The Next Big Thing Is Already Here… Sort of

Media outlets love to highlight the next big thing. Trend spotters love to say they know about it, and investment bankers love to bet on it. As a twenty five year Silicon Valley veteran, I’m always astonished on how often they miss what’s big. That’s probably why, when the next big thing comes out, most of us are shocked since we think the technology came out of nowhere.

Currently the press is talking about drones, robots and smart watches. These technologies are real, but are they the next big thing? Are they life changing? Not really. They simply are prevalent and easy to understand.

The next big thing isn’t the next big company; it’s the next big enabling technology that will change our world. The next big new company will either provide that enabling technology, or more realistically, provide a new product or service by riffing off or re-adapting that technology. To understand the next big thing, it’s easiest to look at past big things and investigate what really happened.

Twenty years ago Netscape exploded onto the scene. Everyone outside of Silicon Valley (and worldwide technologists) were blindsided and blown away by the internet. Those of us working in the technology world all said, “What’s the big deal? We’ve been using the internet for years.”

Netscape capitalized on the simultaneous maturing of a number of technologies including ubiquitous TCP/IP, low cost PC’s, color monitors, and especially graphical user interfaces being applied to everything most importantly browsers and Windows, which made it easy for people outside of technology to participate.

What couldn’t be understood by Silicon Valley, or anyone else at that time, was how the internet would change our lives. Life changed when technologists began riffing off these initial technologies. Examples of companies that successfully riffed off of the internet are Google, Amazon, and Facebook.

The next big thing was the Smart Phone. For years everyone was saying, “why can’t we combine the phone, camera, MP3 player, and PDA’s (e.g. iPod) into one device?”

It took until 2007 for the technologies to mature so these applications could be combined and a Smart Phone could be created. On launch, Apple didn’t allow non Apple applications to run. It took “Jailbrakers” hackers, who broke into the phone to run their own apps, to show Apple the real market.

Smart phones were the enabling technology, but apps and the maturing of WiFi and low-cost ubiquitous cloud servers allowed for new applications to riff off of mobile phones. The confluence of enabling technologies really changed our lives. New companies that riff off of phones are Uber and Square.

Today, the hottest hiring in Silicon Valley is for big data. The two most obvious applications for big data are advertising and genetic sequencing. Companies have established data farms full of data, but we don’t yet have the tools to understand this information or take advantage of it.

Some of the most progressive technology companies are skimming the surface of this data potential to provide better information. But the information derived is mostly regressive. For example, if a consumer views shoes in an online store, advertisements for shoes will appear on screen when the same consumer surfs the web — even if he or she bought the shoes.

Predictive technologies are the current holy grail, but they are considerable more difficult to develop. Highly progressive companies like Facebook are starting to deploy predictive technologist. For example, based on your “Likes,” Facebook can use big data to accurately predict your sex, age, political views, sexual orientation, and a number of other metrics about you. All this predictive information can be used to more accurately target advertising.

A few “forward thinking” media writers have nominally identified big data as the next big thing. And these writers have reported that engineers who work on advertising applications are in big demand, and tend to get promoted into senior level positions.

Their conclusion: advertising is a hot field to be in. What they miss, however, is the BIG BIG trend. Big data is the next big thing and people with any sort of big data experience are highly sought after.

Of course, the next question asked is: how will big data change our lives? That’s why the media doesn’t cover the really big trends until they are upon us.

Currently, we can say superficial things like, big data will provide better predictions for what people want, and this will result in more accurately targeted display adds. Or, improved health information can be provided since we can better spot health trends. In areas like genomics, faster and cheaper sequencing will allow us to create custom health solutions.

The real answer is this: harnessing big data will change our lives. Not this year, and not even next year — but soon. And it will change our lives in ways we can’t imagine. That’s because the killer applications that will riff off of getting information out of big data haven’t yet been conceived.

AirBnB vs VRBO

Last year I joined the sharing economy by renting out our over-the-garage apartment.   I’ve listed the apartment with both AirBnB and VRBO.  Both services work similarly.  Each have pro’s and con’s when it comes to using their web site. What’s interesting is the difference between their clients.

We live in Mountain View, a work, not vacation destination.  With limited hotel rooms and large companies like Google and Linked-In located in our town, along with a bunch of start-ups and VC’s, there are plenty of people needing a place to stay.  I may be getting a skewed audience since I have a standalone apartment, the main stay of VRBO; whereas most AirBnB listings are for renting out a room in a home.  Then again this can result in more AirBnB listings, since someone can rent out three individual rooms compared to one three room house.

Surprisingly about half of my renters come from each service. But that’s where the similarity ends.  AirBnB renters typically are younger and are coming to this area to work.  They typically book from two days to a week before their stay. While VRBO renters are typically over fifty and are coming to the area to visit family.  They book a month to two months in advance. AirBnB renters typically stay for shorter visits, less than a week with a few notable exceptions.  While VRBO renters typically stay for one to two weeks.  

On a recent trip to Europe I stayed in apartments.  After an initial search I only stayed in VRBO apartments since their choice was so much larger then AirBnB.  Probably because I was looking for a stand-alone apartment, not a shared facility.

Both of these companies provide a similar service. AirBnB’s valuation is more than ten times that of VRBO.  I'm surprised AirBnB value is so much higher.  Is it that much more valuable to provides a convenient platform for renting out a room instead of a whole houses?  If so, why hasn't VRBO added a "shared" option to their listings.  It would be easy to do, and could potentially increase their value ten fold.

Google’s Achilles Heel Is Not Limited to Google

Article published in The Manzella Report: http://www.manzellareport.com/index.php/u-s/977-google-s-achilles-heel-is-not-limited-to-google

Google just dodged a bullet. But their Achilles heel still can be exposed by the European Union’s monopoly litigation. Ninety five percent of Google’s revenue comes from Ad Words. They are a brilliantly successful revenue generator. The profit in Ad Words comes from Search. However, this amazing revenue generator is also Google’s Achilles heel.

Advertising revenue allows Google to be what Bell Labs was back in the 20th century — one of the most innovative technology companies in the world. Ad Words allows Google to provide a plethora of products and services for free, a price point only other goliath companies can compete with.
Apple’s favorite saying is, “If you’re not paying for a product or service — then you are the product or service.” As Google has demonstrated, people are willing to give up their privacy for free access to technology. All of Google's technologies are, in effect, additional platforms for them to gather data on users or present advertising.

Government monopoly litigation in Europe and the Sherman Antitrust act in the United States play an important role for large companies, but not in the way most people think. When the U.S. government goes after a company for antitrust violations because they've become too big, many people think government is over reaching.

I think the government is the canary in the coal mine. The government is telling a company it's time to divest, and chances are, the company has gotten too big to be managed effectively.
The only person really negatively affected by a break up is the company CEO. After a separation, shareholders have stock in two successful companies, employees have a job in one of the companies, executives have more paths for success, and the CEO has a smaller organization to run.

The high-Tech History of Antitrust: 3 Quick Case Studies

Back in the 1980's, IBM won their antitrust suit. The government wanted to break IBM into two firms: a large computer and small computer company. To fight possible divestiture, IBM licensed an operating system for PC's instead of using one they had previously developed, thus creating the Microsoft juggernaut.

Instead of using an internally created processor for PC's, IBM used a third party processor thus creating the Intel juggernaut. By the 1990's, IBM realized that small computers and printers were hobbling them, and sold these business units off. For stakeholders and employees, a more advantageous solution would have been to have their stock split into a small computer company — think Lenovo, Microsoft and Intel as one company, and what remains of IBM — a large computer solutions company.

AT&T fought the U.S. government on anti-trust issues for years, finally succumbing to divestiture in the mid 1980's. AT&T found that divestiture gave them a much better way to manage their company. AT&T was way too far flung of an empire. They continued to divest even after the government no longer required them to.

In the 1990's, Microsoft was in the cross hairs of the U.S. government. Microsoft won. But look at the company today. Their revenue is high. But they’re struggling with market share. Rather than being focused on customers and innovation, they have become too big to manage and their ability to innovate is hobbled by internal squabbles.

Back in the 1990's, if Microsoft had broken up into an OS company and an applications company, these new entities likely would have become more flexible and able to lead the market with their technology. Shareholders would have stock in two profitable companies and employees would be working in a more innovative environment.

Now back to Google. Technologically they are into everything and tend to be a Juggernaut in each of these fields — think search, maps, mobile OS, video. Plus, they now they are dealing with European litigation. The real problem: these products either don’t bring in revenue or are barely breaking even on their advertising revenue (re: YouTube) since advertising and collecting information on users is how Google makes money. How do you break that up?

Net Neutrality: Why It’s Crucial to Every Consumer and Business

Article published in The Manzella Report: http://www.manzellareport.com/index.php/u-s/962-net-neutrality-why-it-s-crucial-to-every-consumer-and-business

As a Silicon Valley entrepreneur, I, like everyone else working here, is cheering that we are finally going to get Net Neutrality. The question I have is this: why do Silicon Valley businesses, companies that depend heavily on the internet, care so much about Net Neutrality, and why is Fox News and many vocal republicans, so adamantly against it?

First of all, Net Neutrality has to do with access to the Internet. On one side of the argument are consumers, along with small, medium, and large businesses. On the other side are the four large carriers: Comcast, Time Warner Cable, Verizon and AT&T. What Silicon Valley is cheering for and what informed consumers and businesses want is for all web traffic to be considered equal. While the carries want a multi-tier system.

On the surface, the carrier demand sounds reasonable. Supporting high bandwidth traffic like Netflix is more expensive then supporting low bandwidth traffic like Twitter. The carriers want to charge more depending on the network demand. But what appears on the surface is not the reality. In reality, the carriers want to speed up and slow down traffic based on how much an organization pays.

This level of control gives a company that has a geographic monopoly the legal right to slow down or deny access to individual organizations. They can use this tiered system to act especially egregious when they are negotiating a contract.

From the business and consumer point of view, we already pay for network access, and we pay much more than people in the rest of the world. For example, in Mexico you can get 80 channels and great Internet access for $35 a month. A similar service in Silicon Valley starts at $80 a month.

Netflix, YouTube, Twitter, and your company pay the carriers a lot of money for internet access. What no business wants is the equivalent of a work stoppage when negotiating their next internet access contract, or to find out their competitor paid the carrier more money to slow down their access. Work stoppages like this have already happened.

Last year, while negotiating their contract, Comcast drastically slowed down Netflix’s traffic. In 2013 when negotiating a contract, Time Warner Cable discontinued service to CBS and NBC stations in four cities.

What gets confused on sources like Fox News, is the difference between Net Neutrality and government regulation. Net Neutrality is the what of the issue, while government regulation is the process of insuring that the rules are followed. The carriers have already shown that they can’t be trusted to self-govern. Do you want to be negotiating a contract with a carrier if you know they will drastically shut down your internet traffic unless you agree to their terms?

Realistically, the only way to insure Net Neutrality is to have an oversight group and regulations that assure a third party is watching out for businesses and consumers. Most importantly, what is needed are ongoing rules to measure what's fair to the consumer and to businesses.

Fox News says that any regulation is bad — a heavy handed statement considering the proposed Net Neutrality regulations. This proposal differs from that of a regulated utility since there is no rate or tariff regulation. What Net Neutrality includes is a set of safeguards that make access fair.

The Net Neutrality proposal has been modeled after the 1993 rules for wireless traffic. Rules create certainty. For businesses to prosper and our economy to grow, we need to assure consumer and business rights and privacy over the internet.

So, back to my original statement: why are Silicon Valley companies for Net Neutrality and Fox News and vocal republicans against it? Silicon Valley companies know the importance of Net Neutrality. The web is the blood line of their business and all modern businesses.

I can only come up with two reasons why Fox News is against Net Neutrality. The first reason: they blindly disagree with anything that President Obama supports. The second: any and all regulation is bad. Neither of these arguments involves a rational business decision or creates a positive business climate.