It’s called a disciplined laydown. In poker, winning requires that your hand beats your opponents hand. The problem is that you don’t know what your opponent has. Amateur players often believe that their success depends on the quality of the cards they are dealt. Consequently, they fold their bad cards and wait for that one big hand to get their chips in with. Unfortunately, having a big hand doesn’t mean you’ll win — your opponent could have an even bigger hand. That’s why the most important skill in poker is not bluffing, counting cards, or computing the odds. It’s figuring out when you need to fold a big, big hand. Watching the pros do this on TV is amazing. Over time, they develop an uncanny instinct for knowing when they are beat, and not throwing more money after bad.

In fact, once you realize that this is the most important skill in poker, it becomes clear that when professional players bet, they are really probing for information. Everything is calculated to help them figure out if their opponent has one of those big hands that might beat them. Folding in those situations saves chips that can be used more profitably later in the tournament.

I think there’s some wisdom here for entrepreneurs, too. We get attached to our big ideas, but it’s those big visions that get us into trouble. Just because we’ve sunk a lot of time and energy into an idea doesn’t necessarily mean it’s a good one. In fact, the main reason we need to get out of the building and validate our ideas is so that we can realize we’re beat before it’s too late and pivot. Once you have that insight, you realize that all of the work we’re doing in building an initial idea — from minimum viable product to split-testing to customer validation — is all designed, like the bets of a poker pro, to promote learning about where we stand.

And that provides another possibility for dealing with startup advice. Instead of making an exhaustive search for all the smartest, most successful people and copying them — learn to place small bets. Take any advice (including mine), and think it through for yourself. Do you understand the underlying principles? Can you see how it applies to your specific context? Can you tease apart the impact of luck? And, once you think you have some advice you might like to follow, try it out. Find a way to pilot it without betting your whole company. And then be prepared to fold if it’s not working. Each time, make sure you do a root cause analysis, and figure out what you learned.

And, if you find advice that seems to work, be ready to go all-in.

Eric Ries is a serial entrepreneur and author of the blog Startup Lessons Learned.

Image courtesy Flickr user banspy

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Tags: entrepreneurship, World Series of Poker

Global Index, a technology owned by Skype co-creators Niklas Zennstrom and Janus Friis via their company JoltID, is the fulcrum of leverage in their ongoing dispute with current Skype owner eBay and its potential purchasers. If you were either the buyer or seller in this labyrinthine transaction, you’d likely be tempted to declare, “Let’s just rip out Global Index and use something different.”

Such a move would undoubtedly take the wind out of JoltID’s sails as Skype tries to find a new home outside of eBay. Indeed, many VoIP pundits insist that Session Initiation Protocol (SIP) could be Skype’s savior. But while it’s true that technologies like SIP and its stepchild XMPP achieve a lot of the same goals as Global Index, such an argument ignores the fact that Skype is as successful as it is because it has exponentially better operating economics than the rest of the VoIP industry –- and Global Index is the singular reason why.

The Promise of SIP In 2002, as Zennstrom and Friis were facing a bevy of lawsuits of indeterminate scope and the writing was on the wall as to the profitability prospects of a P2P file-sharing network, many in the then-fledgling VoIP industry were busily attempting to re-architect the telephone network in the Internet’s visage. A number of these services, including two from entrepreneur Jeff Pulver — Vonage and Free World Dialup — used SIP at their core. They were consumer-focused services that, in their own way, attempted to mimic the architecture, business structure and design of the public switched telephone network using Internet Protocol technologies.

SIP is now hugely significant in shaping how many telecom networks are architected. But while many of us initially thought that SIP might herald an era of person-to-person multimedia communications free from the control of large companies, it hasn’t exactly worked out that way.

The Drawbacks of SIP For telecom companies and their vendors, the draw of SIP was that it could be used to transpose the proprietary SS7 signaling network onto the Internet while allowing the calls themselves to transit IP networks –- both at a significant discount to the cost of switched telecom trunking. But even as a client-server phenomenon deployed on the public Internet, SIP is an incomplete solution. On its own it has no way of traversing firewalls or, more importantly, dealing with NAT traversal –- a critical oversight for a protocol created in the late 1990s for the IP address-starved modern Internet.

SIP user agents (such as that software on your computer or that phone on your desk) must also be manually configured to register themselves to a SIP proxy server if users are to be allowed to use them for differing networks. Furthermore, all traffic, addressing and routing decisions in a SIP network are typically handled at the network core or by equipment operated by the service provider. That includes the various workarounds such as STUN that enable folks behind firewalls or using private IP addresses to talk to each other, not to mention derivative (and much cooler) protocols and techniques such as XMPP and Jingle.

If adapting SIP to the vagaries of the modern Internet sounds expensive, it is. By 2006, Vonage had already burned through nearly half a billion dollars. More importantly, SIP architectures are a critically flawed design starting point for a true P2P network. SIP and XMPP networks are really client-server networks masquerading as P2P.

Forgetting about the exponentially more costly business of sending voice or video data across networks, 70 percent of traffic on XMPP instant messaging networks is the result presence updates. Some estimates are that as much as 60 percent of this information is itself redundant. Servicing the traffic on a network such as Skype’s, which consists of some 45 million daily users, would bury most startups in server and bandwidth expenses. Add to that the actual messages themselves, and having to handle the voice channel or video at the core, and it becomes clear that only the big boys get to play in distributed communications services.

Enter the Supernodes Or do they? As it turns out, features like instant messaging, voice/video chat, and presence management are ideal applications for the technology that Skype’s founders had been playing with for years in the P2P world. The networks using their technology when Skype was founded in September 2002, Kazaa and Morpheus, handled massive volumes of data between peers with no real central core to speak of, but still significant domain control by FastTrack, the company created by Zennstrom and Friis to license technology using the same moniker. The key concept exploited by the services derivative of this technology is the distributed, auto-discovering, self-healing node-supernode model tied together by PKI encryption.

On any of the other VoIP and IM networks such as Gizmo or iChat, each user is a node -– a logical endpoint in a cloud that connects to host computers operated by the service. But with Kazaa, Skype and even Joost, a small percentage of each service’s users unwittingly conspire to provide the network’s backbone in the form of supernodes. Which means that if you have some combination of a permissive firewall, really good port-forwarding on your router and a public IP address on your computer, you, too, can be a Skype supernode. When it comes to traversing firewalls, NAT, and handling distributed authentication and presence management, supernodes do all of the heavy lifting.

That is the reason Skype is able to service 45 million daily users on a fraction of the infrastructure that a SIP-based provider like Vonage needs to deploy. The workload that normally would be handled by equipment owned by the company is distributed among the users themselves. The Power of Global Index In order to make this seamless to users, Skype implements a Service Discovery Protocol. Such technologies have always worked well on Local Area Networks (Apple’s implementation is called Bonjour) but often get confused on the public Internet because there is usually no central registry — and because the broadcast packets they use tend to get snubbed by access routers.

When you load it up, it starts with a table of known supernodes and the central Skype server. Skype’s only centralized involvement is in verifying your identity via PKI authentication and providing an update (if necessary) of friendly nearby supernodes. From that point on, your associated supernodes handle every piece of data you share on the network. An added bonus is that supernodes can redesignate the location of the master Skype hosts on your computer whenever necessary.

Since the whole thing is encrypted, and the encryption keys of nodes and supernodes are all validated by Skype’s root key authority, everything on the network is trustworthy and virtually impossible to hack or otherwise corrupt. In other words, the Skype network is fully distributed, self-healing and largely decentralized, but still maintains all of the advantages of command and control desired by a service operator who actually wants to make money from integrating the service.

Thanks to Global Index, Skype operates at cost levels that are believed to be a fraction of those of even the most efficient SIP or XMPP-driven networks. It is this economic advantage that trumps the possibility of forklifting standards-based telephony technologies into the core of Skype’s network. If you truly wanted to replicate Skype’s ingenious — and very practical — design, you’d be better off looking at technologies like Napster, Bittorrent or GNUtella.

Ian Andrew Bell is creator of the team management service rosterbot.com

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Posted by Ian Andrew Bell on GigaOM  |  Permalink  |  38 Comments
Tags: global index, skyp, spi

The new Motorola Droid is pretty hot today. It’s a phone! It’s a brand! It’s an iPhone killer! But here at GigaOM we decided to ask a far more important question, “Is it a RAZR killer?” Can today’s Droid phone top the world’s most ubiquitous mobile gadget on its path to crush the iPhone? Can it even get close to the iPhone? Let’s see how the competition stacks up:

	iPhone	RAZR	Droid
Release Date	July 2007	2004	Nov. 6, 2009
Numbers Sold	34 million	More than 100 million	We’re waiting ….
OS	iPhone OS	None, it’s not a smartphone	Android 2.0
Device Cost	$99-$249 with 2-year plans	$100 unsubsidized today (the GSM version of the RAZR cost $500 when it launched on Cingular)	$199.99 after a rebate, with a 2-year contract
Hottest Feature	Touchscreen/browser	World’s first slim phone, latest RAZR has an 18-k gold cover	Android 2.0!!!
Best Quote	“This device is a true game-changer. Why? The immediacy of the data at your fingertips is huge. Imagine, looking up anything, anywhere.” — AT&T’s Ralph de la Vega	“Bafflingly enough, the hottest, most popular phone of 2005 is a phone from 2004, the RAZR V3,” said Miro Kazakoff, senior associate at Compete, a firm which tracks shoppers’ browsing habits. “The big thing we saw [in 2005] was this triumph of form over features.” — PC Mag	“The abundance of Google applications is to be expected, of course, but it also underscores an important strategic about-face for Verizon, which has consistently tried to ‘own the customer’ by closely regulating third-party apps and preventing outside brands from approaching its subscribers.” –GigaOM

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Posted by Stacey Higginbotham & Om Malik on GigaOM  |  Permalink  |  13 Comments
Tags: droid, GOOG, google, iPhone, MOT, Razr

So the Droid from Verizon just landed and we have an unboxing video. Despite all the hype, I have this to say to the makers of the iPhone: You’ve got nothing to worry about. Go out, have fun and get into the hands of a few more millions. As for the BlackBerry, its makers better be worried. Watch the unboxing video below the fold.

I’m not sure how you guys will feel about the Droid in a few days, but I can safely say that like so many so-called iPhone killers in the past, this isn’t one. That’s not a judgment as to the robustness or usability of the device — I need more time for that — it’s just that Verizon seriously overhyped it.

The New York Times’ Saul Hansell has the whole story on Motorola, Sanjay Jha and how the Droid came to be. It’s an interesting read, and one which reveals that the design choices (or lack there off) are courtesy of Verizon. As Hansell writes:

They found a way to fit a slide-out keyboard into a phone that was only 1.5 millimeters thicker than the iPhone. And they used a 3.7-inch touchscreen, noticeably bigger than the 3.5-inch screen on the iPhone. To take advantage of the higher resolution of that screen, Motorola, working with Google, developed new software that would support high-definition video and 3-D graphics.

Here are some facts about Droid collected by our team.

• Doesn’t appear to be full Microsoft Exchange support — includes Calendar, Mail and Contacts, but not Tasks or Notes, on which some corporate users rely.
• Placing the Droid in the optional car dock immediately opens up the “Car Dock” interface, and turn-by-turn GPS directions are available.
• Placing the Droid in the optional media dock places the Droid into an alarm clock and media player mode.
• The interface is a stock Google Android 2.0 design, so no extra home screens like some other recent devices.
• Unlike some HTC Android devices, Droid offers a standard 3.5 mm headset jack.
• Like webOS Synergy, Droid unifies contacts from Gmail, Facebook and Exchange.
• Dedicated hardware keys offer haptic feedback.
• Verizon includes a 16GB SD card with the Droid, it supports 32GB.
• Droid’s 5MP camera with flash trumps most other current phones with 720×480 (DVD Quality) recording at 24 fps
• The camera also supports Image Stabilization, real-time color effects, scene modes and location tagging.
• Droid does have an accelerometer and landscape keyboard, so it’s not necessary to slide out the QWERTY keyboard for landscape entry.
• There’s no MotoBLUR, but there is a Facebook widget.
• Back of the device is soft touch.
• The 854×480 display offers a higher resolution than the first ASUS Eee PC netbook, which was 800×480.
• Droid runs the same SnapdragonTI OMAP chip as the iPhone.

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Posted by Om Malik & Kevin Tofel on GigaOM  |  Permalink  |  40 Comments
Tags: droid, Motorola, Verizon

While when it comes to cloud computing, no one has entirely sorted out what’s hype and what isn’t, nor exactly how it will be used by the enterprise, what is becoming increasingly clear is that Big Data is the future of IT. To that end, tackling Big Data will determine the winners and losers in the next wave of cloud computing innovation.

Data is everywhere (be it from users, applications or machines) and as we get propelled into the “Exabyte Era” (PDF), is growing exponentially; no vertical or industry is being spared. The result is that IT organizations everywhere are being forced to grapple with storing, managing and extracting value from every piece of it -– as cheaply as possible. And so the race to cloud computing has begun.

This isn’t the first time IT architectures have been reinvented in order to remain competitive. The shift from mainframe to client-server was fueled by disruptive innovation in computing horsepower that enabled distributed microprocessing environments. The subsequent shift to web applications/web services during the last decade was enabled by the open networking of applications and services through the Internet buildout. While cloud computing will leverage these prior waves of technology –- computing and networking –- it will also embrace deep innovations in storage/data management to tackle Big Data.

A Big Data stack But as with prior data center platform shifts, a new “stack” (like mainframe and OSI) will also need to emerge before cloud computing will be broadly embraced by the enterprise. Basic platform capabilities, such as security, access control, application management, virtualization, systems management, provisioning, availability, etc. will have to be standard before IT organizations are able to adopt the cloud completely. In particular, this new cloud framework needs the ability to process data in increasingly real-time and greater orders of magnitude -– and do it at a fraction of what it would typically cost -– by leveraging commodity servers for storage and computing. Maybe cloud computing is all about creating a new “Big Data stack.”

In many ways, this cloud stack has already been implemented, albeit in primitive form, at large-scale Internet data centers, which quickly encountered the scaling limitations of traditional SQL databases as the volume of data exploded. Instead, high-performance, scalable/distributed, object-orientated data stores are being developed internally and implemented at scale. At first, many solved this problem by sharding vast MySQL instances, in essence using them more as data stores than true relational databases (no complex table joins, etc.). As Internet data centers scaled, however, sharding MySQL obviously didn’t.

The rise of DNRDBMS In response to this, large web properties have been building their own so-called “NoSQL” databases, also known as distributed, non-relational database systems (DNRDBMS). But while it can seem like a different version sprouts up every day, they can largely be categorized into two flavors: One, distributed key value stores, such as Dynamo (Amazon) and Voldemort (LinkedIn); and two, distributed column stores such as Big Table (Google), Cassandra (Facebook), HBase (Yahoo/Hadoop) and Hypertable (Zvents).

These projects are in various stages of deployment and adoption (it is early days, to be sure), but promise to deliver a “cloud-scale” data layer on which applications can be built quickly and elastically, all while having aspects of the reliability/availability of traditional databases. One facet that is common across these myriad of NoSQL databases is a data caching layer, essentially a high-performance, distributed memory caching system that can accelerate web applications by avoiding continual database hits. Memcached’s (disclosure: Accel is an investor in Northscale, parent company of Memcached) broad distribution (which is behind pretty much every Web 2.0 application) has become this de facto layer and is now accepted as a “standard” tier in data centers.

Managing non-transactional data has become even more daunting. From log files to clickstream data to web indexing, Internet data centers are collecting massive volumes of data that need to be processed cheaply in order to drive monetization value. One solution that was been deployed by some of the largest web properties (Yahoo, LinkedIn, Facebook, etc.) for massive parallel computation and distributed file systems in a cloud environment is Hadoop (disclosure: Accel is an investor in Cloudera, the company behind which provides commercial support for Hadoop). In many cases, Hadoop essentially provides an intelligent primary storage and compute layer for the NoSQL databases. Although the framework has roots in Internet data centers, Hadoop is quickly penetrating broader enterprise use cases, as the diverse set of participants at the recent Hadoop World NYC event made clear.

As this cloud stack hardens, new applications and services –- previously unthinkable -– will come to light, in all shapes and sizes. But the one thing they will all have in common is Big Data.

Ping Li is a partner with Accel.

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Posted by Ping Li on GigaOM  |  Permalink  |  22 Comments
Tags: big data, Cloud Computing

Boy is there a lot of startup advice floating around these days. To be sure, I routinely feel bad about adding to it. And yet I’m about to do it again.

This time, I’m going to itemize 10 ways that startup advice — typically presented in some form of “I did this, then I got really rich and/or famous, so if you do the same thing, you’ll also get rich and famous” — is flawed.

Startup Advice: The Bad

1. Maybe the thing they did really didn’t cause them to get rich. A lot of startup stories are after-the-fact rationalizations or outright myths. As they say in Latin (and on the “West Wing”): Post hoc ergo propter hoc. In other words, just because something takes place after something else, doesn’t mean the two have a causal relationship.

<li>   <strong>2. Maybe they got lucky.</strong> After all, as my grandmother used to say, “Even a blind pig eventually finds a truffle.”</li>
<li>   <strong>3. Maybe they did the thing they said and it was actually a bad idea, but they were in the right place at the right time.</strong> A lot of powerful businesses (especially network-effects businesses) are largely resilient to incompetence. </li>
<li>   <strong>4. Maybe the thing they did worked, but only in conjunction with some other unnamed factor.</strong> For example, many visionaries partner with a heads-down, practical type.</li>
<li>   <strong>5. Maybe the thing they did worked, but it only under certain circumstances.</strong> For example, perhaps it worked in their industry and not in yours, or only in certain phases of growth, or for certain kinds of teams.</li>
<li>   <strong>6. Maybe the thing they did used to work, but it doesn’t anymore.</strong> For example, perhaps competitors now know how to counter such a move.</li>
<li>  <strong> 7. Maybe the thing they did worked, but for a different reason than they think.</strong> For example, perhaps it was the feedback of their customers, not their grand original idea, that was key to success.</li>
<li>   <strong>8. Maybe they didn’t really do the thing they said they did.</strong> Most of the mythological startup stories are highly misleading. Many of us remember the past the way we wish it had been rather than the way it actually was.</li>
<li>   <strong>9. Maybe they're not really rich and/or famous.</strong> A lot of startup energy goes into what I call “success theater” –- that is, convincing the world that you and your startup is successful. Next time you’re listening to a guru, ask yourself: How do I really know that they're successful? What is their definition of success? What's mine?</li>
<li>  <strong>10. Maybe they have an agenda.</strong> Ask yourself: Does this person stand to benefit if I follow this advice? The VCs I know and trust are honest and very pro-entrepreneur, but I routinely hear others give advice that entrepreneurs should be suspicious of. Fundamentally, their incentives are based on having a portfolio of startups. As an entrepreneur, you have a portfolio of one. Think about that the next time a VC advises you to swing for the fences.</li>

Startup Advice: The Good

I hope by now you’re wondering: If all that is true, why should I listen to you? Indeed, you don’t know how successful I’ve really been. You don’t know if the things I say I did really contributed to that success. And most of all, you don’t know what my real agenda is.

Startup advice can, however, be very valuable — the key is to look for actionable advice that can be applied in small batches, has a measurable outcome and is based on coherent principles that you understand.

Actionable advice proposes a set of behaviors that you’re capable of emulating. I laugh when I hear advice that starts with “Raise significant capital from the top one or two VCs” or “Raise money from VCs you’ve already worked with.” Not everybody has that option. So advice along those lines is interesting but moot.

Advice that works in small batches can be tested and applied over time. Ask yourself: “If this theory is wrong, and I attempt it, am I doomed?” I have found that most good ideas are good in parts, too. Can you try listening to customers just a little bit, and see how that goes? Can you try a slightly more agile release process? Be especially wary of “all-or-nothing” advice. Few things in life are truly that binary.

A measurable outcome doesn’t necessarily mean hard data. It just a way to assess the effect of the advice you’ve taken. To that end, small batches really help, because you can try lots of different kinds of advice, and pay attention to the correlations between outcomes. This kind of associative, intuitive process is something at which humans excel. Use it.

And finally, find a coherent set of principles that makes sense to you. Extreme Programming is an especially good example of this. Each of the practices is based on a set of clear principles, and these principles suggest a series of interlocking practices –- each one reinforces the others. Lean Thinking, Boyd’s OODA loop (maneuver warfare) and Customer Development are other good examples.

But most importantly: Be wary of advice that you don’t understand. If you don’t understand the principles behind what you’re being advised to do, you won’t be able to tell if applying them is working or not.

Eric Ries is a serial entrepreneur and author of the blog Startup Lessons Learned.

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Posted by Eric Ries on GigaOM  |  Permalink  |  20 Comments
Tags: advice, startup

This year, I had the opportunity to serve as a mentor at Seedcamp. I hear pitches from wanna-be startups all the time in Silicon Valley, but the teams in London were different; the entrepreneurial dreamers that I met there typically had letters like PhD after their names. As a result, their ideas were especially innovative -– and complex. So a few pitches in, I started to ask the question: Why do you want to build a startup around this technology? Very few of them had an answer.

One of the unfortunate side effects of all the publicity and hype surrounding startups is the idea that entrepreneurship is a guaranteed path to fame and riches. It isn’t. Building a startup is incredibly hard, stressful, chaotic and –- more often than not –- results in failure. That doesn’t mean it’s not a worthwhile thing to do, just that it’s not a good way to make money.

A more rational career path for money-making is one that rewards effort, in the form of promotions, increased security, salary and status. Startups, unfortunately, punish effort that doesn’t yield results. In fact, the biggest source of waste in a startup is building something nobody wants. While in an academic R&D lab, creation for creation’s sake will often get you praise, in a startup, it will often put you out of business.

So why become an entrepreneur instead of developing technology in an R&D lab? Three reasons: change the world, make customers’ lives better and create an organization of lasting value. If you only want to do one of these things, there are better options. But only startups combine all three.

Take this fictional example of a Seedcamp attendee (actually a composite), which I will refer to as Hairbrush 2.0. At the helm of Hairbrush 2.0 are dreamers with deep AI background. Their dream is to use AI to solve some of humanity’s big problems. Originally, they thought they could make a learning engine that would accurately predict consumer preferences, and tell people what products to buy. Imagine a shopping engine that does your shopping for you. Brilliant. And also very, very hard. So like good entrepreneurs, they went searching for an easier problem to start with, namely helping people find just the right –- you guessed it — hairbrush. This idea took them right off the rails.

They were busy building their product as if they were still in a research laboratory. They hired hair-styling experts to feed their expert system. Their algorithms were world-class. And yet nobody was using it.

The worst part? They didn’t know why.

Hairbrush 2.0 didn’t have contact with customers. Not only that, nobody in the company actually had a use for the product they were building. Trust me, these guys did not brush their hair.

There’s nothing wrong with starting small on the way towards a larger or more mainstream product. But to become an entrepreneur, you have to serve customers, stay true to your vision and build an organization — all at the same time. Indeed, that constant balancing of short- and long-term priorities, vision and data, customers and employees is what makes it almost impossibly hard.

That’s not to say the Hairbrush 2.0 team is doomed. They can make up for their lack of domain expertise by putting a product out early, spending a lot of time with potential customers, and being rigorous about measuring how real-life customers interact with it. But in order to do that, they’re going to have to keep two seemingly contradictory ideas in mind at the same time: that their vision is going to change the world, and that their vision is also horribly flawed. Which parts of the vision are which? There’s no way to answer that in the lab.

Attempting to hold two contradictory ideas simultaneously is known in psychology as cognitive dissonance. Most people go out of their way to avoid this sensation. That’s a perfectly normal reaction; our brains are supposed to experience pain when we try to do the possible and the impossible at the same time. Entrepreneurs are wired differently, however. It’s not that they don’t experience pain — trust me, creating a startup is extremely painful — but that they care more about realizing their vision. And there are much easier ways to get rich.

Eric Ries is a serial entrepreneur and author of the blog Startup Lessons Learned.

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Posted by Eric Ries on GigaOM  |  Permalink  |  36 Comments
Tags: Entrepreneurs, Seedcamp, Startups

The Bill & Melinda Gates Foundation last week sent analysis data to the FCC that put the cost of installing fiber networks in 80 percent of the anchor institutions (hospitals, medical facilities, schools) in the U.S. at $5 billion–$10 billion. But while the FCC quickly issued a public request for comment (PDF) to validate the financial and technology assumptions in the foundation’s analysis, I had to wonder: Does wiring the 98,400 U.S. anchor institutions that lack Internet access make good business sense?

I think it does. In fact, the premise of the foundation’s report –- wire these institutions and great things will happen –- is in my view a great strategic approach to reaping broadband’s promised benefits. It should be the core for our national strategy, as well as a central strategic objective for those applying for stimulus grants. In one fell swoop you resolve three critical issues: financially sustaining the network, fostering economic development and generating widespread broadband adoption.

Financial sustainability

To be clear, the foundation’s analysis estimates the cost to install fiber in every institution but doesn’t include the costs of keeping it operational. My support assumes that network business would be built, not just little islands of fiber access. For one thing, money for ongoing operations has to come from somewhere. Communities have the best shot at making that money by integrating their institutions’ fiber cabling into one network.

If your ultimate objective is to create a community-wide broadband network, then these institutions have to become anchor tenants that actually pay for network services, with libraries being the one possible exception (more on their role in a bit). In many underserved rural and urban areas, low population density and/or low income make it difficult to get enough individual subscribers to pay for a network’s operating expenses (OpEx), even when the network is built mainly with grant money.

If you look at successful networks already in place, anchor tenants collectively produce most of the revenue. It costs less money to win, and then support, for example, 10 anchor tenants at $1,000 or $2,000/month than 400 subscribers at $50/month. Plus, if you provide great service, anchor tenants re-new their contracts every year. And extrapolating the Gates’ premise, you use financing to take communities’ main institutions over the big hurdle of broadband buildout, and thus make it easy for them to become anchor tenants.

It’s important to include local government in that equation, since it’s the mother of all anchor tenants. And many local government offices are burdened with so much ancient legacy communication technology that replacing it with fiber would save hundreds of thousands of dollars a year. Especially when it comes to small towns, building an ROI case is not hard.

Furthermore, local government can build a wireless network on top of the fiber, producing an even greater financial bang for their buck. New York City, Minneapolis, Providence, Rhode Island and Oklahoma City are examples of cities that built or subscribed to citywide wireless networks to run hundreds of mobile government workforce applications and reduce government operating costs.

While it’s true that adding local governments would add to the cost projected in the foundation report, governments can show a significant return on investment to underwrite their portion of the buildout and the OpEx. Economic development

Once you have your anchor institutions wired and wireless, they become a catalyst to drive economic development. Santa Monica, Calif., proved that once a local government and other anchors have a network that’s saving or generating money, it’s less expensive to extend that network to your largest 10–12 businesses. Word of mouth sells services.

This network extension builds on itself. As infrastructure goes out to the biggest companies, you attract new businesses looking to move or expand to small towns and rural areas. Network costs stay reasonable so small businesses in rural and urban areas can afford to tap into the infrastructure. Each anchor tenant can build a wireless hub that attracts shoppers and tourists, which impacts the neighborhood’s economic picture. Broadband adoption

Anchor institutions, particularly when you include libraries in the mix, address one of the more vexing challenges of broadband -– getting individuals to subscribe. After all, it can cost hundreds of dollars to win and keep an individual as a subscriber and it takes months before each one becomes profitable.

Rather than bust your rump and your budget chasing after these individuals, leverage the anchor institutions. If each institution provides content, services and applications that enable their constituents to benefit without having to fight traffic, stand in line or sit for hours with a phone locked to their ears, individuals will subscribe to the network.

As part of the strategy for broadband adoption, anchor institutions hold the key, so be creative in structuring relationships with them. Especially libraries, which are already a central point within communities for people who want to use the Internet to do research or hunt for jobs.

This discussion, of course, may all be for naught if no one can figure out where the $10 billion is coming from to invest in the anchor institutions. I was hoping Bill and Melinda would round up nine or 10 of their similarly well-heeled buddies and put together a broadband investment group, but so far, no such luck.

Craig Settles is an industry analyst and consultant who specializes in developing business strategies for community broadband networks. You can follow him on Twitter (cjsettles).

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Posted by Craig Settles on GigaOM  |  Permalink  |  3 Comments
Tags: Bill & Melinda Gates Foundation

Shares of Akamai got a nice little bump earlier this week, partly due to rumors that Google was interested in buying the company for its CDN business. But does such a deal actually make sense? Not really.

Yes, CDN (Content Delivery Network) technology could help Google deliver YouTube videos faster or serve up search results more quickly. But if that’s what the company is looking to buy, there are smaller, cheaper, safer acquisition targets out there. Here are the top three reasons why a deal probably won’t happen.

1. The price is too high. After the run-up in Akamai shares earlier this week, the company’s market cap stands at around $3.8 billion. That means Google would have to offer about $4.5 billion just to get Akamai interested in taking a phone call, analysts say. While Akamai is clearly the leader in the CDN market, it is by no means the only player. And if what Google wants to buy is CDN technology, it can get that for a lot cheaper than what it would cost to acquire Akamai.

“There are other companies out there that have proven you can build your own CDN for a much smaller price than that,” says Kaufman Bros. analyst Colby Synesael. “Look at AT&T, who spent about $75 million building their CDN out. And Limelight is trading at around $350 million, which is one-tenth of what Akamai would cost. By no means do you have to spend 10 times Limelight’s share price to achieve that.”

2. CDN customers are high maintenance. Akamai’s $800 million in annual revenue is nothing to sneeze at, but there is no reason to believe that Google would have any interest in running a CDN business and managing its 3,000 customers. “You have to figure out why [Google] would want to acquire a CDN, and from my perspective it would be more for the network than for its customers,” says Wedbush Morgan analyst Kerry Rice.

That makes sense. After all, the CDN business — and especially the one that Akamai operates at the high end of the media and entertainment and e-commerce markets — is a fairly high-maintenance proposition with regard to the amount of back-and-forth that goes on between salespeople and customers.  But Google has thrived in creating low-maintenance, automated and algorithmic business decisions, and labored in cases where it’s needed to step outside that comfort zone. It struggled when it needed to sign up premium content partners to contribute videos to YouTube, for instance.

3. Infrastructure issues. A Google acquisition of Akamai would raise serious issues surrounding Akamai’s network architecture. Its CDN works by distributing content from 50,000 servers located in last-mile ISP networks around the world. But after years of fighting with carriers like AT&T and Verizon, is there any reason to believe that those telcos would want Google servers located in their local network facilities?

“Part of Akamai’s value proposition is that they have free access to last-mile service provider networks to access their own servers,” Synesael says. “But who’s to say that will be maintained if Google were to purchase Akamai?” Chances are that access wouldn’t be maintained, in which case Google loses out on a big reason for making the purchase to begin with.

Tech M&A may be on the rise again, but the Google-Akamai rumor is just that — a rumor.

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Posted by Adam Kramer on GigaOM  |  Permalink  |  12 Comments
Tags: acquisitions, Akamai, google

Augmented reality — a group of technologies that marry the virtual world with the real one — has been around for decades, and has traditionally required the use of expensive and specialized equipment. But the proliferation of smartphones that have cameras, displays, and even GPS and other sensors on them has enabled a whole host of new mobile applications — Soundwalk, Wikitude and Layar, for example — that offer a glimpse at how online digital information and offline physical worlds could be combined. With such tools, virtual and real worlds have moved one step closer to one another.

But we are set to move much further. Over the next decade, augmented reality will shift toward “mixed reality,” enabling immersive applications and shared experiences that will change how computers are positioned in our lives. The latest GigaOM Pro report, “3-D Computing: From Digital Cinema to GPUs,” (subscription required) outlines some of the coming changes in:

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• Display Technologies. From movie theaters and home monitors to computer displays and even mobile Internet devices, the ability to see and experience content in real 3-D — with and without glasses— will become a common feature. We predict that more than 1 million 3-D digital signs (try not to think of “Minority Report”) will ship by 2014.
• Interfaces. Keyboards and mice will no longer be primary modes of input. Instead, cameras will go beyond simple image or video capture functions to become virtual eyes through which gestures and other physical information will be transmitted. Combined with voice understanding and scanners, acquisition and navigation in real 3-D space will become easy.
• Computing Technology. New computing demands will be placed on our systems that call for a greater emphasis on visual computing, high-speed networks and software. IBM, Apple, Google and even Microsoft are beginning to embed the frameworks required to enable real 3-D computing interfaces and applications on their platforms.
• Business Process. Online collaboration is moving from web conferencing to video and there are many successful pilots underway with enterprise virtual worlds. Vertical industries like the military, education and even health care are poised to take advantage of these technology advances to use virtual 3-D worlds to bridge time and space obstacles in their operations.

The evolution of augmented reality — and 3-D technology in general — is fostering a convergence of the real and virtual worlds unlike anything we have seen in history. We believe this convergence represents the opportunity of a lifetime for those that can find ways to harness its power and bring new, innovative products and services to the marketplace.

Kris Tuttle is the founder and director of research for Research 2.0 and co-author of the latest GigaOM Pro report, “3-D Computing: From Digital Cinema to GPUs“ (sub. req’d).

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BackPack Shelf for Mac — Adjustable Gear Storage jkOnTheRun – by James Kendrick "; Live Music Comes to iTunes TheAppleBlog – by Liam Cassidy "; 4iThumbs — When the Screen Is Not Enough jkOnTheRun – by James Kendrick "; Dealing With the Avalanches In Life and Business WebWorkerDaily – by Amber Riviere ";

Posted by Kris Tuttle on GigaOM  |  Permalink  |  11 Comments
Tags: 3-D, augmented reality, Soundwalk

Mobile apps are hot. Apple users have downloaded 2 billion of them, Microsoft just launched its Windows Marketplace for Mobile and Verizon, which is trying to lure developers to its own app store due to open later this year, in the meantime has announced it will launch Android-based devices preloaded with apps, and access to the Android Market. But amid all the excitement some painful realities are starting to emerge, such as the role that smartphones play in distracted driving, or the effect some apps can have on battery life or the cellular network. A recently launched startup — Waze — exemplifies some of those issues, while also showing off the great promise of mobile apps when ubiquitous wireless enables access to data.

Israeli company Waze has developed a crowdsourced mapping product that could loosen the hold that proprietary mapping firms like Teleatlas (now owned by TomTom) and Navteq (purchased by Nokia) have on the location-based services (LBS) industry. Waze uses real-time GPS data from participating drivers to assemble base maps for a given geography. Base maps are the core building block of any location-based service, and are usually assembled through costly, complicated and time-consuming van drives through towns, cities and regions.

The base maps for current GPS services are largely developed and monetized by Navteq and TeleAtlas, which Waze believes are pushing up costs and slowing innovation in the LBS arena. According to Waze, the creation of a new base map assembled cheaply using user-provided data could reduce expenses — and increase competition in LBS.

That’s the promise, but there are some realities that Waze must face. In a recent demo, a Waze exec described drivers manually updating information on slow traffic, accidents, etc., from their iPhone in real time. Even if this only involves one or two taps on the screens as opposed to extensive typing on a keyboard, asking drivers to manually update anything while on the move flies in the face of very current and well-founded regulatory efforts to minimize driver distraction.

Second, like many small companies, some of Waze’s development choices seem to disregard the realities of the mobile environment. Its near-real-time updating of position information and delivering of constant map revisions to the handset eats bandwidth, whether free or not. This will impact the performance of both the device and the network.

If a device is continually polling and sending/receiving information from the network, as well as always keeping the GPS receiver on, it will have an impact on device battery life, as described by users of Waze on the support section of its web site. Additionally, if a bunch of devices in the same area (i.e. cars in a rush-hour traffic jam) are using a popular application that’s bandwidth-intensive, the additional data volume will literally cause the cell coverage for a EVDO or HSPA cell site to shrink, meaning the device will have to “yell louder” and work harder to get throughput, resulting in an additional battery life hit, as well as suck up limited cell site capacity.

So while we’re excited that Waze is taking on the base map duopoly, thinking through mobile application behavior in terms of safety, device functionality and network impact is important as well — issues all mobile application developers need to keep top of mind. For as the mobile apps space continues to heat up, it’s important we don’t let them burn out the infrastructure or society’s good will.

Jeffrey Belk is Managing Director of ICT168 Capital, which advises and invests in emerging and growing companies in the information, communications and technology space.

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BackPack Shelf for Mac — Adjustable Gear Storage jkOnTheRun – by James Kendrick "; Live Music Comes to iTunes TheAppleBlog – by Liam Cassidy "; 4iThumbs — When the Screen Is Not Enough jkOnTheRun – by James Kendrick "; Dealing With the Avalanches In Life and Business WebWorkerDaily – by Amber Riviere ";

Posted by Jeffrey Belk on GigaOM  |  Permalink  |  11 Comments
Tags: iPhone, mobile apps, Nokia, Waze