“Leadership is influence.”  – John C. Maxwell

There’s been a lot of noise lately over a company called Klout, which just raised another $30 million in funding from several big-name venture capital firms. Klout, for those who don’t know it, attempts to put a single numerical value on your online influence across major social-media sites such as Twitter, Facebook and LinkedIn.

This seems to piss off a lot of people, who rightly point to a variety of shortcomings in a service that aspires to be the metric of choice for companies that want to reach social-media influencers, in much the manner that Google’s PageRank system helps people understand the reach and reputation of websites.

The Klout complaints are many, even as the company rapidly signs thousands of corporate partners who use its evaluations to dish out “Klout Perks,” such as free entry to parties and events, early peeks at hot products and more. The issues include:

•  The algorithm for determining one’s Klout score is opaque. You know, kind of like Google’s PageRank system.

•  The system can be gamed. One tech-savvy skeptic showed how Twitter bots could be used to create a very strong Klout score in just a couple of months of “work.” You know, kind of like Google’s PageRank syste

•   The system doesn’t measure off-line influence (such as books and conference appearances), or even some kinds of on-line influence (such as most blog services). As one thoughtful piece put it, there’s no way for the system to goose up Marc Andreessen’s mediocre Klout score just because the dude helped found the modern Internet and now helps fund it. To put it succinctly, Andreessen’s Clout far outweighs his Klout. But again, the inability to measure offline influence is hardly unique to Klout. In fact, it’s kind of similar to Google’s PageRank system in this regard

So, in some ways at least, Klout has already attained its goal: it is like Google’s PageRank system, at least in some key ways, the only difference being that no one complains about these things when it comes to Google. They’d probably get consigned to Eternal Search Result Limbo if they did, but that’s another stor

“You can never really live anyone else’s life, not even your child’s. The influence you exert is through your own life, and what you’ve become yourself.” - Eleanor Roosevelt

Actually, the point of this piece really isn’t to slag Klout, though I personally much prefer PeerIndex, one of its competitors. And to his credit, Klout CEO Joe Fernandez freely acknowledges the many criticisms and says the company is constantly trying to improve its product so it can more comprehensively measure online influence. Presumably, the extra $30 million now in Klout’s bank account will help.

“I find Klout fascinating because it is a giant step forward in the dream of the West: pantometry, the measure of everything,” Alex Lightman, one of my favorite technology thinkers, told me. Given the long lead times that typically obtain when a new measurement system evolves into second nature for those who would use it, “Klout should be given time to morph into what it will become.

Some people are outraged about Klout in ways they never would be about Nielsen, comScore or other media ratings that also have had their share of criticism, and outsized influence, over the years

Rob Tercek, former head of digital for Oprah.com and current host of THIS WEEK IN SOCIAL MEDIA “Klout is game disguised as a social rating system.   Klout’s most avid users suffer from an acute type of anxiety that is peculiar to those addicted to social networking.  Their concept of “friend” is so debased by promiscuous over-connection that they now require an external means of validating their worth.     That’s where Klout fits in.   Like most so-called social games, Klout can best be described as anti-social software because it generates a network of ever-increasing social obligations from all participants without providing anything valuable in exchange.   The best that can be said for Klout is that it permits its users to sound like Sally Field at the Academy Awards as they bleat pathetically to the herd “You like me, you really like me!” ”

Why? Because, in this new universe of self-created and -generated media/social networks, what Klout is measuring is not the flawed work product of some distant and massive media corporation. Rather, Klout is measuring the flawed work product of, well, you. There aren’t many things more annoying than feeling judged for your worthiness by a seemingly arbitrary number derived in ways you don’t quite understand.

 “Not only is reputation and influence opaque, but it perhaps is even unfathomable to the average user,” Daniel W. Rasmus, author of books such as “Management by Design” and “Listening to the Future,” told me.“I don’t think anyone understands their credit scores, and I don’t think anyone will be able to understand their social influence score or online reputation either. This reminds me more than a little of the Land of Toys (or Pleasure Island in the 1940 movie) section of Pinocchio.”

“Clothes make the man. Naked people have little or no influence on society.” - Mark Twain

Recent research (admittedly also criticized) suggests that social media postings about our likes and dislikes barely affect the opinion of even our friends when it comes to brands, products and experiences. For all those companies now handing out Klout Perks and studiously trying to enchant alleged online influencers, this finding is both really important and a little bit deflating.

When it comes down to it, Klout and competitors such as PeerIndex, PeopleBrowsr, ProScore, Twitalyzer and Kred are really trying to measure the same thing: someone’s intent to buy.

But why are we online tweeting and posting and sharing and all the rest? Like a good actor might ask, what’s our motivation? Are we trying to influence others when we post about what’s happening in our life, or what products we like, or what stuff we find interesting? Are we intentionally shilling for someone? Why are we doing this stuff?

“There is no power on earth that can neutralize the influence of a high, simple and useful life.”  - Booker T. Washington

It’s a little like, in a different context, spending $25,000 to buy a table’s worth of tickets at the United Jewish Fund annual banquet, then advertising it to all our friends and enemies. Why did you give that $25,000? To help the needy recipients who benefit from the UJF’s programs? Or to show your hyper-competitive fellow rich schmoes what a noble rich schmo you are?

Personally, I don’t think it should count as philanthropy if the donation comes with self-promotion and personal rivalry, but that sentiment, adopted widely, would empty the coffers of American charities.

Or, to put it yet another way, is the most influential and powerful person in any room the one with the most keys, or the one who can get the most doors opened for him/her?

“I didn’t do it because of the underlying greed that’s prevailing, but it is about greed, doing the right thing at the right time using your clout when you have it and what for and what reason.” – Danny DeVito

 At the heart of these rather cosmic questions is a really important basic truth, one that actually inverts the way many people may understand it: Power and influence are granted to you by others, not proclaimed by yourself. You only have influence when someone else gives it to you.

For instance, Gartner is a well-known research company that makes money by publishing and selling lots of moderately priced white papers and research briefs on various industries to lots of people. Accordingly, a great number of people, in tech at least, know about Gartner’s work.

My companies, RampRate Sourcing Advisors and DeepStrat Digital Strategy, do tech research too, but we don’t publish any of it. Compared to Gartner’s big bullhorn in tech research, we might as well be mute.

Instead, we work for tightly focused audiences, tailoring our research to the specific needs of a specific client.  Basically, we don’t ask what a pair of jeans costs; we ask how well does this pair fit your body? Our work often helps focus and forms the decisions of very big clients whose products and services shape entire industries.

So, which research company is more “influential?” The big one that’s well known to lots of people in an industry? Or the little one that’s well paid but not well known? Sometimes, silence truly can be golden

“I have thought a sufficient measure of civilization is the influence of good women.” - Ralph Waldo Emerson

On the side, I write a lot of blog pieces for various outlets. Occasionally, they’re about the industries my companies follow. But the blog-driven bullhorn I use online (which generates an extremely modest Klout score of 13) is seldom used to shout about my companies or even about me, their glorious and brilliant leader.

Yes, I know this is hard to believe for those of you who have come within shouting range of my hyperventilating, shamelessly self-promoting alter ego, Super Tony. But it’s true.

Instead, many of my pieces are motivated by a Ralph Nader impulse, when I’m frustrated by the anti-consumer misdeeds of power utilities, car dealerships, computer stores and others. Other times, I want to highlight the lifestyle and moral choices that we all can make that may improve our own lives or the general condition of the planet.

“Writers write to influence their readers, their preachers, their auditors, but always, at bottom, to be more themselves.” – Aldous Huxley

 Am I trying to influence you? Yes. Do I make money off this writing? In nearly all cases, no. But based on the responses I get to my blog pieces, I know lots of people are listening, and that is its own significant reward.

And because they’re listening to me, they’re granting me influence as they think about what airline or car dealer or computer store they want to do business with or how they want to live their lives and try to preserve this wobbly little blue marble we live on.

And measuring that influence, which isn’t really about selling anything but changing the way we think about the world around us, will never be something Klout and its competitors can measure, no matter how much Clout I might have.  

“It takes tremendous discipline to control the influence, the power you have over other people’s lives.” -  Clint Eastwood

Have you ever had a perfect weekend? A perfect experience? Have you ever been part of an intentional, if temporary, community built out of seemingly thin air that coalesced into a deeply meaningful and rewarding experience for the rest of its short existence? It seems Wired preempted my diatribe.

Recently, I had all of that. It was so intense and special that I was missing it about 0.42 seconds after I headed back home. Since then, I continue to think about what it was that made the communal experience so good, and what it takes to create such temporary but intensely engaging gatherings on a more regular basis, for a richer, more enjoyable life.

All that said, don’t think I want you to try to go to this event the next time it’s held. It would be a horrible experience for you, whoever you are. It’s the absolute epitome of Groucho Marx’s line about not wanting to be part of any club that would have him as a member. You shouldn’t go. You definitely shouldn’t even try to be part of it. If they ask you to come, you should refuse. It would be bad for you. Really. I just happened to have a really good time, that’s all.

Am I talking about Burning Man, that annual confab of cool crazies on the scorching salt flats of northwest Nevada? Nah.

This was something that was simultaneously more exclusive and more inclusive (and thankfully, completely lacking caked-on alkali dust on any sensitive bits). And it was on the other side of the Nevada border, at Squaw Valley near Lake Tahoe.  Rather, this was the Summit Basecamp weekend organized by TheCollective in late January. Squaw Valley is really un-beautiful this time of year, and cold, cold, cold. You would have hated that.

It’s hard to do justice to all the amazing people I met at the event, and trying to list them all merely ensures that I’ll forget several incredible someones. There were astronauts and musicians, doctors and venture capitalists, social media mavens and authors, oceanographers and attorneys. None of them, however, were people you would want to know.

The attendees included a lot of people with boring, conventional, high-level titles, like CEO or founder or partner. And then there were those amusing attempts to define one’s role, like Director of Corporate Espionage or Chief Troublemaking Officer or Chief DODO or Breathing Guru, Chief Humanist, Chief Love Officer or Chief Eternal Optimist. You get the idea. Lots of terrible people, with awful titles. You wouldn’t have liked any of them.

Given its location near Tahoe, there were lots of people from the Bay Area and Los Angeles. But there were lots of others from Israel and Doha, Rio de Janeiro and Guatemala City, Paris and Sydney, Bogota and Montreal, Shanghai and Phnom Penh. You’d have felt uncomfortable with all those funny accents.

It even drew a few some actual celebrities, like the president of the Republic of Georgia, Mikheil (Misha) Saakashvili, rapper DJ Jazzy Jeff, Emanuelle Chrique of Entourage fame, comic Patton Oswalt and director Gus Van Sant. And there were a lot of people who are famous in the tech world, like Zappos.com founder Tony Hsieh and Webbies founder Tiffany Shlain, and more VCs than you could shake an IPO document at. But you wouldn’t have liked to talk with any of them in a relaxed and stimulating atmosphere. Sekou Andrews wrap up simply stunned the audience.

There were cool artsy sessions, like mentalist LIor Suchard divining the name of someone’s first girlfriend, and Swedish and Argentinian superstar Jose Gonzalez performing his intensely quiet guitar-driven music. And lots of brain food on investing in NGOs, creating lean startups, understanding the Mayan calendar system, the history of Prohibition, memorization tricks and the meaning of money. You’d have been bored in those sessions.

All that said, I had several important takeaways from this gathering:

1)  For once in my sometimes overly driven life, I didn’t go to an event with intent driving my choices. I went to the event with no agenda, no long list of people I had to meet, no events I couldn’t miss, no declamations I had to make. I went with an open mind and an open calendar, and just enjoyed all the experiences that serendipity brought me, like that lunch with Misha, his aide, and the beautiful woman friend who invited me to the lunch.

2)  Life is made up of people who are givers or takers. I’ve never seen such a large group of givers. Hats off to the organizers who curated the wide-ranging mix of invited attendees. They worked hard to figure out the most challenging possible thing: waving in the right mix of people to create the most precious club I’ve ever been in. Everyone, it seemed, was there to connect and support each other. It simply wasn’t possible to meet someone who didn’t say, “How can I help?” I  revisit a piece on Gratitude I  wrote years back, truly showing these Summit creatures must feel the same.

3)  As exclusionary as the gathering was (a pricey, invite-only gathering in an expensive, somewhat remote ski resort), the attendees were amazingly inclusionary. You didn’t see cliques that turned their backs on strangers. With each passing minute, I would pinch myself being honored to attend. And I can’t wait to figure out new ways I can give back to others as a result of the inspiration I came away with.

4)  It didn’t matter how wealthy or successful you were. No one was peacocking, boasting about their influence, trying to prove their power, showing off their expensive duds. Every attendee got a pair of TOM’s sunglasses and Bogner boots, which ended up making sure everyone ended up dressing a bit alike. It became very egalitarian, flattening out differences something like how parochial school uniforms do. It was a crowd without ego or pretense, or at least with no need to express those to others.

5)  I felt almost like an elder statesman in this Benetton ad of a diverse crowd. There was no hierarchy of beauty, brains, income, gender or race, the participants’ warmth and smiles turning handshakes into hugs. The mix of attendees was split among those who already had wonderful achievements and the leaders of tomorrow. It was an unbelievable combination. As tech-oriented as many in the crowd were, though, it wasn’t a typical frenetic, Type AAA dot-commer crowd. Instead, it was a dot-calmer crowd.

6)  I still treasure the wonderful presences of Summit Basecamp organizers Elliot Bisnow and Jeff Rosenthal. They led an impeccably groomed team that managed the most demanding and humbled of crowds, placed somewhere between hippies and executives. People were all sharing rooms, spaces and parties and meals like there was no tomorrow, and truly meshing into beautiful collective experience. The organizers pulled together a remarkable set of materials, from building a bar that housed the Prohibition and cocktail talk, to a website, support materials, participant materials and more. It was a veritable eye and brain feast; like Burning Man meets TED meets Davos meets the Allen Media Conference meets Pop Tech.

I salute the organizers and the participants for the experience they allowed me to enjoy with them, and I thank them greatly. But remember, whatever you do, don’t even bother trying to be part of this. You’d hate it.

Besides, I want to get invited back and actually have time to meet everyone who’s there, because they’re some of  the coolest people in the world. If you came, it’d just be one more amazing person I might not have time to get to know. That would really suck.

Speed thrills, especially near the speed of light. For Wall Street traders, speed creates new fortunes on the world’s fastest networks, for makers and users both.But those technologies require lots of money and brainpower, creating questions about unfair advantages for privileged insiders with the fastest networks and best relationships, even as regulators ponder what to do.

Welcome to the future, where winners are determined by who arrives first with the most intelligence. Whether it’s making a killing with a million-dollar trade, snagging choice concert tickets,  or sniping an eBay auction, technology’s next big leap is nearly here. Low-latency networks will reshape most industries, even if they never approach the speed of light.

 Finding Alpha Between Each Tick of the Clock

Through my firm RampRate, I have watched companies pay big money to get even a mile closer to the trading floor. Trading speeds have accelerated to millionths of a second, with nanosecond reactions coming. Sophisticated financial traders are zipping in and out of positions in less than a heartbeat, generating billions of dollars in arbitrage profits.

“The people who are upset with the leaders of the pack (for being) like genetically altered Olympic hopefuls hopped up on performance-enhancing drugs are people who want to be big players,” says Chuck Ocheret, formerly head of Deutsche Bank’s platform solutions. “But they don’t have good alpha-generation principles, and aren’t smart enough to achieve ultra low latencies anyway.”

But are the millions spent optimizing latency (some of which trickle down to my company, which advises companies on the right co-location centers and networks) truly creating market efficiency? Who really needs this speed?

How Low Is Low? Depends on Your Business

Low latency is heady stuff. But not all industries need to flirt with the speed of light t to create competitive opportunities now. What counts as low latency in your industry will be a crucial differentiator in your success.

 “Latency matters a lot and means different things, depending on where you are in the value chain,” says former BBC and CBS digital chief Mark Kortekaas. “On the one extreme are the high-frequency traders where physical distance is crucial. On the other is the time it takes for an end user to see your service.  Google has said even half-a-second delays to search results significantly drop traffic.”

So, speed is vital, but so is perception. Companies such as Gomez and Keynote prevent latency gaffes a user might notice that can affect brand image, customer satisfaction and employee productivity. Slow can be a blow, no matter the industry.

The most likely immediate low-latency candidates are industries with lots of bidding or trading and massive data analysis. Financial news outlets are obvious, the velocity of information creating arbitrage potential. Companies such as Activ Financial not only get the news to traders faster, but interpret it too.

Auction sites are ripe for adjustment, as seen with eBay “sniping attacks.” So too is the legalized gambling of the penny auction. Second place in a penny auction is worse than not playing, because you’ve spent money on all those penny bids, yet bought nothing

STATS LLC provides sports fans (bettors) rich, fast data on 234 sports, including pitch-by-pitch and play-by-play updates, using the same analytic concepts used in financial markets. Betfair.com, the UK gambling giant, uses high-frequency data to respond to news that causes rapid adjustments of prices and odds.

Who Profits? The Infrastructure Play

In my work, I’ve seen buyer approaches range from bashful to brazen. Some clients strongly prefer specific geographic and network topology locations that we know are close to trading floors. Others say money is (almost) no object if it speeds their London-Singapore link by 10 milliseconds.

“It can be difficult to imagine how milliseconds or nanoseconds of latency make a significant difference,” says Internet technologist and RampRate CTO Steve Hotz,   “but from the viewpoint of a data transaction making the trip hundreds or thousands of times, that incremental advantage can add up.”

Hibernia Atlantic is building a $300 million trans-Atlantic cable to cut data transmission 6 milliseconds compared to Global Crossing. Spread Networks just linked Chicago to New Jersey with a high-speed connection. And if anyone figures out how to bore straight through the Earth, you can be sure they’ll have customers.

Eyebrows are raised particularly when exchanges themselves sell low-latency links. Nasdaq’s co-location business has been under regulatory scrutiny since 2009, and the NYSE is seeking special permission from the SEC to sell more co-lo.

Others can’t help wondering if this game is rigged. Are some competitors being kept away from fast links? And do some others get a cross-connect a few feet shorter, and few slices of a second faster in even the best locations?

Many of these complaints are spurious, but can’t be totally dismissed. Markets thrive on confidence and transparency, and when people suspect cheating, they stop playing.

The blame game is not reserved to unsuccessful players. Complaints erupted after 2010’s “Flash Crash,” when the Dow Jones Industrial Average plunged more than 600 points in 5 minutes, and then magically bounced back 20 minutes later.

High-frequency traders did have a role in the crash, but analysts have said they were not at fault, there or in similar events.

Some believe high-frequency trading unfairly advantages a privileged few. Others complain that it disrupts conventional trading. And though it creates undeniable efficiencies, it also creates undeniable perceptions of impropriety, which may outweigh benefits.

What Now?

Despite calls for more regulation, these networks are moving forward, evolving quickly. Already, more than 60 percent of U.S. financial trading (and a third of European trading) filters through an HFT platform. With physical laws doing what man’s laws cannot in limiting speeds, some believe current concerns will soon go away.

“Unless we change the laws of physics, the high-frequency/low-latency game has played out,” writes Larry Tabb of the Tabb Group research firm. Tabb says we ask the wrong question in wondering whether high-frequency trading is bad for the market. It’s already been transformed, with more to come.

“We have seen a 2,000-fold drop in average core-trading latency in the last three years, and I think the move to measure trading latency in picoseconds is nearing,” says Christian Sommer, Intel’s director of capital markets.

It may be that the need for speed will simply hit a wall. Even measuring latency in picoseconds requires such sophisticated tools that it practically requires a CERN physicist. After all, a picosecond is to one second as one second is to 31,700 years.

 “Light travels 30 centimeters in one nanosecond,” says Neil McGovern, Sybase’s senior director of strategy and financial services. “So if light can go only a few centimeters in a picosecond, how much faster are you going to get?”

In which case, markets will have to look elsewhere for competitive advantages, like being smarter. High-frequency, low-latency architectures will just be tools for executing a strong alpha-seeking strategy.

“The truth is that if you really have the talent on board smart enough to achieve true ultra low latency,” says Ocheret, “then you are probably smart enough to make money without it.”

A friend of mine in the research industry used to give out little post-it-notes to trainee analysts that said “be wrong boldly.” Her reasoning – if you are bold and right, you will be hailed as a prophet. If you’re wrong, most likely the crowd will have moved on by the time your prediction fizzles. But accountability for our past advice is a core value here at RampRate, so we have to see how we did on our 2011 predictions – and see just how well our crystal ball was working. By our count, we have 4 hits, 2 partial hits, 1 miss, and 3 TBDs that won’t be known until later. What do you think?

1. Everything that’s old will be new again – we predicted that the main technology splashes 2011 will be retreads. The year was a bit short on new fads compared to 2010, with most of the top tech gifts like new tablet PCs and phones being evolutionary rather than revolutionary developments. The one true innovation that we got to participate in — the purely electric car — is, however, a classic reprise. The first electric cars held speed records and went head to head with internal combustion (and steam) in early days of the industry only to be trounced by cheap gas. With several major manufacturers mass-producing all electric cars, the old electric car new again, making this prediction a hit
2. Markets will stay irrational longer than companies stay solvent – although the year was a busy one for data center and telecom M&A activity, most of the acquisitions were hardly fire sales. And while there were 9 telecom bankruptcies for the year, the only ones that made it into the top 20 were in satellite communications. That said, bets on rapidly rising data center prices have continued to not pay off as RampRate customers typically saw material per-kilowatt cost decreases in their renewals and greenfield projects, leaving the prospect of further shakeout down the road and a partial hit for the prediction.
3. A large firm will overpay to jump on a bandwagon – while most of this prediction covers 2012-2013, there are several examples of cloud / data center acquisitions that start off on the hype path, such as Verizon’s purchase of Terremark at 5.4x annual revenue and a 35% premium vs. market  and CenturyLink’s Savvis purchase at 3.2x revenue and an 11% premium vs. market prices (which would have been a 53% premium had it been bought at the same time as Terremark). Time Warner’s purchase of NaviSite (albeit at a smaller 1.9x revenue multiplier) completes the trio. We wish these folks all the best, but the prediction still stands as TBD.
4. More CDNs will be built and fail – Dan Rayburn’s list of current and former CDNs keeps growing. However, 2 of the main exits of 2011 and the first week of 2012 – Cotendo and Voxel – could be considered successes, and Tata’s pickup of BitGravity at least a salvaging of a mediocre situation. So this one will be a miss… for now. Some catastrophes like Amazon web Services failed it customers, but not financially for Amazon..
5. More peering disputes will be recast as net neutrality – As predicted, Netflix CEO Reed Hastings elevated this issue to headline levels by publicly lobbying Congress for a better deal for its provider. Others such as Global Crossing and Voxel followed suit, leaving a harried AT&T and a cable providers’ industry group pleading with the FCC to decide on the issue. Regardless of the outcome, the prediction is a hit.
6. The media industry will step into another content rights PR nightmare – Ah, where to start? Should it be the inability to sell Hulu – the one digital property that the media industry nurtured to prominence due to content rights issues? My favorite suitor was Amazon. Or with getting half the Internet to mobilize against the SOPA and PIPA legislation? Or yet another single-player game rendered inoperable by remote server failure – but only for legitimate users? A clear hit. 
7. A top exec or politician will demonstrate technology cluelessness matched only by his / her influence on the industry. This year’s Ted Stevens memorial award goes to the many sponsors of SOPA and PIPA, with special mention for Mel Watt (D – NC) and Maxine Waters (D – CA).
8. Security restrictions will cripple productivity without actually improving security. Without another scandal to stir the pot, the pace of silly security measure adoption has been slow. With the UK government actually moving to more, rather than less sanity on allowing open source software, we were about to label the prediction a big miss. But between proposals to build a whole separate secure internet and contributing to LA’s inability to migrate to Google apps, the FBI salvaged a partial hit for us on crippling government productivity for the sake of security aspirations destined to fail due to simple social engineering.
9. Analysts will invent a new acronym destined to melt away by 2013. It’s altogether too easy to say that an acronym or buzzword will fade away. A bit harder to say which one will. Will “gamification” join “protail” (forecast to be a $1.5B industry by 2012 as of 2008 and nonexistent by 2011) in the dustbin? Or will it be underperformance of a hyped segment like PaaS joining data loss prevention’s failure to deliver ($2B in 2012 as forecast in 2008; $832M in 2015 as forecast more recently)? We’ll rate this one as incomplete for now. I  certainly hope this stuid world cloud gets contained or it will be the greenwash term of the decade.
10. Something big will be lost in waves of hype. This one won’t be final until 2018, but Gartner has some guesses. Then again, most of their guesses from 2009 either stayed in the same place on the curve or disappeared, as predicted by number 9. Incomplete.

So, all told, we didn’t do badly, certainly not compared with other prognosticators of more wobbly consistency and clarity. Only one outright miss, and three others that will take a while more to fully determine. That leaves us batting, more or less, .600 with prospects for further improvement. That’s enough to get into the Pundit Hall of Fame, presuming of course than any other pundit actually bothered to look back at what they used to predict would happen before things actually did happen.

Up next, predictions for 2012.

By Tony Greenberg

“Electricity is really just organized lightning.” - George Carlin

Let me start by saying that I love new technologies, especially when I can try them before anyone, even if I’m sometimes out on the “bleeding edge.” I don’t mind the cuts for the cool that comes with them. Who would have thought my Nissan Leaf is a status symbol.

And let me say that I love treading more lightly on our battered planet, as evidenced by my conscious diet and walkable commute. I particularly love not delivering more wads of cash to problematic places to buy their petroleum.

It even extends to my business, which drives down data-center costs and emissions and measures dirty and clean power for eco-/cost-conscious clients, and to my related efforts with the Clinton Global Initiative (watch for new government initiatives we are driving.)

At the end of the day, watching out for corporate social responsibility (CSR) saves my clients millions.

And finally, may I say that, at this point in my personal evolution, it was time to move on from my standard-issue, bachelor-dude Mercedes convertible.

All of which is to say that, when my friend Henry Unger offered me the Nissan Leaf electric car that he had ordered back in April 2010 and that had just arrived, I was ready. Boy, was I ready.

When I tell people I bought a plug-in car, they say, “Howz da Tesla?” But Tesla ain’t the ride for this mountain man, Patagonia Tony.  I needed to slow down, and Nissan helped me turn over a new, ahem, Leaf. Simply put, this car is wonderful.

“And God said, ‘Let there be light’ and there was light, but the Electricity Board said He would have to wait until Thursday to be connected.” – Spike Milligan

Let’s start with the bottom line. The Leaf retails for $37,250, fully loaded with the best Bluetooth, audio and other goodies. There’s even an iPhone app that checks the car’s charging status and remotely starts the climate control.

Even sweeter, the Leaf qualified for a $7,500 federal rebate and a $5,000 state break (basically a third off), to get Americans off oil and onto electric. There are even subsidies to retrofit my garage to a Level 2 charging system that “refuels” the car quicker.

And there are lots of other perks: free parking at LAX, Santa Monica, and other cities, and (legal) carpool-lane use without a companion. And my Handy-Dandy Wonder Nav* (*Not Its Official Name) helps me find the nearest charging stations. I blinged my LEAF for 5 bucks.

This all sounded great. Except…

Except that there’s one other thing I must say: I really value customer service. In my business, I kill myself to take care of my clients. And when I’m the customer, I expect companies to do the same. When they don’t, well, I make a lot of noise.

I’m about to make a lot of noise.

Remember that retrofit subsidy? This, it turns out, isn’t so simple. My 25-year-old townhouse would seem modern enough that it should be easy to upgrade. Except, it’s not. Getting my garage rewired actually requires getting my whole building rewired.

That process ping-ponged me endlessly between Southern California Edison and several vendors who would retrofit my garage/the building/western Santa Monica/the western United States, for $5,000 to $65,000* (*does not include full retrofit cost for western United States).

Ultimately, I couldn’t persuade my neighbors, even in the People’s Republic of Santa Monica, to rewire the building because some residents inexplicably still don’t have electric vehicles.

“Benjamin Franklin may have discovered electricity, but it was the man who invented the meter who made the money.” - Earl Wilson

The only pleasant part of this rough process was meeting Paul Scott, the environmental activist turned auto impresario who founded Plug In America. Paul knows this space cold, even telling me where to park, plug in for free,

Paul plugged me in to the nuances of going electric, and he wasn’t even selling me anything. He’s the Real Deal.

“Electric-drive transportation is here to stay,” Paul says. “The efficiency gains going from internal combustion to electricity spinning a motor shaft are significant. Furthermore, the energy source is 100 percent domestic, so we (would) eliminate sending $400 billion out of the country every year for foreign oil.”

Through Paul, I came to understand how important adequate access to charging sites is. Gas stations are everywhere. Electric charging stations…not so much.

A Level 1 charging facility uses your standard house 110-volt system. It’s really slow, taking almost a day (20 hours) to recharge a Leaf. As the Supreme Court justice once put it*, “Juice delayed is Juice denied.” (*A very rough paraphrase)

A Level 2 system uses the same kind of juice that most electric ovens use, 220 Volts at 40 Amps, and charges the Leaf in about 7 hours. My ESVE Update will charge my daily use in less than an hour.

By contrast, a Level 3 charging facility is really fast, though not as fast as gas stations. It will charge a Leaf to 80 percent in about 30 minutes. But the Level 3′s real problem is they aren’t very common. Even green-savvy Los Angeles has only a handful of Level 3s, mostly for big government or commercial fleets.

The real secret, although Ecotality and Aerovironment who are simply wasting government funded programs, are forcing misinformation into the market. Fraud and misrepresentation prevail

As an alternate, try the handy dandy conversion kit from the geniuses at EVSE Upgrade, which will double charge through a dryer connection. They are a wonderful solution to bypassing the complicated crap being pawned off at Eco and Aero. Tell them Tony sent ya.

“Electricity can be dangerous. My nephew tried to stick a penny into a plug. Whoever said a penny doesn’t go far didn’t see him shoot across that floor. I told him he was grounded.” - Tim Allen

Electric cars also have, ahem, modest range. When my Nissan dealer told me the Leaf has a 110-mile range, I thought, “Great! That’s enough to get around LA.”

A friend’s take was different: “Great! That means you can only drive 55 miles before you turn around!”

That’s because I still need to get home. Combine short range with scarce recharge stations and new electric-car owners invariably suffer from RangeAnxiety, though it eases after 90 days.

“It ain’t easy being an early adopter,” acknowledges Chris Paine, who with Paul helped make the seminal 2006 documentary “Who Killed the Electric Car?” “But then I’d add that it sure is worth it. The stakes couldn’t be higher and only if people like you make the effort, do we have any chance of getting the car companies to start making more and more of these.”

Despite the cheerleading and guidance from Chris and Paul, this whole learning curve was driving me nuts. I was a grumpy “Gran Torino” grampa, muttering under my breath as the complicated realities of electric-car ownership settled more firmly on my slumping shoulders.

“They were nothing like the French people I had imagined. If anything, they were too kind, too generous and too knowledgeable in the fields of plumbing and electricity.” - David Sedaris

But my real devil was Miller Nissan, whose customer service rating speaks louder than I could. They took weeks to allow Henry to transfer his reservation to me, costing me that $5,000 state rebate. It took another month of ”encouragement,” and repeated broken commitments, for Miller to pay for that lost rebate.

I’m glad my dealer finally did the right thing. I just wish they did it without turning me into Angry Gran Torino Man. I vowed to do everything I could to force Miller to learn how to deliver a Leaf the right way or short of that, get every Leaf left in town allocated to Paul at Nissan at Downtown LA.  Paul loves to hook people up. He can be called at: 310-403-1303

I still haven’t seen the process changes that will correct where they went awry with Terrible Tony* (*formerly known as Patagonia Tony). But perhaps Miller Nissan will get a clue, eventually.

“We believe that electricity exists, because the electric company keeps sending us bills for it, but we cannot figure out how it travels inside wires.” - Dave Barry

So, has this electrified ride down Bleeding Edge Drive been worth it? I do feel better about reducing my impacts on the planet, and doing it with what is simply the best car I’ve ever owned.

And the process has forced me, again, to think more carefully about how I live my life. What’s my part in all this? Am I an influencer or just a lunatic*? (*Don’t answer that.) Sometimes I think the response depends on my Klout score.

And I’ve had some novel experiences. When I posted to see who might temporarily trade cars when I have a long drive, just about every Tom, Dick, Mary and even Gran Torino Guy was game.

And I once again thought about what is essential. My life’s greatest pleasures are Dr. Bronners and Pressure cookers. My early adopter agonies probably are worth it if I’m helping humanity’s future, which I think I am, however modestly.

And here’s the funny part: I also may have found a new status symbol.

My yoga teacher friend told her father to stop shopping for a Bentley: “If you really want hot chicks, Dad, ditch the ego car and pick up a Leaf.”

Yeah, Dad. So, life is good. And it’s getting better.

“There are two great unknown forces today, electricity and woman, but men can reckon much better on electricity than they can on woman” - Josephine K. Henry

“You’re walking around blind without a cane, pal. A fool and his money are lucky enough to get together in the first place.” – Gordon Gekko in “Wall Street”

By Tony Greenberg, CEO RampRate Sourcing Advisors / DeepStrat

A week before Groupon’s initial public offering, Henry Blodget at Business Insider was telling readers he wouldn’t touch it with a 50-foot pole for reasons that amounted to, “It’s an insider’s game.”

As Blodget expected, insiders were indeed the big winners. Investors who bought at the peak that opening day are now down about 20 percent since then. The only good news for investors: at least they’re not in the territory of Demand Media, which now trades about 70 percent below its first day of trading back in January.

Investing in IPOs today screams “caveat emptor.” But do we listen? The prospect of investing in something that all our friends are using seems to be as irresistible as super-sizing a fast-food meal — and can be equally bad for our (fiscal) health.

There’s also the view that if people are buying things they don’t understand, they should lose their money. It’s called capitalism, redeploying money to smarter people so it can be invested more intelligently.

Better Ways To Invest?

I agree that capitalism should not reward stupidity but we also should make it a little safer for non-insiders to invest. Why not increase transparency and let outsiders see what’s really going on in a company?

Perhaps it’s time for the equivalent of nutritional content labels on investments that outline, in plain language, just how much risk we’re taking. And maybe it’s time we also start asking if there are better ways to invest, not just for us but the health of our planet. That’s happening now with a growing trend called “impact investing,” defined as for-profit investment made to solve social and environment problems.

“Impact investing will need to scale to an enormous level for these solutions to be achievable,” said Eric Kessler, founder and principal at Arabella Philanthropic Investment Advisors, which advises philanthropies like Gates Foundation and Rockefeller Foundation and touches nearly $1 billion in grant and impact investment portfolios a year for. “Profitable, socially-driven businesses are the only sustainable solution. Philanthropists are awakening to that now and transforming themselves into impact investors.”

As things currently stand, it’s turned into a bit of the Wild West for investors. In an era of Occupy Wall Street and too many investing scandals, the impulse is to blame fraud or at least insiders who take liberties at the expense of the rest of us.

True, neither Groupon nor its underwriters held a gun to anyone’s head to buy a single share. Key information, from insiders taking money out to decelerating revenue growth, was thoroughly and publicly documented, as per all SEC regulations and rules.

But months before Groupon went public, breathless news stories were estimating a $25 billion valuation for the site. By the time the IPO put real numbers on those estimates, Groupon was valued at $13 billion instead, but even that seems optimistic for an unprofitable company founded three years ago.

Sky-High Valuations

Groupon is not the only example of misplaced “IPO-ptimism.” Zynga, the online game company, was reportedly seeking a $20 billion valuation. It now expects to go public with an estimated value of about $14 billion, though some seasoned analysts think $5 billion is more realistic. Facebook valuations currently range from $60 billion to $80 billion, up from $500 million just four years ago, though the social media behemoth has yet to announce when in 2012 it may actually go public.

Ask a venture capitalist about these sky-high valuations and their response ranges from a shrug of their shoulders to a gleam in their eye. The bottom line, though, is they don’t know what to think. This is uncharted territory, with companies only a few years old riding huge valuations to ridiculous riches, at least for a few.

“The biggest risk I see in today’s extraordinary Internet company valuations is the short length of time these companies have been in business,” said William Edward Quigley, co-founder and managing director of Clearstone Venture Partners. “The longer a company has been operating, the more secure its competitive position in the market and the more predictable its revenues.  Predictability is a core ingredient in successful public companies.”

Quigley points to LinkedIn, which went public after a full decade of operations, with a seasoned executive team, strong internal and financial systems and a proven business model. Groupon, by contrast, has had none of those advantages.

“A pubic investor should be more cautious when investing in companies that are still figuring out their business,” Quigley says.

IPOs Hit The Skids

This brings us back to what we are investing in and whether those investments are wise. One recent report looked at the dismal performance of new companies in the IPO market. During the past 15 years, the number of young companies entering capital markets through IPOs has plummeted relative to historic patterns, hobbling job creation.

The report, “Rebuilding the IPO On-Ramp,” also had a number of recommendations, including the need “to improve the availability and flow of information for investors.”

Regulations have driven up costs for young companies looking to go public, the report says. At the same time, institutional investors are leery of buying stock in startups because their risk levels are much higher.

“Right now, there is very little capital available to these emerging companies,” said Wall Street investor Terren Peizer, chairman of Socius Capital Group. Peizer said more than 4,000 publicly traded companies have market capitalizations of less than $300 million each. Companies that small just aren’t attractive to choosy institutional investors.

“These companies are unable to attract capital on viable terms, if at all,” said Peizer. “Increased regulatory pressure has had the unintended consequence of choking off capital access for the small companies.”

“In today’s regulatory environment, it’s virtually impossible to violate rules … and this is something that the public really doesn’t understand. It’s impossible for a violation to go undetected.” – Bernard Madoff

All of this leads me to hope there will be a greater emphasis on impact investing, which may help resolve these problems.

The Rockefeller Foundation started looking at these issues in 2008 when it developed a set of guidelines for “Impact Investing and Investment Standards,” or IRIS. As part of the process, the foundation developed a common reporting language for impact-related terms and metrics.

Out of IRIS came the Global Impact Investing Network Investors’ Council. GIIN was set up to identify how investor funds define, track, and report the social and environmental performance of their capital, in a way that’s transparent and credible.

In my company, RampRate Sourcing Advisors, which deals with similar issues of managing risk in an opaque environment, I’ve learned that it’s not about making a single right decision. Instead, it’s about hedging, diversifying, and understanding your risk vs. reward. It’s also about doing what’s right.

So much of what’s wrong with the investing picture today stems from the basic human impulses of fear and greed. People are afraid they will miss out on something big, which is the attitude that helped puff up the housing bubble. And that fear leads to greed, as people pay big bucks now, hoping to reap huge returns later.

Perhaps it’s time we put fear and greed back into the bottle and focus on how to invest for a better tomorrow that makes all of us winners.

The battle for Hulu has come down to a few prime fighters hustling for victory. I’m placing my vote that Amazon should be the winner. Well, that is for a consumer win.

There’s been a lot of courting to acquire Hulu from News Corp., Walt Disney, and NBC Universal’s Comcast. And while these Hollywood honchos rarely run a profitable business online, they do love the smell of early cash.

Of the many trying to grab Hulu, including Google, Yahoo, Dish Network, and DirecTV, I think Amazon should get the ring for the many gifts it can present. Amazon has more ways to monetize film and TV brands, thus putting more money in the pockets of Hollywood. Amazon does a better job of marketing than anyone else. It is also best positioned to cross-market the video properties with affiliate commissioned sales of music, merchandise and books.

“Advanced merchandizing will be a key ingredient for success,” said Phil Wiser, former CTO of Sony and founder of Sezmi, a global cloud-based TV platform and a veteran of marketing content online. “We are at the brink of a seismic transformation for the TV industry,” he said. “Online video technology has evolved to a point where it can truly replace a traditional pay TV platform in the home.”

Media executives are reluctant to admit this is the case, but they know there is a sea change occurring. Indeed, Hulu was created largely as an experiment to see how the process works. But Hollywood has a shameful history of turning their golden video properties into online sawdust. For them to get it right they know it’s time to set Hulu free.

How they will handle the sale is a tough one to call. As I pondered in my previous story on Hulu, will its partners sell to the weakest competitor or to whoever is willing to strike the richest deal? At least they have the hindsight to have seen first hand how the music industry mismanaged their digital properties.

“Looking back at the music industry, the digital business only really scaled when the content companies stopped trying to do it themselves,” said Wiser. Steve Jobs came to the rescue with iTunes, though it contained a few sour notes. “They effectively created a monopolistic retailer,” said Wiser.

Amazon is best positioned to offer Hollywood a win-win proposal. It has the best business model to weave the video content into multiple revenue strings, thus being able to hand over a golden cloth that Hollywood mavens will be hard pressed to resist.

“Of all the suitors, Amazon is the least objectionable to the TV networks’ traditional cable distribution partners,” said Jack Meyers, media economist and publisher of Jack Myers Media Business Report. “Hulu has the established infrastructure, financial leverage and consumer relationships to justify the inflated investment.”

Amazon blows away the others starting with the basic economics of how online businesses are valued. It has the lowest client acquisition cost and the highest lifetime customer revenue. The other suitors are not really prepped for prime time.

Consider that Yahoo is foundering and has pretty much destroyed all the properties it has acquired in the past. If the Hulu owners simply want their baby to wither and die, than Yahoo may be the right choice.

Google has been working on its online video strategy for years but has yet to show how to market TV and movies profitably. Yes, Google’s YouTube is the 800-pound gorilla in video content, if skateboarding dogs, curious cats, celebrities by accident, and music videos are what lights your fire. Google’s job is to sell ads, not content. This counts against Google as Hulu’s acquirer as another losing proposition for the consumer. The other potential suitors have problems that may also lead to a lousy ending for Hulu.

Amazon is not going to let the eggs of the Golden Goose that is Hulu rot. It’s obsessed with customer service and satisfaction. Amazon was rated No. 1 among online retailers in customer satisfaction in a Top 100 lists compiled by Foresee Results, displacing Netflix from the top perch. Customer satisfaction drives customer retention. That drives customer loyalty and revenue growth. I am confident Amazon buys content licenses for less than similar licenses sold to Netflix, who is spending its public coffers kitty in a mere land grab, rather than Amazon, which is disciplined in their process and valuation.

But wait, there’s more.

Customer loyalty is a huge management challenge and Amazon has mastered it. It has achieved that partly by building the best online recommendation engine in the world, much better than Netflix, the assumed champion. Amazon’s recommendation engine puts their customers at the center first by homing in on their interests and proclivities. Amazon invested a lot of money and brainpower figuring out who you are and what you like and they back up your vote with your purchases every day. Amazon also has low cost and highest-scale delivery infrastructure and encoding facilities through Amazon Web Services. These are essential keys that put it in position to offer Hulu owners the best value proposition.

The Seattle-based merchant also had the foresight to buy IMDb, the Internet movie database that gets more than 100 million unique visitors monthly who can watch film and TV content, including that from Hulu. Combine that with Amazon’s unique click-and-buy features and soon you’ll be able to buy the proverbial Jennifer Aniston’s sweater on a whim! Or buy the book the movie was based on through your Kindle. That’s cross marketing, baby, with proceeds to be shared by all. Then there is Amazon Prime, where subscribers pay $79 per year for preferred shipping and access to digital movies and TV shows. That’s about $6.50 a month, less than what Netflix charges and it’s pure margin.

More than 100,000 videos are available through Amazon Prime service. Combine that with Hulu’s huge library and Amazon trounces its competitors. It could merge in Hulu Plus, currently available for $7.99 a month, for free. Current Hulu subscribers could be given instant access to Amazon’s massive library, making it a win-win situation. It’s still early days for Amazon Prime, but customers love it, even if they may overpay on locally-available items. In this case, does the 80/20 rule hold, where Amazon Prime is a heavily subscribed, under-utilized service?

As noted here, while Prime may seem to be simply about shipping, it is really about bolstering customer loyalty and encouraging consumers to buy more products than they might otherwise purchase. There are some other ideas why Amazon and Hulu make a good fit here. Put it altogether and Amazon has more resources than Netflix, Google, Yahoo, and all the rest. Amazon has other incentives. It’s ready to unveil a full-fledged tablet computer, which could very well be tightly integrated with Amazon Prime and Hulu video services.

Wrap it all up and Amazon is a favorite suitor, with a special connection. Hulu CEO Jason Kilar has had a close relationship with Amazon CEO Jeff Bezos. Kilar had a 10-year career at Amazon, ending up as senior vice president for application software before joining Hulu as CEO

Lights. Camera. Action! ~~~Buy!

Congratulations should go to News Corp., Disney, and NBC Universal for finally creating an online company so big and successful that tech industry giants may stumble over each other to acquire it. Does Hulu or its buyer get the short stick?

Amazon, Google, Yahoo, Dish Network, and DirecTV appear willing to pay big bucks for Hulu, reportedly up to $2 billion or more, for the privilege of owning it.

Given the painful history of Hollywood creating a salable online unit, this is a major accomplishment. It’s a more positive variant of what I like to call “Suck-Cess.”  The more “successful” a business unit becomes, the more it sucks. In this case the Hulu owners create real value but can’t stand to hold onto their baby because it might grow large enough to eat their existing business

Hollywood’s unhappy dance with online video typically starts with overheated expectations and results in shattered ventures. Here’s hoping they don’t screw the pooch again.

“Hulu has long been treated as the unloved bastard offspring of a doomed tryst among three aging TV giants,” said Robert Tercek, former digital head of Oprah.com and a veteran of several Los Angeles startup ventures. “Joint ventures are born to fail. When the partners disagree, management is powerless to take decisive action. Ultimately no TV network has had the courage to commit 100% to a new venture that could cannibalize its legacy business.”

Hulu is a decent and popular service that attracted more than 24 million unique views in July, according to comScore, which is roughly 10% less than the subscribers of decades-old HBO. Hmm. I wonder how consumption rates differ between the two. Hulu generates material revenue from ads as well as subscription fees for its premium service, Hulu Plus. But which analyst or media firm has counted how much value has been applied in free broadcast time pushing Hulu to its owners’ constituencies?

But Hulu also represents much of what’s messy about quality video content on the Web. Shelly Palmer, host of Fox Television’s Shelly Palmer Digital Living, quips, “Hulu is a business model, not a business. Take away its quality network content and it ceases to have value.”

Assuming Hulu gets acquired, it might end up like other ballyhooed Hollywood ventures, a limping zombie with few compelling shows and an operation suspended in perpetual animation in a bid to recover acquisition costs. That’s because Hollywood, like the music industry, is so busy protecting its old business models that it hasn’t figured out how to profitably nurture new ones in the online ecosystem. The inherent conflicts with a site like Hulu have not been resolved, even though it has blossomed beautifully. Such problems have in the past scuttled video sites such as Movielink, Screenblast, and the UK’s Kangaroo.

The big question about Hulu is what will be included with the sale and what’s left out. Given all the challenges Hulu has had getting full content licenses even from its owners, what will happen when Hollywood no longer has a stake in Hulu’s success? Les Moonves even said, “Are they buying two years of programs for $2 billion? I don’t know.”

Will a newly acquired Hulu come with rights to all the content it currently has? Will the partners sell it to the weakest competitor or to whoever is willing to strike the richest deal?

One analyst put it just right: “What matters is how long the content is locked up, what the rules around it are, and if they can change in the future,” said Rich Greenfield of BTIG Research. “Nobody is going to buy Hulu without answers to those questions.”

Hulu reportedly has annual revenue trending to $500 million, but a raft of competitors like Netflix now seeking similar content deals will challenge it. And don’t rule out Walmart with its online video service Vudu. It recently surged into third place in the movie-download business. A court ruling this month gave Wal-Mart a major boost in its effort to muscle in on Netflix’s streaming subscribers.

One possible hitch to the Hulu sale could be the insistence that viewers who are not cable or satellite TV customers would have to wait eight days to access a show after its initial broadcast. If that’s part of the deal, Hulu will sell for a handful of pennies on the dollar compared to what it is worth without that restriction.

There is a lot of risk and uncertainty involved here. If Hulu is freed from restraints studios have so far imposed, it could present other problems for Hollywood. A freed Hulu might really give cable and satellite competitors a run for customers and their fees. Does that create a new golden goose for Hollywood, or just pluck the old one?

All of this is going on against a backdrop of complicated issues affecting video delivery. As online video explodes, pipeline providers like AT&T are choking unlimited bandwidth with metered pricing. They are creating an artificial bandwidth scarcity with new metered pricing plans, even though the cost of delivery has plummeted. These plans risk making Hulu, Netflix, YouTube and other online video services far less attractive, right when consumers are embracing them heartily. The fact that Comcast is leading the push to metered data services is an example of the conflict that exists between its cable and media assets.

Throw in the festering fight over Net Neutrality, where pipelines owners, including Google, will charge premium prices for preferential treatment of video delivery, and you have increased the mess, as I previously wrote. And this doesn’t include the potential problems with mobile platforms and the booming popularity of smart phones and tablets for video use.

All this feels like a re-run of the fate of online movie-download service Movielink, which five Hollywood studios owned long ago. Its executives were flustered by interference from studio board members, who repeatedly fought over pricing and special offers.

Is bundling licensed content and distributing it to consumers the wrong business model? Larry Gerbrandt of Media Valuation Partners, long-time media and advertising analyst, asserts, “Over the top television is perfect for an explosion of long tail content, niche content, and foreign language content. Netflix on steroids.  I recently spent some time with the folks at Google TV and they are starting with what is NOT available ANYWHERE, such as all of the college sports that don’t get on broadcast or cable TV + high school sports in major markets.  But it will take a Google, Amazon, or Yahoo to combine enough eyeballs across all the niche content to make it of interest to advertisers.  They still pay a premium for reach and you can’t change the fundamentals of TV advertising overnight.”

The result was a hamstrung service that eventually faded out.  Movielink was acquired by Blockbuster in 2007. The chances of Hulu having a similar fate may not be quite the same, or maybe it will be. Despite creating a significant business that could project them toward a dominant position in the online video market, will Hulu’s backers jump through hoops to keep it from being too successful? That would be another tragic comedy. You have to love Hollywood.

So who will be the best group to own Hulu and how will consumers benefit?  I will tell you in my upcoming paper. What do you think?

Public Cloud in the Big Picture

Public cloud infrastructure is a trendy label that has been applied (and misapplied) to many services along the spectrum of managed hosting. For the purposes of this article, the cloud services we are addressing are:

• Infrastructure as a Service (IaaS) – open architecture public cloud platforms such as Amazon EC2
• Platform as a Service (PaaS) – development platforms such as Microsoft Azure
• Software as a Service (SaaS) – application delivery such as salesforce.com

Figure 1 Hosting Spectrum for Cloud and Non-Cloud Deployments. Source: RampRate

At a minimum, the Public Cloud solution must exhibit the following features:

• Most key design decisions belong to the vendor
• Automatic provisioning
• On-demand scaling or elasticity, often with charge-back reflecting per-hour rather than per-month charges

Public Cloud Buyer Profile

As part of getting buyers towards an optimal decision, we use a scorecard mechanism to weight priorities vs. solution strengths. Historically, public cloud buyers — whether starting new projects or attempting to migrate legacy applications — have shown the following attributes compared to their colleagues that opt for other forms of managed hosting:

• Higher risk tolerance. Moving into the cloud does entail some early adopter operational risk. It is a market where several of the top providers have a history of outages, and customer service standards are not always enterprise class. public cloud buyers are all too aware of the risk and seek to hedge it in other ways – whether through application resiliency or provider diversity.
• More emphasis on price. The TCO on a public cloud platform may not always be lower, but the sticker price usually is, and it does attract the cost-conscious buyer.
• More emphasis on scale up than out. Buyers of public cloud services want one thing — on-demand compute capacity/storage — done at scale, rather than a broad portfolio of infrastructure and telecommunications offerings.

Figure 2 Priorities of cloud buyers

Heir to Multiple Legacies

The profile of the cloud infrastructure buyer bears many similarities to early adopters of other infrastructure approaches as well. However, crucial differences remain, based largely on alternatives to each technology available at the time of its initial uptake:

Co-location

• Similar to public cloud, early fears with regards to outsourced shared data centers often focused on security concerns that were largely, though not always, overblown
• However, unlike public cloud, the adoption of early data centers was less about scale and price than about operational health (i.e. uptime) – to be precise, a specific mix of resiliency and cost that found a sweet spot in the market. Yet it was still not a solution for all buyers. A closet with an air conditioner served for the buyer with minimal uptime concerns, while true Tier IV data centers for the maximalist were (and remain) rare and expensive, and are still built as often as rented.

Content Delivery Network (CDN)

• CDN adoption was similar to today’s public cloud infrastructure in the role of scale. Steep and unexpected demand on the infrastructure is a key driver for both services. CDN was also similar in offering usage-based billing in place of capacity-based charges of alternatives – supplanting the traditional per-Mbps charge model with a cost per gigabyte transferred.
• However, unlike public cloud, CDN adoption during its early days was less often a price driven decision, and more often a question of technical fit and performance. Questions like “Does the CDN support a specific streaming media format?” “Does the increased price for bandwidth increase my revenue from my website?” “Can it generate unique URLs to keep my content secure?” “Is it faster than my own servers?”, and even more mundane concerns like “Will the caching mechanism blow up if my file size is too big?” were more top of mind than, say, support for a specific OS version is on a public cloud infrastructure.

Implications for the Public Cloud Buyer

For both co-location and CDN – now mainstream and mature services – the same growing pains of unexpected outages, indifferent customer service from market leaders, and the prospect of smaller providers winking out of existence kept the initial risk profile high. Yet, when the dust cleared, the key attributes of choosing each one — operational health for data centers and technology fit / performance for CDNs — remained as key guides to the core value. Similarly, buyers who put scale and price first will eventually drift to the public cloud. Risk tolerance only determines where in the technology maturity cycle they will make the leap.  If on-demand growth at a low cost is your primary goal, then the public cloud should be somewhere on your roadmap now. If your top of mind concern is ability to control and fine-tune the performance profile or retain backwards compatibility with retained legacy components, it may be best to proceed more cautiously, building private cloud competencies that can be extended to public cloud services in the future.

Most legacy applications have implicit assumptions about operating systems, hardware, geography, latency, throughput, scalability, governance, access rights, monitoring and other aspects that must be carefully addressed before deploying to the public cloud.

by Alex Veytsel, Steve Lerner and Tony Greenberg
as published by Microsoft TechNet 

When faced with the many opportunities afforded by a cloud infrastructure—on-demand scale, potential cost reductions, elimination of complex maintenance processes, etc.—the decision to build a new application in a public cloud is often a no-brainer, especially for the buyer with the mindset of prioritizing agility and speed-to-market over customization and the perceived security/reliability advantages of internal infrastructure.

Migrating an existing application, however, is a different beast. Most legacy applications have implicit assumptions about operating systems, hardware, geography, latency, throughput, scalability, governance, access rights, monitoring and other aspects that must be carefully addressed before deploying to the public cloud. Some of these have been addressed through the experiences of adapting these applications to function correctly in a private cloud, but the provisioning of shared resources in a public cloud remains a more difficult leap.

Migration Decisions

When deciding whether or not to migrate existing functionality to the cloud, the decision criteria are more complex than for new builds. Key questions in “cloud planning” include:

• Should I migrate to a public cloud (and if so, which one), or a private cloud within my existing data center?
• How can I tell if my application can be moved to the public cloud at all? Should I engage in an application remediation strategy to accommodate such a move or rebuild from scratch?
• Should I hybridize my application to move some part of functionality to the public cloud while keeping other components on an internal private cloud?
• When should I consider public cloud SaaS solutions for my end-users, and how should I approach the build? If so, is portability across multiple heterogeneous clouds important for my application and how can it be achieved?

For those enterprises that are just beginning their journey and not yet ready to tackle the full depth of analysis needed for migration, we offer a few rules of thumb for the first few questions above. However, it should be noted that this is only the first step. For organizations with large application portfolios, it is important to go beyond these rough guidelines and establish a consistent scoring and evaluation across disciplines and departments, so that they can effectively prioritize those best suited for cloud migration. More thorny issues of formalizing these rules as well as dealing with governance issues of regulatory constraints, security restrictions, access rights, and SLA commitments often wind up being solved with another technology layer of planning and governance software.

Public Cloud vs. Private Cloud

Many of the advantages of the public cloud can be achieved with a private cloud capability as well — by deploying similar mechanisms used in a public cloud, but within the existing data center and implementing an on-demand, API-driven orchestration layer. Key criteria that would lead buyers to choose this approach instead of public cloud include:

• Predictable Demand — if you know what amount of compute capacity and storage you will need a year from now, you can provision virtual or even dedicated servers to meet the demand. If every month brings new surprises, private cloud deployments can prevent overprovisioning waste or under-provisioning congestion, not to mention the stress of hitting tight deployment windows.
• Consistent Demand — for services that have the same amount of volume each hour, day of the week, and each month, a private cloud deployment may make sense. The same goes for those whose divisions have that peaks are asynchronous enough to benefit from optimizing utilization among disparate user groups.  When considering projects in industries like retail (with a Black Friday spike and a broader December plateau) or online games, where winter weekends spike demand, the public cloud becomes more attractive.
• Tight Coupling Between Apps and Devices — if an application is tightly integrated with other applications or hardware (such as network attached storage devices) that you are not yet ready to move to the cloud, it may encounter latency issues or other problems when moved by itself. A private cloud deployment will help mitigate this issue.
• Specific Network Access — if applications are required to access specific networks for connection to clients, offices, or other network dependent entities, private cloud may be the only choice due to the ability to deploy hardware on a specific network or mix of networks.

How to Diagnose Moving Difficulty

In our experience, the customers that could benefit the most from moving to the public cloud were often the ones least able to do it due to core assumptions in the design of their applications. Some of the ones we have seen in the past include:

• Hard-coded Geography and Network Topology — applications may have implicit assumptions as to where they are on the network and in the world. Hard-coded IP addresses are the easiest example, but other decisions may assume geographic or network hop proximity to resources that the cloud instance will no longer have nearby.
• Tight / Undocumented Latency Needs — in designing data center deployments, we have worked with buyers whose SAN needed to be no further than 20 feet away from their servers because their applications would time out otherwise. In a cloud environment, even if your storage is in the same location (not always guaranteed), it may be a mile away in the same data center campus.
• Extreme Throughput — many cloud storage providers shy away from high performance database storage altogether because of an inability to hit IOPS targets. Even services ostensibly designed to support databases don’t always offer the consistent high throughput of dedicated hardware.[1] Applications built on high-performance throughput assumptions may not be able to adapt to the more variable – if not outright lower – performance of their cloud instance.

If your application faces multiple constraints such as the one above, it may be worth it to look to the next generation and build for the cloud in the next major release rather than try and adapt existing functionality built on the assumptions of certain latency, throughput, and location.

Hybridizing Apps

Another interim step is “hybridizing” an application to run some instances or functionality in the public cloud while retaining the core on an internal private cloud. Key decision criteria that would make this approach desirable include:

• Limitations in Existing Infrastructure — a hybrid approach is often useful to overcome specific gaps in the original design. For example, if a company has a single data center on the West Coast of the U.S., a public cloud extension or instance can better serve customers on the East Coast or in Europe while retaining centralization / synchronization to the master database.
• Low Cost Added Availability — a Tier IV data center can cost up to 50% more than a Tier III data center while offering only 1.2 more hours of uptime annually. So when your app must be available 24x7x365, a light version of an app hosted in a public cloud that can hold down the fort during datacenter outages or maintenance can be a life saver at a fraction of the cost of extra redundancy.
• Event-Based Demand Spikes — if your spike demand (say due to a promotion or media coverage) is different from your regular demand profile, it may be possible to build functionality just for that extraordinary bulge in the public cloud, trading in some performance for extra flexibility. The interface or functionality or response time might be a bit off, but your one-time spike users will never notice.

The Final Step: Migrating Apps to SaaS

The last key migration question is when to make a more wholesale change from a client application to software as a service (SaaS), and if so, how much to rely on pre-built functionality of a PaaS or SaaS vendor rather than developing in house. Rather than a classic migration dilemma, this is more of an architectural decision, and is made at a more strategic level based on the following questions:

• What’s Less Predictable: Configuration or Access? — the bane of the desktop application is the plurality of desktop hardware and software configurations and the possible conflicts this engenders. If the desktop is not locked down, client-side apps are harder to build and support than browser-based apps. Conversely, if access to the internet is more inconsistent, then SaaS often runs into problems absent client-side workarounds, while local apps work better.
• Can I Support Constant Releases? — a major advantage of SaaS approaches is the constant addition of incremental functionality. If developing significant functionality in-house but without tight QA controls, this advantage can turn into a liability quickly, as bugs are introduced along with new features on a weekly or monthly basis. The discipline of the development process becomes key.
• How Much Lock-In Is Acceptable? — IaaS approaches, while not perfectly interchangeable, can be switched with relatively little pain. PaaS and SaaS platforms are much easier to get started on but may be much harder to leave. If Microsoft or salesforce.com is a strategic vendor that you trust implicitly, the tradeoff is worth it. If you envision changing platforms down the road, a more generic approach may be better.

Conclusion

The decision to choose public or private cloud-based solution is not trivial even for new builds — a stigma of risk still hovers over the industry given outages at some public cloud vendors. When migrating existing applications, the risk threshold is even higher and buyers still often choose to only dip their toes by virtualizing within existing data centers or building extensions in the cloud while keeping the core as it was.

As public cloud technology matures, the aspect of risk will start to fade away. What will remain is the tradeoff between easy / rapid scale on one hand and customization / control to accommodate application-specific environments on the other. And as connectivity becomes more ubiquitous, and development discipline reduces the need for fine-tuning hardware, all three flavors of public cloud: IaaS, PaaS, and SaaS, will become increasingly viable targets, not just for new apps, but for migration of legacy functionality.