photo credit: Sideshow Bruce

Last week, AM New York published a list of the hottest startups in NYC. The amNY article started us thinking about all the advertising-focused startups located in New York City. In today’s Internet-based world, location is less important than it was in the past; however, proximity to the epicenter of advertising, Madison Avenue, is still important. For this post, we researched advertising startups located in NYC that have been in business for five years or less.

Startups

• AdMeld – An ad-optimization platform focusing on large, premium web publishers
• AdSafe Media – Brand protection data provider
• AppNexus – Real-time bidding platform and cloud hosting provider
• Better Advertising – Provides more transparency to the advertising process
• Clickable – An online solution for search advertising automation
• Collective – A premium, audience-focused advertising technology solution
• Demdex – Behavioral data management solutions
• Double Verify – Brand protection and campaign validation (NYC HQ, eng. in Israel)
• Exelate Media – A marketplace for behavioral targeting data (NYC HQ, eng. in Israel)
• Medialets – Mobile advertising platform
• MediaMath – A demand side platform
• Peer39 – Semantic advertising solutions (NYC HQ, eng. in Israel)
• Pontiflex – Focused on cost per lead
• Trust Metrics – A quasi-stealth startup focused on the online advertising environment
• Yieldex – Publisher inventory management

Nearby

There are several notable advertising startups making waves in Boston and Philadelphia, but for the purpose of this article, close does not count.

Note

If we missed any notable advertising startups located in NYC, please contact us and we will edit the list.

Recently, News Corp. has been making a lot of noise about removing their web properties from Google’s search index. This appears to be a desperate move being made by a company that has not adequately embraced the culture or technology of the Internet. The important aspect of a total removal from Google that is not being discussed is how News Corp. would potentially screw thousands of businesses that have outbound links from their web properties.

Partners

Google uses a concept of “trust” when they assemble their search index. In theory, if a popular and trusted site like The Wall Street Journal (a News Corp. company) links to a site, Google is going to pass link juice or link equity to that site. The theory is that if the WSJ trusts you, then you are probably an OK site (i.e., not full of spam and the content quality is similar). The concept of link equity is similar to the professional references provided to a company when applying for a job.

Future

It appears that News Corp. is an old company and their business/negotiation tactics seem to be based on an outdated machiavellian business philosophy. The future is calling you News Corp., evolve or perish.

Recently, we looked at the Skype sale drama, and now it appears as if there may be a shift in the deal. Both the NYTimes and GigaOM are reporting that a settlement may soon be reached between Skype co-founders, Janus Friis and Niklas Zennstrom and the private investors acquiring the 65% stake from eBay. The odd men out appear to be Mike Volpi and London-based Index Ventures. Given the legal circumstances, swapping Index Ventures for Atomico Ventures was probably an easy decision for Silverlake Partners, CPP and Andreessen Horowitz.

Recently, it was announced that eBay sold 65% of Skype to a consortium of private investors, led by Silver Lake for $2.75 billion. At first, this deal sounded great considering eBay purchased Skype for $2.6 billion in 2005 and was never was able to realize the original goal of integrating the product into its online auction service. However, more information has come out that makes this look like a potentially enormous mistake for the new investors. When eBay (at the time led by Meg Whitman) purchased Skype from Niklas Zennström and Janus Friis, Whitman failed to secure the rights to core P2P intellectual property. Failing to secure the core IP, known as the Global Index Software (GI Software) was an enormous mistake that potentially borders on negligence. Whitman,  who is now interested in becoming the Governor of California, may feel the sting of this mistake as people question her ability to properly manage the negotiation of complex deals.

Global Index Software

The core P2P IP (the GI Software) in Skype is still owned by Zennström and Friis in a holding company known as Joltid. Their company has licensed the GI Software to several companies including one of their latest ventures Joost, a video distribution company. Until recently, the CEO of Joost was former Cisco executive Mike Volpi. While at Joost, Volpi led the company away from a P2P approach (using the GI Software) and towards a CDN or semi-centralized content distribution architecture. This was a relatively smart move on Volpi’s part because of the limited upload speeds available to most home Internet connections. Limited upload speeds mean that it takes a lot of dormant/idle computers to serve HD content to a single user. Without an enormous install base, the Joost P2P product appeared to have difficulty streaming high definition content. While leading the migration away from the P2P framework, the Joost engineers had access to the GI Software source code. The transition was not trivial and it cost Joost a lot of time/money. More importantly, this gave Volpi experience in leading a migration away from the same proprietary software in Skype, which — thanks to eBay — is not owned by the company. Not too long ago, we wrote a post about Skype’s Achilles’ heel in their P2P core. Undoubtedly, we are not the only people who see the long-term issues with the P2P core.

Focus on Volpi

The major issues for Silver Lake are the new lawsuits against them and the people involved in the deal. Recently, Volpi’s employment at Joost was terminated. In a new lawsuit filed by Zennström and Friis, they alledge that Volpi (while still an employee of Joost) used his proprietary knowledge of the GI Software (and how to migrate away from it) to shop a deal around to investors to purchase Skype. They also claim that he recruited Joost engineers who worked on Joost’s migration away from the GI Software to Skype. Of course there are always two sides (at least) to every story, but the lawsuit against Volpi looks incredibly damning. This of course is up to the courts to decide but the impact on Volpi’s reputation may extend a lot further than this deal.

Future

We hope all this will not impact the availability of Skype. We use the product a lot but are concerned that the company/product may not weather these times well, due to its current legal woes. Perhaps the smartest thing would be to pay Zennström and Friis to go away, but we fear their price may be too high.

Happy Talk Like A Pirate Day!

In a previous post, we discussed the history of Oracle and MySQL. In this post we will focus on Oracle’s relationship with its new star, Java.

History

Oracle made its first big move into the Java space in 2001 when it acquired a non-exclusive license for the source code of Sweden-based IronFlare AB’s Orion Application Server to serve as the foundation for the Oracle Application Server. Oracle continued to make progress in the J2EE space for the next few years, but it was always stuck behind JBoss, WebLogic, WepShere and others.  Rumors circulated around BEA Systems for years that Oracle was interested in purchasing the company until 2008 when Oracle finally acquired the company. With the BEA acquisition, Oracle came into control of a superior Java Application Server (WebLogic) and one of the few really good Java virtual machines, JRockit. The acquisition of Sun and, subsequently, Java puts Oracle firmly in control of the Java industry.

Future

The majority of the Java virtual machine was open sourced under the GPL V2 license in 2007 via the OpenJDK project. Several libraries related to the Java 2D APIs were withheld because of previous license agreements Sun had made. If Oracle decides to stop supporting free and open source Java, there will be a void in the industry that would require Google, IBM, HP and others to invest heavily in the language to keep dominance away from Oracle.

We expect IBM to make a play for Red Hat before they lose too much of its competitive edge in the software infrastructure industry.

Relevance

According to the May 2009 TIOBE Programming Community Index, Java comprises the dominant 19.537% of the programming language mindset.  The ownership of the Java space gives Oracle a problematic amount of control and influence over the Java platform. As server operating systems become less relevant in favor of logic embedded in platform independent Java, Oracle is well positioned to place extreme pressure on all of Microsoft’s server solutions. Additionally, most of the modern scripting languages have been embedded into the Java virtual machine so the platform truly transcends Linux, Windows, Mac OSX, Solaris etc. Google’s new operating system, Android, is based on Linux but the APIs exposed to developers are primarily Java-based. Additionally, Google also recently released Java support for its platform solution, App Engine, and its Web Toolkit is also based on Java.

With an uneven power shift over the Java platform, it is completely possible that innovation of Java will not continue at its current pace.

Growth

We would like to see Google participate more in funding, development and maintenance of the OpenJDK project to help ensure innovation is pushed forward and Oracle is kept at a safe distance from discontinuing open source releases.

Recently, after a failed bid by IBM, Sun announced that they will be selling the company to Oracle for $7.4B. At Deft Labs, we saw the writing on the wall for this deal in January of 2008. This post examines the historical relationship between Oracle and MySQL and looks at the potential impact on the immensely popular open source database.

History

Innobase, the Finnish software company responsible for InnoDB (one of the storage engines available in MySQL) was sold to Oracle in 2005. Oracle made another move against MySQL in 2006 when they purchased Sleepycat, the company responsible for Berkeley DB,  the low-level open source software which Innobase built InnoDB on top of. Oracle also attempted to purchase MySQL in 2006 but then CEO Marten Mickos told reporters, “We will be part of a larger company, but it will be called MySQL.” It is no wonder Mickos turned down the offer. Most open source advocates probably would have seen an Oracle deal as a betrayal. MySQL continued to progress until they sold to the open source-friendly Sun in January of 2008.

Future

We do not forsee any changes in the status quo for the next year or two. After that, we expect to see more of Oracle’s proprietary database technology in MySQL (which will not be available in the open source/developer edition).

Relevance

Several so-called “web scale” databases are beginning to mature. Most of these databases are document-oriented and typically reduce the amount of logic that can be executed in the database/storage layer in favor of more modern techniques which process data in the application layer. A few of the “web scale” databases available are:

• MongoDB (Open source)
• Amazon SimpleDB (Proprietary)
• HBase (Open source)
• Hyptertable (Open source)
• CouchDB (Open source)
• App Engine’s BigTable (Proprietary)

In a nutshell, with the migration to a new database paradigm, the loss of MySQL to Oracle will probably not be the worst thing in the world.

Recently, it was announced that Microsoft is suing GPS device manufacturer, TomTom over GPS patent violations. TomTom runs on the open source Linux operating system and a lot of people believe this is an attempt by Microsoft to assert their perceived intellectual property rights over Linux.

Normally, this news would not be too exciting, but this time it appears as if Microsoft may be up to their old tricks again. It is widely rumored that several netbook manufacturers have plans to ship devices with Google’s Linux-based operating system, Android. If Microsoft is able to scare netbook manufacturers away from shipping devices with Linux then they may be able to maintain Windows’ stranglehold as people migrate to inexpensive mobile laptops.

Eric Schmidt, Google’s CEO, said, “netbook” three times today during his presentation at the Morgan Stanley Technology Conference.

Note: We have to give credit to Google’s sense of humor. A week before the Microsoft vs. TomTom news broke, Google announced that they would go to any length to fight off patent trolls.

Recently, we upgraded one of our Macbook Pro laptops with the idea of selling the old model on Craigslist. Within an hour of posting the laptop, there were a handful of interested parties. The question asked by most of the interested parties was, “What software is installed?” This question seemed odd but after reviewing some of the other Macbook Pros for sale, we realized that people were selling their laptops with expensive Adobe and Microsoft software installed. The real question is, are they also selling the license for the software? If the seller does not include the license for the software, then he/she is selling pirated software. For example, one post claimed the following software was installed:

• Adobe CS4 Master Collection: $2,499.00
• Microsoft Office 2008: $399.00

This means for $2,000 you get a laptop worth $1,800 and software worth $2,898. What most people don’t realize is that the software is pirated and they are not selling a valid license. It is amazing that Adobe and Microsoft have not cracked down on this potentially illegal market. The reckless disregard for intellectual property rights is disturbing, although for a site that has been dealing with prostitution and human trafficking, it appears to be par for the course.

Updated: Craigslist bowed to legislative threats from around the United States and removed their erotic-services category in favor of a legal adult services category. Each post to this new category must be manually approved by Craigslist for a $5 fee.

photo credit: dharma

Technology predictions are always challenging. A detailed knowledge of the past and a thorough understanding of the industry are required to attempt to predict the future. Major financial upheavals are difficult to predict and can definitely shorten growth cycles.

We are going to review the social technology predictions we made at the end of 2007.

Social Networks

LinkedIn did not purchase Meetup but they were able to raise an additional round of $22.7 million on a valuation of just over $1 billion. There has not been a massive rush to develop applications for the platform but it is not stagnant either. Reviews are mixed about its platform. Given the ease of application development, we are surprised that LinkedIn is not more agile.

According to Compete, Plaxo was able to double its unique monthly visitors in 2008. An impressive number, but Plaxo still feels like it is “the other business social network.”  Perhaps a change in management might help move this product forward.

Facebook made it through what will probably be its largest growth phase (with regards to new user registrations). We predicted Facebook would grow to 100 M+ users and it succeeded by enrolling roughly 120 million unique users.

MySpace looks like it had a rough year. The site’s traffic appears as if it is still being cannibalized by Facebook. Below is the most recent MySpace/Facebook Compete chart:

With its traffic numbers sliding so much, it is amazing that the MySpace big focus appears to be who will be named CEO of its music business.

Ning did not make any acquisitions in 2008 and Marc Andreessen joined the Facebook board. This is a surprising move given that Ning was able to increase its monthly unique visitors by roughly 650%:

Technologies

Google’s OpenSocial has continued to grow and gain strength although it is still lagging Facebook’s application platform. OpenSocial has been strongly criticized for not living up to its “write once, distribute broadly” claims.

OpenId failed to deliver in 2008. The technology was adopted by several large players; however, there is a lot of criticism about the complexity of implementing OpenId.

Browser-based widgets have become the norm for just about every publisher on the Internet. They are primarily seen as additional channels for content distribution. We eventually expect to see a fairly sophisticated “affiliate” model work its way into the widget market.

RSS has continued to move forward. It is considered by many to the be the fastest growing social technology platform. Companies are finally starting to monetize their RSS feeds by inserting advertisements. Gawker Media claims to have seen a 300% gain in their RSS advertising revenue.

Blogs

Wordpress appears to be moving ahead at full steam and LiveJournal appears to be toeing the line after its acquisition by Russian based SUP.

Twitter was an obvious success, as predicted. Twitter experienced explosive growth in 2008:

Tumblr also had an explosive year. To date, Compete has reported an annual traffic increase of 387%. We like and use the Tumblr services, but have been a bit disappointed by the evolution (or lack thereof) of the product.

Instant Messaging

Last year, we pleaded for Mozilla to integrate a messaging client into the browser and it appears as if they have made some progress with the 0.13 release of the Instantbird product. We have not had the opportunity to take Instantbird out for a test-drive, but we look forward to doing so.

If you examine the pressure on the content distribution industry by top tier ISPs, it’s clear this industry is changing. ISPs are now competing against their transit and hosting customers for content distribution business. This is a fairly bold move for ISPs, but it’s clear that they’re starting to question where their next spurt of growth lies.

Internet Service Providers

In 2006, Savvis (in what may have been a fatal mistake) sold their CDN business to Level 3 for $125 million. Apparently, AT&T also got the memo and rapidly deployed a CDN.

Globally, the majority of ISPs don’t have a CDN offering and they will continue to lose business to those that offer a “more complete stack.” All of this inevitable consolidation is necessary as the content distribution business becomes more efficient. Panther, one of the commodity CDN players offers a CDN solution for ISPs, and it’s possible that this model will become more prevalent because the majority of ISPs are ill-equipped to provide sophisticated (and cost-effective) CDN services.

Why?

Now, why does Google need to purchase Akamai? If the obvious continues to play out then the ISPs will have a renewed sense of “hand” when dealing with their customers. If Google is serious about becoming the dominant cloud provider then they will need all the leverage they can get when dealing with their peering partners. It’s widely believed that Google owns some of its fiber infrastructure and they have been busy building data centers around the globe.

Legal

The good part about Google acquiring Akamai is that there is solid competition in the CDN space. Akamai is the dominant player, but based on their recent stock performance, it’s clear that the ISPs and commodity players are gaining ground.

We don’t believe a legal protest of this acquisition would have much credibility. Akamai also employs a fair number of PHDs so we imagine it would be an adequate culture fit.

Viacom

Additionally, if Google acquired Akamai then Viacom would be in a precarious position. The company that Viacom is suing over distribution on YouTube would suddenly be distributing their content (Viacom is a large customer of Akamai  – get off my CDN, Sumner Redstone :-)).

Rumors

There have been some recent rumors about Akamai selling so we’re interested so see what unfolds. The real question as Google discontinues its free dinner offering is:  can they spend the $5 billion to acquire Akamai?

See Also:

• Google and The Sushi Chefs

For over five years, Skype has flown under the radar with their P2P based messaging system. Because of the distributed nature of P2P, they’ve been able to deploy a minimal amount of infrastructure to support their always-on solution. Unfortunately, we think that Skype/eBay is in for a rude awakening.

As last-mile providers move to a bytes transferred model, we’re guessing that they won’t charge their customers for the bytes transferred for Internet calls if you’re using their VOIP service. This means that the once-free Skype will now start costing users a quantifiable fee.

Additionally, as computer services move away from the desktop and on to the server, users will be forced to purchase a separate piece of hardware to use Skype (the same hardware that other VOIP providers include with their services).

Overall, we don’t think Skype will disappear; we simply think this seemingly pirate business is in for some drastic changes.

Note: We at Deft Labs are not fans of a bytes transferred model for personal/home communication. We think it will stifle the communication revelation we’re experiencing. Oh, outside of a truly awful experience we had when purchasing a phone from Skype, we love the product.

In a nutshell, the core concept behind AGPL is that if your applications links to an AGPL licensed library and you make your product/service available via a network service, then your application must also be open source.

We reviewed the following pages in our research:

• GPLv3 and Software as a Service
• GNU Affero Genenal Public License
• Affero General Public License (Wikipedia)
• Network Service (Wikipedia)
• Application Service Provider (Wikipedia)
• GNU General Public License (Wikipedia)
• Google’s festering problem with the AGPL
• The AGPL in Simple Words

Image courtesy of the Free Software Foundation.

We have to preface this post by stating that we love Google Apps. We’ve been using Google Apps at Deft Labs for almost two years and have had a fantastic experience. It’s an excellent product for the price. Everyone pays $50 per user per year for a slew of business tools (a fantastic browser-based e-mail tool, group calendar, e-mail lists, browser-based office suite, etc.). This breaks down to ~$0.14 per day per user. Microsoft Office will run you ~$0.18 per day per user if you buy one new $260 license every four years. Additionally, if you stop using Google Apps after two years, you would have only spent ~$0.14 per user per day versus the ~$0.36 you would’ve paid for Microsoft Office. If you factor in the e-mail server hosting expense, you’re looking at a cost per user per day that is an order of magnitude higher when using Microsoft Office.

Productivity Gains

What’s difficult for most people is the switch to a purely web-based solution. For years, people have been using the same interface for their office tools. When you introduce a new tool you can expect to suffer an initial productivity setback. After your users have adjusted to the new tool, you should see a significant productivity gain. Google runs their highly successful business on the same tools.

Inbox Zero

One of the most important productivity gains we discovered with Google Apps is the concept of Inbox Zero. The basic premise of Inbox Zero is that you only have action items in your e-mail inbox. Everything else is archived or organized by a limited set of labels. One of the major setbacks of Outlook is search. There really is no comparison to the e-mail search capabilities of Google Apps. Even amongst thousands and thousands of e-mails, it’s easy to find the one you’re looking for. In Outlook, people tend to compensate for poor search capabilities by archiving their e-mail in (often) scores and scores of nested folders. The overhead associated with organizing and accessing data in this manner can often be overwhelming. SAI recently released a similar post describing the cost of compulsive e-mail monitoring.

What Evil?

Alright, now we have to justify our title :-) Recently, we went to renew our Google Apps account and when we were presented with the checkout screen we weren’t able to adjust the number of user accounts. This was on the confirmation page before the checkout (i.e., billing) page. Next, we thought about what e-commerce sites on the Internet don’t allow customers to modify the quantity of their order before checkout, and we couldn’t think of one. After clicking around for a minute or so we weren’t able to figure out how to change the quantity. Eventually, we sent a message to customer support and a day or so later they cheerfully responded with a link to a help page. After reading ten or so FAQs entries we found the section we needed to solve the problem.

Help Pages?

A not-so-radical theory in user interface design is that help pages are a list of failures. Sometimes they’re intentional but most of the time they document strange scenarios/functionality that isn’t intuitive to the majority of users. Looking at this issue, it’s obvious to us that modifying the quantity of your order should be apparent to everyone. The real question we had to think about is does Google not understand that modifying your order before checkout needs to be obvious or did they intentionally make it difficult in hopes that they would experience a rebate effect (i.e., if you require the customer to go out of their way then they probably won’t make the effort to do so, even if money is involved).

If you consider that Google has 92% of the web-based productivity market then you realize the amount of money that could be collected by making a quantity change difficult. One pleasant surprise is that they pushed our renewal date back a few days to allow us to compensate for the customer support interaction :-)

Best of Breed

Stand alone providers who offer services provided by clouds are going to find it difficult to survive on their own. Currently, enterprises have way too many Internet service vendors. The situation is reminiscent of the software industry in 2000. For a long time enterprises found themselves taking a best-of-breed approach with regard to software vendor selection. This worked for a while, but eventually products mature, prices align and competitive differences dwindle.

A good example of this is the competition between J2EE container providers. For a few years, BEA provided a stronger J2EE container than IBM, JRun, JBoss, ATG, SilverStream and others. The competing products eventually matured and the industry was commoditized. This placed customers in an awkward position when justifying the expenses related to maintaining numerous software vendors. SilverStream went to Novell, BEA went to Oracle, JBoss went to Red Hat and JRun went to Adobe (by way of a sale to Macromedia).

The Stack

Eventually, the software “stack” was born. Software publishers started consolidating and now you can get just about everything you need from a single vendor. Of course some companies still take the best-of-breed approach in their vendor selection process, but when you make a lot of separate purchases you miss the economies of scale that a single large transaction can bring. Most software publishers offer sizable discounts on non-core products when you buy the complete stack.

In a nutshell, the same consolidation we witnessed in the software industry is about to hit the cloud/platform space.

Blueprint

The name of the game is efficiency and this can only be achieved through service consolidation. The following is a list of services/functionality we think are essential for cloud platforms providers:

• Storage – The ability to transparently increase your storage capabilities. This is going to be a tough nut to crack. If company A has a disk IO read requirement of 400 MBps, they may have issues with the current services available. Currently, cloud storage models are based on bytes transferred in and out of the cloud and the amount of storage available. Eventually, you’ll be able to pay extra for high throughput.

• Message Bus – The ability to reliably communicate between applications and distributed nodes using a common interface.

• Network Isolation – Most companies don’t believe in encrypting everything that hits the wire. This results in potential security issues for applications sitting on the same network. This may be a difficult problem for cloud vendors to solve (consider each of the nodes your app runs on may be on a separate subnet).

• Database – This is obvious, but what is not is the death of RDBS technology. It doesn’t make sense for companies to continue using this technology much longer. The costs associated with writing applications that require multiple programming languages are high. OO databases are starting to mature and the reduction in bookkeeping and development costs will drive people to this technology. Google, Amazon and others have already released OO database services. Google added a SQL interface to their OO database for legacy users/apps.

• Job Scheduling – Some applications need to run at scheduled times.

• Load Balancing – HTTP load balancing should be transparent.

• Resource Scheduling – Clouds need to provide consistent performance for all types of applications. For non-web based applications this means that they need to dedicate specific disk, memory and CPU resources. Additionally, the cloud must detect when an application needs additional resources and dynamically allocate those resources. This is easy for most standard HTTP applications but is a more difficult problem when looking at data processing/computational applications.

• Parallel/Grid Processing – Let’s say we need to analyze the HTTP logs we collected over the last year. This can be dispatched to a single machine but it would take forever to run. The ability to transparently process data in parallel is essential for the enterprise adoption of cloud platforms.

• Network Capacity – Some applications are optimized and can easily max out a 1 Gb network connection. Most cloud platforms use shared or virtualized resources. This can make it difficult to isolate network capacity. The release of 10 Gb networking technology (with 100Gb technology on the way) will drastically change the way applications are designed. Engineers will have significantly fewer restrictions when developing distributed systems. The primary focus with network capacity is on the LAN level. It’s assumed that the cloud platform has enough network capacity to handle their customer’s WAN requirements.

• Caching – This should be transparent for data store access. Users need the ability to create complex transient data structures that support distributed access.

• Advertising – Complete campaign management and fulfillment from a single vendor is essential. This includes email, text, banner, video, outdoor, IPTV, etc. The recent consolidation in the industry indicates that this is already underway.

• Web Analytics – Currently, there are a variety of stand alone companies who provide this service. We think these companies will be forced to sell/merge into the cloud platforms.

• CDN – Content delivery should be as simple and transparent as possible. Cloud platforms can transparently provide this service to their customers. Expect to see a lot of consolidation in this space over the next two years. The jewel in the industry is Panther Express ☺

• Email/Communication – Providing a single corporate UI to your employees is essential. Switching UIs results in a context switch and requires a brief period for the user to adjust to the alternate environment. Integrating web-based email access with the rest of software/services customers use to run their business will further increase the efficiency of their employees.

• Core Service APIs – Embedding new applications in a cloud needs to be fast and easy. Providing a common API/framework is critical. Imagine customer A uses service B provided by company X. Customer A already has an application management console provided by the cloud. They need to be able to configure service B using their existing admin tools. Pluggable admin tools should resemble Facebook’s development environment.

• Content Management – Companies need to be able to organize, publish and track their content. This needs to support all common media formats.

• DNS/Registrar – Nobody wants to think about the plumbing nor do they want to maintain multiple accounts to manage this functionality. Using DNS provided by a single ISP doesn’t make sense from a reliability standpoint. ISP networks and services are much too xenophobic. Cloud platforms need to be 100% fault tolerant. An outage no longer impacts one company, it impacts thousands.

• ERP Tools – All companies need a few basic tools no matter what industry they’re in (e.g., time tracking, contact lists/corporate directories, issue tracking, project management, documents, spreadsheets, billing, etc.).

• Monitoring/Alerts – Users need to be notified when conditions change. These attributes must be configurable.

• Service Billing – Clouds will provide great environments for mashup development. A clean billing and tracking solution is necessary so that services can be used without adding additional vendors to your list of partners.

Serious Clouds

Looking at the functionality list above, it’s obvious what Google, Amazon and others have been thinking about for a while.

A serious cloud platform will require a lot of custom development, but it’s still really early in the game. However, developing ALL of the systems/applications listed is a bit unrealistic. The best approach to creating a company that can compete with Google, IBM and Microsoft is to make a slew of acquisitions and integrate the applications. Most of the applications can continue to operate in relative backend silos with a completely integrated UI. The problem is that the return on investment will not be realized for some time. Enterprises are only beginning to look at moving to cloud platforms.

The golden age for platforms is not too far away and everyone and their brother will be looking for a pick and an axe.

Recently, we’ve been researching cloud computing so we decided to take a look at Google’s App Engine. We had hoped to write this earlier, but it was some time before we received access from Google to use App Engine :-) We’re excited to see cloud computing move forward but, as usual, we’re digging through the hype.

Data Access

Data access appears to be well implemented. Users have the option to create Google Query Language (GQL) or object-based queries. GQL is essentially a scaled down version of SQL (currently, GQL does not support join statements). The GQL extension is handy, but we expect most people to use the object query interfaces. We were pleasantly surprised when we saw that App Engine supports transactions.

Configuration

The configuration files for App Engine use YAML. While this is cool from a geeky staindpoint, XML would’ve been a better choice for the masses. Hopefully, Google will add a nice web UI down the road that removes the need to edit these ugly configuration files.

Local Development

We like the local development SDK, although it needs a lot of work. When we added an error to our “hello world” application, we were a bit frightened. The stack trace was scary and the first 90% of the message related to App Engine SDK (dev_appserver.py). After scrolling to the very bottom of the page, we found our problem:

Runtime Language

Google’s App Engine only supports Python right now. However, there is a placeholder in the primary configuration file (app.yaml) that keeps the window open for additional language support down the road. We’re not huge Python fans, but they should be able to easily integrate just about any language into the cloud in the future.

Pricing

Details about how much Google will charge for the service haven’t been released yet. The free account only allows 500 MB of storage so it seems as if their model is to make money on storage and CPU. Their bandwidth prices are pretty good… they offer 10GB in and out per day for free. We shall see how they do in their quiet entry into the CDN industry. Perhaps this will be the product that pushes Akamai to sue Google over patent 6,108,703.

Missing

The main component that is missing is an advanced UI. Google lets you perform some basic operations in their administration interface but it’s not even close to a robust environment. We expected a really slick browser-based editor from Google.

Also noticeably absent is the ability to run scheduled/cron jobs.

Vendor Lock-In

There is huge potential for vendor lock-in with App Engine. Google has open sourced all of the App Engine APIs, but if large tech companies don’t support/implement the platform then it’s little more than a defense to ward off lock-in criticism. AppDrop has already released an alpha implementation but without support from an IBM, Red Hat or Novell, it probably won’t gain much traction.

Competition

Google’s App Engine release formally kicks off the third chapter of the Internet’s evolution. There are already several startups working feverishly on cloud platforms and we expect lots of exciting news this summer about new companies trying to compete in the space. Of course there will be a lot of companies who washout, but the more people involved, the more innovation we’ll see.

Overall

If App Engine had been released by a startup, we would’ve given the product five stars. However, Google employs nearly 17,000 people and is worth roughly $174 billion. We’re happy that there are cloud platforms coming to market but expected more from Google.

We had the opportunity to play with the 10gen alpha, and so far, App Engine has some ground to cover to compete in the cloud space. Of course, having the most recognized brand in the world goes a long way ;-)

We decided to take the plunge and upgrade to WordPress 2.5. Despite the many prompts to upgrade in the WordPress administration tool, we decided to wait a few weeks to before upgrading the application.

The process was easy but definitely required more typing than we expected. With over 15 plugins installed, we were surprised that everything but PhotoDropper worked after the upgrade.

The 2.5 admin tool is a pleasant surprise. The interface is fresh, clean and simple. There are some things we would change surrounding wide computer screens but, they’re minor inconveniences.

We moved from Blogger to WordPress about two months ago and so far we’re very happy with the product (and the price – free).

The three step upgrade process is available on the WordPress site. The entire upgrade process took about 20 minutes :-)

Update: PhotoDropper fixed their plugin and it works great.

photo credit: Lodewijk van den Broek

Cloud computing is garnering a lot of attention lately. There are wild rumors and announcements about Google, Microsoft, IBM and others entering the space. Additionally, startups like 10gen and Heroku also appear to be working on the same problem.

Cloud computing will be a fast and drastic shift that will initially result in a lot of innovation on the Internet. Companies will no longer have to worry about plumbing when they decide to build web applications. Additionally, the barrier to entry to build sophisticated web applications will be significantly decreased.

In the next couple of years we expect to see a lot of cloud infrastructure deployed. Cloud platforms should be the fuel for the next tech boom. Of course we think it will be at least two years before cloud platforms are the norm (outside of startups).

Why?

Cloud computing is an essential evolution for the Internet. Power and space costs for server hosting are consistently increasing and in the not-so-distant future, it will be difficult to justify Internet infrastructure if it’s not fully utilized. For example, a server that is 10% utilized does not consume that much less energy than a server running at 100% utilization.

Multi-core CPU technology and virtualization are the primary drivers behind cloud computing. With the upcoming availability of eight- core chips, you’re now able to pack 16+ CPUs in a single 1U server. Virtualization isn’t really a new concept, but the ability to run inexpensive or free virtualization software on commodity hardware makes the technology accessible to more companies.

Development Costs

The costs to develop, deploy, scale and maintain applications should be drastically reduced when using cloud platforms. Communal services and libraries on a platform will reduce the amount of code that must be written to develop sophisticated applications.

Job Security

If you’re a system or network admin you may want to consider taking some classes. Cloud computing will drastically reduce the number of admin jobs because these positions will be outsourced to the cloud platforms. Engineers should also take note. The number of engineers needed to write applications will also be reduced. Most platforms will build sophisticated development environments that will allow engineers to use more visual tools to quickly assemble/extend applications.

It looks like 10gen is hiring if you’re in the market.

photo credit: L-plate big cheese

The Long Haul

The problem with cloud computing comes down the road. If there aren’t constant improvements/extensions to cloud platforms, there will be a lull in innovation. We predict that in a few years there will be several primary platform providers. Hopefully, the competition between these companies will be sufficient to force the platforms to innovate.

Vendor lock-in is potentially a huge problem. If you’re only able to run your applications on one platform, you’re essentially stuck with your cloud vendor. We think that the WordPress model will prevail. WordPress’s blogging software is free to download, modify and use. Additionally, WordPress offers a hosted platform which provides free and paid services based on usage and functionality.

More Info

Here are some interesting links we found while researching this post:

• Cloud Computing – Wikipedia
• How Cloud & Utility Computing Are Different
• When Do The SaaS Acquisition Games Begin?
• Rumor: Microsoft about to unveil web-apps strategy
• Rumors of Signs and Portents Concerning Freeish Google Cloud
• The three kinds of platforms you meet on the Internet
• I Want a New Platform
• The Information Factories

Local Development Issues

Local development has issues with intellectual property (IP). Companies do not want to expose all their IP to engineers, nor do they want to provide a simple way of moving that information from one computer to another.

From a practical standpoint, centralizing a team of engineers on a web-based editor simplifies development needs and reduces the costs associated with local/native editors. Open source local editors still have costs surrounding developer setup time and synchronization of configuration amongst team members.

Browser-based source editing reduces the risk of environmental differences. When engineers write code on a local machine the likelihood that all computers will remain in sync with the production servers is decreased.

Remote Development Issues

Granting engineers shell access on a remote server can open up a host of security issues. An organization must thoroughly (and continuously) audit the security of their servers to make sure they’re not susceptible to exploitation.

Remote server development has been out of style for a few years because of the tools available. Vim and Emacs are incredibly powerful tools that include most of the functionality (as well as a lot of additional tools) found in modern IDEs. However, the learning curve for these editors can be overwhelming for some engineers.

The Future

Expect to start using browser-based editors in the next several years. If you’re a Vi user, don’t worry, there is already a JavaScript version available :-)

Happy coding!

According to FeedBurner, everyone has unsubscribed (including everyone at Deft Labs)! We’re sure this is simply a glitch but it’s not the first time we’ve seen major errors with the service. We’re grateful that FeedBurner is there to provide feed syndication (and you can’t beat the price – free), but we’re a bit concerned about their quality of the service right now.

For those who don’t know, FeedBurner was acquired by Google in May of 2007 for $100 million.

Update: Two hours later, it appears as if they’ve fixed the problem :-)

photo credit: pittaya

From a practical business standpoint, Kevin may be right. Based on the recent loses, Google may face an investor coup d’etat if they don’t reduce their expenses. Below is Google’s six month chart:

Landing Where?

If Google does reduce their headcount, where will the engineers go? The majority of Google’s infrastructure is proprietary, so a lot of the tools/libraries that engineers have been exposed to won’t be too practical in the market (what do you mean you don’t have Bigtable?). Of course you can argue that a talented engineer is useful anywhere, however experience with software/technology that is in widespread distribution might be more valuable to some hiring managers.

Recreating the culture at Google will also be difficult. A company like Google, which has amassed so much wealth in such a short period of time, can afford to be more liberal in their employee benefits and productivity expectations.

We imagine a lot of cashed-out Googlers will end up hiring engineers for startups.

The Chefs

Having enjoyed the luxurious Google cafe several times over the last year, we decided that the litmus test for the wellbeing of the entire company is the sushi chefs. The state of the union for the 16,805 person company worth somewhere in the neighborhood of $135.86 billion is directly related to the employment of the sushi chefs at the various campuses. Having witnessed several less than stellar quarters at DoubleClick, we understand the difficulty that must come with justifying sushi chefs to ravenous investors.

A personal note to the sushi chefs: We like cream cheese with our asparagus roles. It’s a cheesy lowbrow taste acquired at an inexpensive Sushi restaurant on Khao San Road in Bangkok, but we just can’t shake it. But, in all honesty… we’re pulling for you!

photo credit: rick

We are always on the hunt for web technologies that add functionality and decrease development time. We have been tracking The Yahoo! User Interface Libraries (YUI) for a while and are finally ready to slap on the Deft Labs seal of approval :-)

photo credit: V.P.Tz.

Paradigm Shift

For more than a decade engineers have been debating about which technologies are best suited for dynamic HTML page development. Typically, a developer would fall into the PHP, Java, Microsoft, Perl, Python or Ruby camp. All the platforms have similar tools, strengths and weaknesses when it comes to dynamic page development.

Something a lot of developers haven’t fully grasped is that the future will not include much in the way of server-side Html generation. The Internet makes a lot more sense when HTML clients are developed exclusively in JavaScript/static HTML. The paradigm of client-side HTML generation definitely isn’t new but the tools available are finally maturing.

Review

Over the last year we researched Dojo, GWT, script.aculo.us, Prototype, and YUI. All the frameworks have numerous strengths and weaknesses but we found YUI to be the best in show. To make our decision, we looked at:

• Documentation
• Available Libraries/Functionality
• Sample Code
• Styling Attributes
• Developer Adoption
• Code Performance
• Reliability
• Project Progress
• Content Distribution

We found that when all aspects were considered in each framework, YUI was the best solution for us.

Content Distribution

The beautiful part about client-side HTML rendering is that your client can be deployed globally on a CDN. Requests for dynamic content will still be sent to your servers via AJAX but the amount of data transfered for each action/request is drastically reduced. Additionally, you can cache data on a CDN in the form of JSON encoded data structures/files.

An added bonus of using the YUI is that you are able to piggyback on their content delivery network. This provides lower bandwidth costs, geographic distribution but most importantly caching in the browser. Yahoo! also uses YUI so there is a good chance the libraries will already be cached in the user’s browser (thus decreasing the time to load the page).

SEO Issues

One of the primary issues with an all JavaScript UI is Search Engine Optimization (SEO). Most bots or crawlers are not smart enough (yet) to render JavaScript UIs. This creates a problem when user’s are trying to find a piece of content through a search engine. Until the crawler technologies catch up, there is a simple way around this problem. You can identify the user agent in the request and display a separate/simple page. For example, if the request detects a crawler then you can display your content in a bot friendly format.

Of course the links provided to the bot must be translated when the user agent is indicative of a user. To assist you in keeping track of the crawlers you can use the data provided by the Browser Compatibility Project. The basic flow of this looks like:

If you’re using Apache you can accomplish this using the rewrite module.

Another way to simplify things for crawlers is to create a Sitemap file with all of your pseudo crawler links. If you only have several pages that need to be indexed then you can always use the <noscript> tag.

Cost

Currently, there aren’t any fees tied to using YUI. However, we think that Yahoo! will eventually start charging for the content distribution. It makes sense for Yahoo! to create a loyal developer base first.

License

The source for YUI is freely available under a BSD style license.

Happy Coding!

We are pleased to announce the latest release of Xaddress. Xaddress is a simple service that enables you to lookup Geo data based on an IP address. We created the service for our internal applications; however, we thought others would like the new JSON and XML APIs.

http://xaddress.com

A special thanks to MaxMind for the open GeoLite data.

After the recent Amazon S3 outage we decided to investigate why people use S3 to serve content. On the surface it seems like a good deal but if you actually investigate the bandwidth costs, geographic locations, reporting and fault-tolerance, you’ll see it may not be the best deal out there for serving content.

Billing Models

If your application constantly serves 1 Mbps then you will consume ~ 321 GB of bandwidth per month. This of course does not include the inbound traffic which Amazon also charges to you. In reality, applications don’t tend to serve a consistent amount of data. Bandwidth consumption fluctuates up and down, the peak to mean ratio for a site is usually around 2:1. One important aspect of paying by Mbps is that you typically enjoy billing on the 95th percentile. This means that each month you can throw out the top 5% of bandwidth consumption. With a bytes transferred model you pay for everything (in and out). As network systems become more efficient, it is likely that everything will be billed on a bytes transferred model but, for the next few years, take advantage!

Costs

Now, let’s look at the costs associated with serving content in S3. Each month, you’re paying approximately $58 / Mb. This is a decent price per Mb but it’s not the best out there. Once you reach S3’s top tier you’re paying around $41 / Mb. Of course to get to this level you must be serving 50+ TB of data or a consistent 160 Mbps. The real problem is that once you’re in the top tier, you’re able to buy the bandwidth yourself for a lot less. If you use a modern CDN then you’re going to pay somewhere in the same price range as S3 but you get geographic distribution, advanced reporting and fault-tolerance as well.

Content Delivery Network

Amazon really isn’t a CDN. They serve content out of a couple geographic locations. This may work well if you’re physically near one of the data centers but for the rest of the world, it’s not adequate. Also, as the recent outage confirmed, they’re not able to distribute load in the event of a failure. Oh, it looks like Google isn’t the only Internet company using a two level name system to host content. It appears as if Amazon may be using this approach as well.

Review

We think S3 is a good system for archiving data. Amazon provides a trusted remote data center for you to store your content at a reasonable price. Would we use it to serve content real-time? No. Would we use S3 as an origin server for a CDN? Yes!

If you are a feed reader you may have noticed that all the posts were marked as unread.

We hope you enjoy the new site!

Disclaimer

The views expressed here are opinions and guesstimates for research purposes. There are insights that can be made about Internet systems; however, without inside information, it is impossible to determine the exact implementation of a system. Our goal in this post is to research the litigious nature of Akamai.

The House that ‘703 Built

The lawsuit filed by Akamai against Limelight Networks is heating up. There was a summary judgment of noninfringement in favor of Limelight on patent 6,553,413. Now, Limelight has to defend their position on patent 6,108,703.

It appears as if patent ‘703 may be built on a house of cards. The inventors meticulously documented a hosting system based on a two-level name system. In reading the patent, it looks like claim after claim builds upon and extends this core idea. Akamai probably used this approach because with the technologies available at the time, it made the most sense. It would be silly for a modern hosting system to use this approach. It only adds latency to the process. Taking the second level name system out of the equation would result in a drastically different patent. The only company we’ve seen using a two-level name system these days is Google :-)

SCO Who?

We’re not a huge Akamai fan. You could argue that it is Akamai’s numerous lawsuits that have impeded the distribution of content on the Internet. Even if Limelight is able to defend their system, they are still incurring the cost of a large legal battle. This legal battle doesn’t seem to have impacted Akamai. Today they announced that they had beat the Street’s estimate and growth was up 46% year over year.

Location, Location, Location

One important aspect to consider is that the trial is being held in Massachusetts, the home of Akamai and more importantly, MIT (the patent owner).

In what will undoubtedly be the largest tech deal of 2008, Microsoft has announced that they would like to get closer to Yahoo!, a lot closer. Microsoft is in acquisition talks with Yahoo! for the mind-blowing sum of $ 44.6 billion.

Forced Hand

Yahoo! has been under intense investor pressure for the last couple of years. The stock skyrocketed after the acquisition talks with Microsoft were announced but, prior to that, it had been two years of gradual decline while their main competitor’s stock was climbing.

In an attempt to regain investor confidence, Yahoo! finally parted ways with Terry Semel and brought Jerry Yang out of his semi-retired state to lead the company. It is our belief that it was Semel’s excursion into content that lead to the decline of Yahoo! While Semel was spending his time trying to do content deals he watched Google ramp up and take over. When Semel first joined Yahoo! he agreed to acquire Google for $1 billion only to have the offer later rejected by Google’s founders.

Culture Issues

Microsoft and Yahoo! probably have fairly similar cultures. Both are going to have the lifers around and thick layers of bureaucracy. Both Microsoft and Yahoo! are probably overloaded by process to ensure nothing moves too quickly.

Technical Systems

There can be only one! For this deal to make sense they will need to replace redundant systems. We believe Yahoo! will win in mail and Microsoft will undoubtedly win in search. If anyone is looking for a few thousands machines with Hadoop installed, there is probably a team at Yahoo! who can help :-) We have no doubt that the majority of ad serving will be migrated to the aQuantive systems.

Vendors

If Microsoft acquires Yahoo! then Akamai is going to be in an interesting position. We’re guessing that Yahoo! is by far Akamai’s largest customer so Microsoft is going to be in a very strong position to negotiate with Akamai if they decide to move forward with the acquisition of Limelight.

Impact on Microsoft

It will take Microsoft years to fully absorb and integrate Yahoo! While Microsoft is busy with this massive deal, Google will only continue to move forward.

Blocked

Google is assembling a roadblock to try and block the deal on the claims of an anti-trust position. If they’re successful, Yahoo! will be left dazed, confused and with a plummeting stock. If the deal is delayed then Microsoft will more than likely sit on their hands until it goes through. Google is in a slightly weaker position because it sounds like they’re reversing the position they just defended in the DoubleClick deal. Microsoft is likely to use the loss of the DoubleClick deal as a win here. Now that’s what we call reusable code :-)

Overall Sentiment

Outside of the sheer size, there is nothing inspiring about this deal. It boils down to a technology giant moving in and devouring a former Internet luminary.

Good luck you Yahooligans!

If you look at the enterprise space, IBM, Oracle and Sun have a relatively full software stack. Additionally, IBM and now Sun have a mostly complete hardware stack as well. It seems natural that Oracle would’ve liked to acquire the product (to kill), but we can’t imagine the MySQL team would ever sell to them. However, if Sun buys MySQL and then Oracle turns around and purchases Sun in a year or so, then you’re going to see Oracle sitting a lot more securely in the enterprise space. When pitching large customers Oracle always has to partner with a hardware provider in order to compete against IBM. With Sun, Oracle could completely cut HP out of the picture and capture all the revenue soup-to-nuts. If Oracle has a full hardware and software stack, HP is left selling the printers.

It is possible that Microsoft is primarily interested in hiring Limelight’s 1,000 employees that are trained and working in the CDN industry.

We believe that Microsoft would get a lot more bang for their buck if they purchased one of the smaller, more agile CDN players like Panther Express.

Note: As a co-founder of Panther Express, I may be a bit biased.

In case you’ve been hiding under a rock for the last month, Android is Google’s new mobile operating system. In August of 2005, Google acquired Android from a company founded by Andy Rubin, Rich Miner, Nick Sears and Chris White. Android and the Open Handset Alliance were officially announced in November 2007.

Open Handset Alliance

In a move to help mobile carriers escape the pressure from closed and proprietary technologies, Google has created the Open Handset Alliance. This coterie includes Sprint and several strong European and Asian mobile operators. Currently, AT&T and Verizon are noticeably absent on the official member’s page, although there are rumors about their participation floating around.

From a hardware perspective there is a strong list of supporters and from a software/service perspective there is also an impressive list of companies. For years, software companies have had a difficult time gaining real estate on mobile devices. Often, application providers have to port their software to a half a dozen different mobile platforms if they want consistent distribution. With operating conditions like this, it’s no wonder that Google pushed this through.

Developer Contest

In an effort to guarantee developers create Crowdware applications for Android, Google has announced a $10 million competition beginning on January 02, 2008. We think developer competitions are a fantastic way to stimulate market growth. We don’t think competitions like this are for all tech companies, but if you’re able to garner the attention of a large group and the bounty is adequate, you should see good results.

A note to developers: don’t bother writing yet another Twitter-style application for Android. Google recently acquired Jaiku, a Twitter clone. If you want to write a good communication app, mashup all the existing Twitter style APIs (Twitter, Jaiku, Tumblr, etc.) into an innovative interface. Make sure your app has some restraint when pulling data. You’ll kill the battery if you suck on the Internet connection too much.

Alternatives

Bug Labs and OpenMoku are both open source mobile device platforms that engineers might like; however, they don’t have development competitions or the backing of Google.

Wallpaper

If you’re sick of your background Google has provided some desktop images. We imagine these backgrounds are popular at Google :-^

Developer Tools

Positron – A nice unit test framework (uses JUnit).

DroidDraw – A slick tool for creating layout foundation.

Android Focused Sites

Open Android(s)

Hello Android

Android Freeware Directory

Google Android Blog

Droidr

Show me the code!

Misc Links

Open Handset Alliance

Official Android Developer Site

Android on Wikipedia

Social Networks

We don’t believe there will be the massive rush to develop applications for LinkedIn. We think recruiting, consulting and contact management applications will have a lot of success on LinkedIn. We also think LinkedIn should purchase Meetup.

Pulse is a solid product and we believe Plaxo will continue to grow this year. We don’t expect them to overpower LinkedIn but solid growth is expected. We’ll see how they do in the 3rd party application space.

With a war chest of approximately $300M (minus whatever people took off the table) we expect Facebook will continue to invest heavily in infrastructure and R&D. We expect to see their user base go to at least 100M this year. Application development will continue at an amazing rate but we’re fearful we may start to see application neglect work its way into the system. If 3rd party application developers don’t maintain their products then you will see start seeing errors. We also predict that 2008 will be a year of consolidation for 3rd party applications. Application prices are low and someone will come in and buy a lot of them.

We believe the MySpace network will continue to be cannibalized by Facebook and other social networks. They will continue to produce innovative ways to promote content but we see a lot of their users migrating to other platforms.

Valuations of social networks will come down to something reasonable and Ning will scoop up a handful of smaller players to create a large network.

Technologies

OpenSocial will continue to grow and mature. Facebook has about a 9-12 month technology lead on Google but if platforms continue to adopt the technology it should do well in the long run. OpenSocial has a long way to go to capture developer mindshare and releasing a product prematurely doesn’t help.

This is the year of OpenId! There are over 120M OpenIds in existence and the list of major tech companies that have already or are in the process of adopting the technology is impressive. Expect major growth in this area.

Browser based widgets will continue to grow strongly and monetizing widgets with advertising will become prominent.

The massive adoption of RSS has been amazing; however, too many people still don’t get it. Expect to see companies start further monetizing their RSS feeds. We don’t think the subscription model is the proper way to monetize RSS feeds. Innovative advertising will win in this market.

Blogs

Blog adoption and growth is dependent on the tools available. We expect Wordpress to take a large step forward this year at the expense of Blogger and LiveJournal.

Tumblr has drastically simplified blogging. Their micro-blogging approach has gained a very loyal audience. We expect great things from this young company.

Twitter has revolutionized how people communicate. The use of Twitter in business isn’t widespread outside of the tech community but we predict its adoption will continue to grow. Truly private Twitter groups would drastically speed the adoption rate by teams.

Instant Messaging

This is more of a plea than a prediction. Firefox – Please build a universal instant messaging client into the browser. Use the Adium source if they have a compatible license.

Have a great year!

With a steady flow of new applications being released for Facebook, the platform continues to prove an excellent opportunity for everyone.

Rumors and Theories

VentureBeat believes that News Corp is interested in LinkedIn to bolster the declining Wall Street Journal classifieds business. We think this might be a nice enhancement for WSJ but that other News Corp properties stand to gain more from the acquisition, namely MySpace. We think the WSJ integration will probably work its way around but imagine that MySpace will be the number one priority. We see the stagnant/declining MySpace traffic as a much larger leak in the dam.

Read/WriteWeb believes that an acquisition by News Corp would increase the pressure on Facebook to join OpenSocial. If both MySpace and LinkedIn hadn’t already joined the OpenSocial network, we would give more credibility to this statement.

What is Murdoch thinking?

MySpace has announced that they will release a friend feed, privacy controls, application platform and an ad network. The beauty of these announcements is that they all came after Facebook already released products in these categories.

Outside of content distribution it appears as if the innovation canister has run dry at MySpace. We think Murdoch needs to clean house at MySpace and bring in people who can give the property a technology advantage. Perhaps this is the real reason behind the acquisition of LinkedIn.

LinkedIn’s Pipeline

LinkedIn must have something special in their product pipeline if they’re discussing a sale. LinkedIn has stated that they have been profitable since March of 2006 yet they took $12.8M in venture capital in January of 2007. What are they spending the money on? Take a look at our previous post that estimates Facebook’s platform costs.

If LinkedIn doesn’t have a stellar product in their pipeline they may be spooked by their drastic decline in traffic last month.

12-06-2007 UPDATE: It looks like the initial Compete numbers may have been off. Originally, they showed a 31% decline in LinkedIn’s traffic in Oct of 2007. Hmm…

What about Google?

Google is trying to sit on top of all social networks so this really doesn’t impact them. Google is already in bed with News Corp so they’ll only have to worry about fewer OpenSocial partners to integrate with.

LinkedIn Valuation

We’ve heard a couple of interesting numbers about what people think LinkedIn is worth. We’re going to assemble a valuation based on publicly available data and a couple of assumptions.

Users: 16M
2007 Growth: 264%
Oct 2007 User Visit Growth: -31%
2006 Revenue: $10M
2007 Revenue: $25M (guesstimate based on 2007 user growth)
Monthly Visitors: 6,631,828
Monthly Page Views: 74,939,656

Based on their traffic and revenue it’s hard to imagine that LinkedIn would fetch that high of a price. LinkedIn’s most valuable asset is actually your data or their social network. If LinkedIn is able to fetch $300 per user then they are looking at a $4.8B valuation.

The main problem with LinkedIn’s traffic is that their users are not visiting the site much. Last month only 1.9M or 12.3% of their users visited the site. If you compare this to Facebook’s 50% of total users visiting the site each month you can see that $300 is way out of the park for LinkedIn. We think that the LinkedIn users are worth more along the lines of $35 each. This puts the valuation of LinkedIn somewhere around $560M. At this price LinkedIn would sell at an estimated revenue multiplier of 22.

Of course you can’t discount social network hype. They may very well get an astronomical sum. Facebook was able to raise capital on a revenue multiplier of 115. If LinkedIn is able to sell for $560M then the founders, investors and employees should all be really happy.

Page Views
This post is based on 1.5 billion 3rd party application page views per month (via Compete).

Bandwidth
This is tough to estimate so we looked at the global distribution of their user base, estimated a peak-to-mean ratio based on the global distribution and then investigated the average size of 3rd party application pages. After all this research, our guesstimate is that they’re consuming a peak of approximately 1 Gbps for 3rd party applications (static video and image hosting not included in estimates). We’re going to take a stab in the dark and estimate that they’re paying $15 / Mb for this large commit and this brings us to an annual bandwidth bill of $184,320. Once again, this does NOT include any content delivery, this is merely an estimate of the 3rd party application bandwidth.

Hardware
The Facebook platform requires a lot of HTTP connections to and from external application servers so this reduces the overall number of requests per second each server can support. Additionally, to make an application like this scale you must keep most of your data in core. We’re going to make the assumption that each user profile has about 500 KB of data. If we assume each server has 4 GB of memory they would need ~ 5,000 servers to cache the 19 TB of profile data. Assuming they’re using commodity hardware, this is roughly $5,000,000 worth of hardware. We’re not going to discuss the hardware amortization in this post. Fortunately, these servers can also serve requests/content.

Hosting
If we assume Facebook has approximately 5,000 servers and each rack has enough power for 30 commodity servers, then Facebook would need an estimated 167 racks. Let’s say they’re paying $500 per rack per month (including power costs); if so, they would see a bill from Level 3 for ~ $1,000,000 per year to host their servers (bandwidth excluded).

Staff
People are usually the most substantial cost for a company and Facebook is no exception. For this post we’re going to estimate Facebook has one hundred people dedicated to their platform (engineers, sys admins, managers, marketing, etc.). Salaries are hard to guess but we’re going to say the average salary is $80,000 per year. Each employee has a lot of loaded overhead as well. In this post we’ll assume Facebook has $100,000 per employee per year in loaded costs (medical benefits, hr, office space, training, vacation, etc.). This brings the average cost per employee to approximately $180,000 or $18,000,000 per year for the platform. We didn’t consider the value of the option grants, but we’re sure they are significant.

Year One Costs
The purpose of this post is to try an estimate what Facebook’s platform costs are for one year. Since we don’t have any inside information from Faceboook, our year one guesstimate is:

Bandwidth:       184,320
Hardware:      5,000,000
Hosting:       1,000,000
Staff:        18,000,000
------------------------
             $24,184,320

Advertising
Facebook places an ad banner on most application pages under the left navigation. Looking at the numbers above, it’s important for them to monetize this space in order to keep the platform free for developers. Since Facebook is able to derive ad revenue from 3rd party applications there is nothing that leads us to believe they will start charging applications for access; however, we do think that they will eventually start charging for promotion in their application directory.

We’d like to give special thanks to MarketingVOX, GigaOM and others for their coverage!

We would also like to thank all the AppHound users. The application continues to grow at a very respectable rate. If you have feedback on how we can improve the application, let us know. We hope you find the application as useful as we do!

If you look at the potential market for AppHound you’ll see it’s not outstanding. There are 100,000+ Facebook developers registered and we’ll assume there are a lot of marketing people that will also love AppHound. Let’s say the total market is around 200,000 users. Considering we only spent three weeks developing the application, if we are able to capture 25% of the market and all the users visit the site daily we would consider AppHound a huge success.

We also think that AppHound is an outstanding marketing tool for Deft Labs. With AppHound we’re able to expose our company to the people driving the social application industry. Our next application is coming soon :-)

If your company has an advertising platform or network we’re open to partnerships. Our data can provide invaluable insights into applications your sales force should contact as you build-out your Facebook advertising network.

http://apps.facebook.com/apphound

Our usage numbers are based on our live servers.

AppHound is an analytics application for Facebook that allows users to organize Facebook applications using labels, create trackers that log events when traffic patterns change and search for applications based on keywords or usage. Additionally, users are able to review Facebook application market data.

AppHound is a must-have for all serious Facebook developers. It can provide invaluable insights into popular application categories and will alert you when your application usage goes up or down.

We hope you enjoy using the application as much as we enjoyed developing it!

http://apps.facebook.com/apphound

Overall, the event was great but we could’ve done without the random real estate agent who took the opportunity to pitch their business plan.

Feedback for Facebook
If you really want to expand your developer community, send engineers to these events. A lot of the developers we met have a ways to go in their understanding of the Facebook data and APIs.

Feedback for Developers
Unfortunately, the demo laptop was running IE 6. Test your applications in all browsers before releasing. If your application is on Facebook it’s going to have a significant number of IE 6 users.

Feedback for the Event
Get a microphone :-)

Despite the tone of previous posts we still think OpenSocial is good for the social application industry. However, we still think the product has a ways to go.

Markup Language
One of the real powers of the Facebook platform is FBML. Facebook provides a markup language that helps developers keep the look and feel of their applications consistent with that of Facebook. FBML also reduces the amount of UI code a developer must write. We would like to see the same functionality in OpenSocial.

JavaScript Only
OpenSocial was released with a limited JavaScript API. Facebook has client libraries for 14 languages.

Missing APIs
The following APIs have been announced and Google has offered a preview of the format but they’re not available/live yet.

People Data API
Activities Data API
Persistence Data API

Developer Mindshare
The release of the Google OpenSocial API is disruptive but we don’t see a mass migration in the near future. When MySpace is up and running and the product is actually production ready (i.e., all the APIs, client libraries and actual live sites) you will see more people adopt the technology.

Memory Lane
In 1999 Microsoft released Passport, a unified profile/payment solution. While this isn’t an apple to apple comparison you might remember that they launched with over 50 partners. Anybody use Passport recently?

Going Forward
The OpenSocial API is something we’re going to watch closely but we’re going to sit on the sidelines until the product is a bit more polished.

Advice to Social Networks
Build your own platform technology. Embrace the partnership with Google but don’t put all your eggs in one basket. Don’t have a clue about how to build a platform? Partner with Deft Labs :-)

Google Engineering
We’re assuming someone pushed you to release this… alpha.

Social Sites – Monthly Page Views

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We are flattered that people like our ideas but we would like credit for our effort.

http://creativecommons.org/licenses/by/3.0/us/