Moving to Blogger

I'm moving Bizpunk to Blogger.  I have to move my web server up to northern California over the summer, and I want to have a stable site in the interim.  I may go back to my Typo blog after I move, but I'm here for now.

I'll try to back-fill my old posts here when I pull them off the server.

DICE

DICE is always an interesting gathering. If GDC is (or at least was) a combination job fair and tech seminar for the video game industry rank and file, and E3 was the sales and marketing orgy, then DICE is where the industry celebrates creativity and the craft -- and occasionally where the creatives confront the suits.

I was there to do one of the two Autodesk-sponsored "Fight Club" sessions. My old friend Keith Boesky and I took opposing sides of the consolidation debate. I was pro, Keith was con. In the second session, Kelly Flock and Min Kim, from Nexon, debated packaged goods vs. online. It was a lively and amusing format, with questions and catcalls coming from all sides of a stage in the middle of the crowd.

There were a couple of uncomfortable moments. A guy from Sierra Online spoke out to dispute our contention that big video game companies can't innovate creatively. He said Sierra was innovating creatively. Huh? I could only feel pity as I imagined Activision shutting Sierra Online down, as they will certainly do after the merger with Vivendi is complete.

The second uncomfortable moment came when a strange guy in a baggy, cream-colored linen suit, wearing wrap-around, Paris Hilton shades, approached the microphone. He rudely suggested that I had no business talking about innovation because I published JAMDAT Bowling. This is a common fanboy posture, which I have heard many times before. It completely misapprehends the nature of innovation in mobile gaming -- a casual, accessible, immensely fun game that you can play with one thumb on a tiny screen while in line at the theater is the very essence of innovation. What made this confrontation remarkable is that the oddly dressed fellow was Mark Ollila, the head of games at Nokia. Wow. Maybe he thought he was being funny. Maybe he was bitter about the failing high-end mobile game startup he founded, Telcogames. [UPDATE: Telcogames has since gone bankrupt, torching its creditors]

I also attended a couple of the big hall lectures. The one by the senior team from Blizzard made me realize something. Blizzard is lionized for its creative independence as a developer, but remember that Blizzard has been owned by a large corporation of one sort or another since 1994. They were only independent, in the business sense, for 3 of the 17 years they have been operating. So, I wonder how useful their comments about killing bad projects, taking as much time as necessary, etc., are to actual developers, since Blizzard hasn't had to worry about the common developer headaches of payroll, milestone-based cash flow, or securing a publisher for their next project. They've been attached to a corporate teat throughout their period of peak creativity.

Their genius (aside from their immense and obvious game-making genius) seems to be in keeping the suits at bay. They have the amazing ability to retain their creative independence while under the corporate boot. It's a lesson for Activision and EA to learn (happily, from reports I heard of John Riccitiello's comments on Friday, he seems to have learned it).

The other illuminating lecture I saw was by Robin Kaminsky from Activision. She gave a brave talk about the limits of creativity and the importance of marketing -- a tough message to deliver to the DICE crowd. It was very thoughtful and well-researched (but her presentation materials were appalling -- Robin, go read Presentation Zen right now!).

What caught my attention was that Robin's talk showed, precisely, why the suits will never vanquish the creatives. Activision has been masterful at getting behind hits. Whether it was MechWarrior, or Quake 3, or Tony Hawk's Pro Skater in my era there; Spider-man, Call of Duty, or Guitar Hero in this era, they max out hits like no other publisher.

But that marketing machine is dependent on the existence of great games. Robin talked at length about engineering Call of Duty 4's success. But that was relatively safe -- Call of Duty had several successful previous incarnations, it was being built by an A+ team at Infinity Ward, and COD itself was built on the genre-making success of EA's Medal of Honor. Same with Guitar Hero -- that was the creative brainchild of Harmonix, and it was Red Octane who took the market-acceptance risk, shipping a game with a plastic guitar. The contrast between Blizzard's approach and Activision's was stark. Should make for an interesting merger.

Packaged goods executives come from industries where you can create products by consumer and market research. But in creative businesses, it's impossible to do research on something nobody has ever seen before. That's the realm of creative genius and risk. There is a quote that I've heard attributed to both Tripp Hawkins and Dan Scherlis: that a video game genre is just a successful product and its imitators. The packaged goods marketers have been great at mining existing genres, but not so good at creating the new ones.

Microsoft

In early 2000, Microsoft was at the top of its game. Windows 95 and it's successor Windows 98 had achieved worldwide dominance. Apple was still a year away from releasing OS X and the iPod, marking the beginning of the company's renaissance. Internet Explorer had wrested leading market share from Netscape, repositioning Microsoft as a leading internet company and dooming the dot-com darling to an ignominious marriage with AOL. The Xbox was poised to take significant market share in the video game market, unprecedented for a non-Japanese console. And, of course, Outlook and the productivity suite were near-monopolies in businesses worldwide, without significant challengers.

Sure, there were chinks in the armor. Linux (aligned with MySQL, Apache, and various open-source programming languages) was clearly taking significant share on the server side from NT, SQL Server, and Internet Server. But Microsoft had such enormous advantages through its monopoly in desktop OS that it seemed unstoppable.

Now, eight years later, it all seems to have gone very, very wrong. Microsoft has never seemed so vulnerable. Apple is taking share on the desktop with better user interface and a superior media suite (iTunes/iPod, iLife), giving customers what they actually want. Ubuntu is clunky but credible, challenging at the low end. Google, Yahoo, Facebook, and Myspace, in aggregate, have built more market value than Microsoft with pure internet plays, in just a few short years. Xbox 360 is incinerating billions of dollars of capital; the Zune is DOA. And Vista is a massive dud -- never has a major Microsoft OS release been met with less enthusiasm. They've completely lost the web serving and file serving markets to the open-source stacks.

The surest sign of Microsoft's vulnerability is the recent challenges they've faced on productivity apps. Zimbra for email and the iCal standard for PIM, cutting into Outlook. OS X "Leopard", slated for release later this month, promises even better calendar and email integration. Apple's iWork suite, Google apps, etc. -- not great, yet, but getting there. We see a lot of pitches from internet and media companies, and I'd say a good 25% of them show presentations on Macs with Keynote. Completely unimaginable 8 years ago.

The management's view on all this seems hard to read. Balmer continues to snark it up, calling Google a "one-trick pony" and Facebook "a fad" -- it's not that he doesn't have a point, but you'd hope for a little more clarity of strategy and a little less schoolyard dissing.

So, as Lenin would say, "What is to be done?" I've heard glib chatter that Microsoft would have been better off had it been broken up by the antitrust courts into smaller companies. I am not so sure I buy that. But clearly something needs to give. The current strategy is just not maximizing the considerable assets.

Galaxy-Chelsea

I went to the match with my family on Saturday. I'll have more to say about the atmosphere and Beckham-mania later, but first, the match.
It was very entertaining. Chelsea, clearly still in pre-season form, played most of their great players (Robben was a notable exception). In the course of the afternoon, Drogba, Lampard, Kalou, Terry, Joe Cole, Sean Wright-Phillips, Essien, Makalele, Shevchenko and Carvahlo saw action, as well as newcomers like Malouda, Ben Haim, and Sidwell. That's some A+ talent. Some of the most expensive footballers in the world. Getting to see these guys in the cozy confines of the Home Depot Center was a thrill in itself.

The Galaxy - dismissed in the English press as little more than a "pub team" after getting spanked 3-0 by Tigres earlier in the week - were inspired. They are not a great team; only Landon Donavan, Abel Xavier and maybe Carlos Pavon could really be considered world class, and none of them could dream of starting for Chelsea. But the supporting cast produced a scrappy performance and managed to keep the explosive Chelsea largely in check.

The first half felt quite even. Both keepers made great saves - Joe Cannon had to fend off hard shots from Wright-Phillips, Malouda and Drogba; Cech was nearly beaten by Kyle Martino's diving header, and had to tip a dangerous Xavier header inches over the crossbar. The Galaxy defense was a mess, but they were lucky and, frankly, Chelsea wasn't all that crisp. Could have been 0-3 Chelsea at the half, but could just as easily have been 1-0 Galaxy.

The Galaxy's luck ran out at the start of the second half, and the poor defending gave Chelsea the chance they needed as Terry scored off a lose ball, just in off the upright. That proved to be the winner. The crowd thought it was 0-2 just 5 minutes later when Shevchenko created some magic on the left side, but was flagged for offside. In the 70th minute, Donavan had a great chance - probably the Galaxy's best of the game - but put his header high over the bar.

The crowd was excellent - lots of Chelsea supporters and lots of old and new Galaxy fans wearing the just-released white and blue colors, which are a huge improvement over the tacky gold and green. The fans were pretty knowledgeable, too. It's a great stadium for LA - lots of social spaces, very intimate. I ran into a bunch of people I know, and had a chance to talk to them, which never happens at a Dodgers game. With a reported 27,000 in attendance, including a bunch of celebs, it was noisy and crowded, but not out of control. More like a Lakers game than an NFL game.

Ok, Beckham. The hype is out of control. I'm sick of Posh, and all the Coming to America bullshit, etc. But his debut in the 78th minute of the match was pure theater. He kicked an errant ball back onto the pitch; the crowd roared. He laced up his boots; the crowd roared. He stretched; the crowd roared. He disappeared into the tunnel (apparently to retape his ankle, and to pee); the crowd groaned. Finally, he stripped off his warm-up jacket and jogged to the sideline, resplendent in his white Galaxy home kit. The crowd went wild. A huge cheer, and flashbulbs, went up every time he touched the ball.

So, what to make of it. I guess I come away largely optimistic about the whole Beckham experiment. Commerce drives sports in America, and great product drives commerce. It's hard to argue with the marketing campaign so far, given the number of shirts I saw on the backs of fans, and the fact that Adidas is claiming the new #23 Galaxy jersey is currently the world's best selling kit. The stadium was packed with enthusiastic fans. It was a very tough ticket.

The product was pretty darn good, too. Let's not forget, amid the Galaxy's woes this season, that Donavan is a great play-maker, that Xavier has defended at the highest levels of the sport, and that Pavon is an athletic New World striker. They've got some work to do on defense, but with Beckham in central midfield, they'll have some sick wing play and counter-attacking. You could feel them feeding off the crowd and playing at a higher level. And they'll have huge crowds on the road, too, cheering for Beckham and, by association, for them. Oh, and TV coverage on ESPN doesn't hurt.

One last thing: this is great for English football, a fact which the yobs in the British press are too thick to appreciate. All these new Beckham fans are going to be England fans, when he returns to do his duty in the Euro 2008 qualifiers. The increase in exposure, fan base, and even merchandise sales for England in America is a huge growth opportunity. I predict American fans will be traveling to Austria and Switzerland in '08, to cheer on the LA boy.

Gold Cup Semi: USA-Canada

USA 2-1 Canada. USA heads to the final despite playing a weak and sloppy game, again. And, frankly, they probably shouldn't have won -- give that an end-of-injury-time equalizer by Canada was called offside, when it clearly was not. However, given that the match was in the 5th minute of a supposedly 4 minute extra time, it's hard to get too worked up about it, unless of course you are Canadian.

Ironically, the USA had it's best start of the tournament. They just flew at Canada in the first 10 minutes, threatening to score on a couple of early chances. Tons of energy. I was surprised to see Eddie Johnson and Michael Bradley starting; I think they both have had appalling tournaments. But given Twellman's three howler misses in the last match, I can at least understand Coach Bradley's thinking on Johnson. Starting his son again, that's looking a little weird.

As it turns out, my fears were justified. Bradley had a shockingly bad game. He looked like a pathetic college player out there. And Johnson was equally terrible. Twellman may have missed his chances, but at least he created chances. Johnson was listless and lacked any creativity. I would be surprised if he had a single shot on goal.

The opener from Hejduk - his first goal in 7 years with the national team - was a good one. Nice set up from Donavan. Nice finish. The penalty that turned out to be the winner was also clear as day. Dempsey released Beasley with an astonishing through ball and while the Canadian keeper, Onstad, complained bitterly that Beasley dove, the replay showed the keeper tripping him up well off the ball. Landon finished the spot kick brilliantly.

Then, the wheels started coming off for the USA in the second half. The Canadians just had much more energy and looked dangerous on a couple of occasions. The USA had trouble keeping possession and looked incredibly tentative on the ball. There were a few chances, but mostly they were flubbed by Johnson playing with his back to goal. In one especially laughable moment, Donavan fell on his ass in the box with a clear shot on goal and the keeper beaten. Ooof.

Hume came on for the Canadians in the 64th minute and made a huge impact, scoring once and looking dangerous a couple of other times. Then, true to form, Bradley (fils, not pere) took a ridiculous swipe at a Canadian player who had beaten him like a redheaded stepchild, and was shown the red card. Idiot. At least we won't have to see his sorry ass on the field for the final.

Hard to feel good about this one. If Mexico wasn't equally shambolic, I'd say we were going to get pounded in the final 3-0. But since Mexico is just as bad, it should be a good match. That is, if Mexico makes it past Guadalupe.

GS Internet Conference 2007

I attended the Goldman Sachs Internet Conference in Las Vegas this week. Anthony Noto, the lead research analyst at Goldman, puts together a great conference. He's whip-smart, gets great people to attend and present, and balances it all very nicely.

Over the two days, I saw presentations from Microsoft, Getty Images, Linden Lab, eBay, Tencent, LinkedIn, Viacom, Disney, Amazon, Glu Mobile, IAC, DemandMedia and Shanda. A very diverse and interesting group of public and private companies. The themes I noticed were obviously influenced by the presentations I chose to attend (media heavy, to say the least).

Some of the big themes:

• Advertising. Display vs. search. How to crack mobile advertising/location? Diverging CPMs for premium vs. junk inventory. In-game ads. The DoubleClick and aQuantive deals where on everybody's mind. 
  
• Fragmentation. Big sites losing traffic to more targeted small sites (sites with over 15 million monthly uniques were down 7.5% year-over-year). Usage is flat. Overall visits are down. The proverbial long tail is getting longer. Web 2.0 tools and Google Ad Sense are making it more frictionless for start-ups to get started up. DemandMedia's whole strategy is essentially an arb on internet ad platforms (particularly domains), monetizing fragmentation and pools of enthusiasm in verticals.
  
• Access Platforms. As I discussed in my last post, the access platforms are getting stronger and stronger. Email, search, shopping, news, weather and maps are aggregating a larger and larger portion of overall traffic and therefore ads. Value of video search as explanation of Google/YouTube premium -- can't index video same way as HTML.
  
• Games & Entertainment. Between Microsoft, Linden, Tencent, Viacom, Disney, DemandMedia, Shanda and Glu, gaming and entertainment was everywhere. High customer engagement is a very sought-after commodity, and games produce high engagement. Also, lure of in-game advertising.
  
• Virtual Worlds & Avatar Chat. Everybody had a play. Viacom (Laguna Beach), Disney (Pirates, Fairies, ToonTown), even IAC (Zwingy). And of course, Shanda and Linden. And Tencent's QQ avatar chat.
  

Why Silicon Valley Doesn't Get Mobile

Since I've started at my new job, I have looked at a number of mobile products and services. While I've had some amusing meetings where entrepreneurs show me their hot new "mobile marketing" concept that's essentially crude, circa-2003 SMS/WAP Push, the more interesting conversations relate to the current and future role of the mobile operators, or carriers, in the mobile content and commerce equation.

I can't tell you how many times I've been asked: how long will it be before the carriers are inevitably relegated to "dumb pipe" status and the mobile internet opens up like the wired internet? How long until we can safely route around the carrier? My answer - "a long time, or never, unless we see a disruptive technology replace cellular" - always confuses people. How could it not happen in the next 12-18 months?

This is, unfortunately, a major blind spot of the web-centric -- a blind spot that has worked to my advantage in the past. For example, at JAMDAT we supported BREW even though it was "closed" and built a great business; meanwhile the "open" Java Community Process for J2ME failed to produce a competitive offering in a timely manner. Sure, J2ME ended up being an important and widely adopted technology, but avoiding BREW because it was not "open" was a stupid business decision that my competitors came to regret.

Shawn Conahan, the CEO of InterCasting, summarized it pretty well:

... I talked to a VC who said he would not invest in any company that includes “working with wireless carriers” in its pitch. Worse in my opinion would be investing in any company that includes “going around the wireless carriers” in its pitch. While the former is a difficult path, the latter practically ensures failure.

Shawn's point is completely lost on many venture capitalists in the Valley, who don't understand the need to create symbiotic businesses in mobile. They are so intent on creating disruption, they miss the forest for the trees.

It's not going to win me any popularity contests here, but I would argue that the mobile business may be more a model for the future of the internet than vice versa. Look at MySpace/Photobucket, or Windows Live, or Facebook, and you'll see access platforms asserting their supremacy in the value chain ... just like the big, bad mobile carriers.