Facebook kicked off their second annual developer conference in San Francisco this afternoon with a keynote by founder & CEO Mark Zuckerberg. The overproduced keynote, with too many words repeatedly incessantly, seemed like a lullaby sung by a nanny in a language alien to yours. There were some who compared Mark with Steve Jobs after last year’s presentation. Now, having watched the two weave their respective spells, I would say the comparison would be as exaggerated as equating the thespian abilities of Colin Ferrell with those of George Clooney.

These non-important and highly personal observations aside, I came away fairly impressed with what Mark & Company are doing with their Facebook Connect (FC) system. (The program launched today with 24 partners, and a press release. It will go into beta soon.) As a caveat, there is very little information available on how FC is going to work “technically.” Still, It seems Facebook has a much better chance of succeeding where Microsoft and othesr have failed. FC’s integration into services of partners like Digg and Six Apart makes it very clear that it is more than just a simple web ID system play.

In addition to offering a simple authentication method, FC allows granular social interactions to be embedded in non-Facebook services. If Facebook can work with its partners to build interesting use-case scenarios that go beyond simple sign-on, it is quite feasible that Facebook can out-execute Google, MySpace and everyone else with its ID ambitions.

Why? Because this is their one chance of building a monetization engine. The company makes no bones about trying to build a platform that allows it to offer branded advertising in a manner akin to Google’s Adsense. A simpler person (like yours truly) would call this a platform that serves ads for all occasions, reasons and seasons.

As I pointed out yesterday, Facebook Connect is the second iteration of the Beacon system and seems to be much less draconian and evil than the first version. Of course, it has been improved enough to become the underpinning of a highly effective advertising platform.

When you use Facebook Connect on a web service outside of Facebook, say Digg or Xobni, you are transmitting back “a little something about you” to the proverbial Facebook brain. I will use the example of the service built by Six Apart to illustrate my point.

If you visit a blog that is published using Six Apart’s Movable Type publishing system, you can leave a comment by using Facebook Connect for authentication of your ID. Your comment on a blog post can also be published to your Facebook account. This is fairly standard ID stuff.

However, it is the act of leaving a comment that is more important. You are essentially telling Facebook’s proverbial brain what topics — blogs or specific posts — with which you like to engage. In other words, you just told the system a little bit about yourself. Now imagine such information coming from dozens of Facebook Connect partners.

Each service adds a few more data points about you inside the Facebook brain, which is quite aware of your activities inside the Facebook ecosystem. The brain can then crunch all that information and build a fairly accurate image of who you are, what you like and what might interest you. With all that information at its disposal, Facebook can build a fairly large cash register.

In comparison with the Beacon system, this is almost benign. Beacon drew scorn & spit and my personal disdain, mostly because it sought to make commercial gains by compromising people’s privacy without giving them any choice. In comparison, the new system asks you to make a choice. By signing in to partner sites using the Facebook identity system, you are essentially saying yes and plugging into the Facebook brain. (I hope that Facebook and its partners learned from the mistakes of the past and make it very clear to their users how the system is going to work, and how their privacy/personal information will be used.)

At the post-keynote press confab (I skipped since I had to go see my doctor), when asked how the company will make money, Mark apparently said the company isn’t currently focused on monetization and will be looking to extend their platform’s reach. He doesn’t have to - if Facebook Connect works, the money will follow.

In the life of every company, there comes a time when it is faced with the choice of how to extend its reach: Either build a new product or service, or acquire the one that’s already established itself as the best in its class. Larger companies face that question every day, but it is rare for a nano company like ours to have to make such a decision.

I am pleased to announce that Giga Omni Media, the company behind GigaOM, has acquired jkOnTheRun, a blog started by James Kendrick and Kevin Tofel that focuses on the wonderful world of mobile gadgets, including mobile phones and cloud client computers. James and Kevin will join GigaOM, but will continue to work from their respective homes of Houston and Telford, Pa., and jkOnTheRun will become the sixth blog in the GigaOM Network. (James & Kevin write about the deal on jkOnTheRun. Also, coverage on The Houston Chronicle & Techcrunch.)

“Acquiring,” while technically the right word, is a relatively soulless one. I prefer to think of this deal more philosophically. As I see it, we have proudly added two new members to our growing family.

Why jkOnTheRun?

jkOnTheRun is one of the rare blogs that covers the world of mobile gadgets with razor-sharp wit and insight. More importantly, it has a genuinely consumer-centric point of view. I first got to know the blog as a reader and have long considered it good enough to rank among my 10 favorites. (WebWorkerDaily editor Judi Sohn is also a fan.)

Strategically, it’s a publication that rounds out our existing areas of coverage. For instance, GigaOM tracks the world of web infrastructure pretty closely, but very rarely do we write about cloud client machines. And with the exception of the iPhone and some occasional mobile reviews, we don’t provide much gadget coverage, either. I think as we start to cover the world of cloud computing more closely we will no longer be able to afford to ignore the client side of the equation.

What happens to jkOnTheRun?

Absolutely nothing! Sure there are going to be some cosmetic changes, including cleaning up the web site to make room for sponsors and advertisers, but if it ain’t broke, why fix it?

James and Kevin will continue to write their posts, record their podcasts and shoot their videos. The jkOnTheRun feed will be integrated into that of our network and will be syndicated along with our other blogs. We hope some of our readers become part of their community, and hopefully some of jkOnTheRun’s readers will find something in our network that they like as well.

In summary

Getting back to my introduction: We were faced with the choice of either building out a blog that helped us track the mobile revolution more carefully (but with a consumer perspective) or buying one. It would have taken us a long time to build one — buying jkOnTheRun was a far better option.

I think in many ways that is the blueprint of our strategy going forward: When we find blogs that allow us to dig deeper, to complement and extend our areas of coverage, we will acquire them. If we can’t find ones we like, we will build them. But all that is in the future. Today, please join me in welcoming James and Kevin!

If you were thinking of starting a set-top box company that delivers video content to the TV, let me stop you right there. There are already numerous players vying to dominate your digital entertainment future, and three of them are big names that you already know. Those three are also well-funded, well-equipped, and well on their way to becoming the center of your home video universe.

Amazon: The e-tailing giant just announced its new Video on Demand service, which will stream 40,000 movie and TV titles directly to Internet-connected Sony Bravia TVs and other devices. In addition to already having a huge user base to which it can market the service, Amazon will store all purchased movies on its end rather than with the end user, an approach that is likely to endear it to piracy-hating studios.

Currently the big sticking point with Amazon’s VOD service is that it doesn’t offer movies in HD — a must for this day and age. And hopefully the company will learn from Unbox, its earlier download video service that only worked on PCs and TiVos and didn’t exactly set the world on fire.

Netflix: The DVD-by-mail rental company is prepping for a disc-free future by streaming 10,000 of its titles to the Roku and the Xbox 360. Both offer an all-you-can-watch video buffet baked right into your existing subscription, which makes using the streaming service a snap.

But if Netflix is going to beat out the competition, it needs to build that catalog far beyond just 10,000 titles (most of which are pretty lame). It also needs to offer HD video. The Roku and Xbox 360 are HD-capable, but no word yet as to when HD titles will be available.

Apple: Steve Jobs & Co. helped spark the latest digital video revolution through iTunes and Apple TV, the set-top box that pipes iTunes content directly to your TV. Titles from all the major studios are available on the same day they’re released on DVD, plus the signature Apple simplicity and style makes it hard to beat.

Apple has said it’s renting or selling 50,000 movies a day through iTunes and the service is projected to pump out 18.25 million movies this year. But what we don’t know is how many actual Apple TV boxes the company has sold. The device was projected to sell 1 million units in 2007, but barely sold 400,000. It was then relaunched in January of this year with a renewed effort behind it; popular shows like “The Office” and “30 Rock,” however, still aren’t available.

And while these three have the best shot of succeeding in the digital video download space, they are by no means the only ones trying.

Game consoles, long considered a way for companies like Microsoft and Sony to establish a beachhead through which they could offer more services, are now boasting video capabilities as well. In addition to the Netflix streaming capabilities of the Xbox 360, there is also the Xbox Live Marketplace, from which you can purchase downloadable movies and TV shows. Meanwhile, Sony just launched its video service for the PS3. But the appeal of these devices will always be largely limited to gamers.

Televisions with Internet functionality built in could eliminate the set-top box altogether by offering access to web video directly or using the new tru2way technology to deliver interactive TV functionality. A shift from set-top boxes to the TV would benefit Amazon and Netflix most, as Apple would likely be loathe to give up that much control.

The real wild card in this battle will be the efforts of the cable and telecom companies. Their set-top boxes have a huge footprint in the market (Comcast alone has 24.7 million cable customers), and they have proven, by throttling certain kinds of traffic, that they can play dirty. Now they’re even considering usage-based pricing, which would mean that the more video you download or stream through the Internet, the more you pay.

There are other participants, some that are well known, like HP with its HP MediaSmart Connect, or TiVo. And some are upstarts, like Vudu, Zv, Verismo and Sezmi. But the future belongs to Amazon, Netflix or Apple. It’s still too early to tell which one will win the race to your big-screen TV, but they all have the right combination of size, recognition and content to get there.

This was originally published in BusinessWeek.com.

Updated at the bottom: We have short memories in Silicon Valley, which is both a blessing and a curse. We forget the bad times as quickly as we forget the good times.

At the turn of the century, everything went to hell with the dot-com bust. Then the pendulum started to swing the other way; the pessimism that once reigned supreme was being replaced by wild-eyed optimism. Now Silicon Valley is in for a long-overdue reality check, one that should worry one and all. Why? Because the news coming out of advertising-focused companies is not good.

Yesterday ValueClick, a display advertising network, said it now expects its second-quarter revenues to range from $162 million to $164 million, lower than the previously forecasted $170 million. The company also cut its full-year 2008 sales guidance by about 10 percent, to between $655 million and $675 million. It blamed weakness in its display and comparison advertising business, and flatness even in its lead-generation business.

Time Warner’s Platform-A advertising division isn’t doing so well either, according to some of my sources. The company is instituting wide-scale belt-tightening measures, including freezing travel budgets. Pali Capital in a blog post today forecast, “AOL’s display advertising revenues down about 8% in Q2 (Q1 ‘08 was down about 10% organically), with the back-half down mid-single digits.”

Microsoft, in its fourth-quarter 2008 earnings call today, also admitted that online advertising was tough. “The one proviso to that is in the online advertising space…it was weak in the fourth quarter. There is a direct impact and we’re not immune in the online space, ” Microsoft CFO Chris Liddel said in a conference call with analysts. “The online advertising area is part of the business that we think is most challenging…the online advertising area is very difficult at the moment.”

And if that wasn’t enough, Google just announced spectacular growth in its second-quarter revenues — about 39 percent over the same period lat year — but fell short of Wall Street’s profit expectations. Between The Lines blog notes that Google CEO Eric Schmidt, in his company’s conference call with investors, said they would survive the downturn because there will be a flight to quality, and that they will provide a better return on investment. Maybe! Larry Dignan hit the nail on the head when he wrote:

“Color me skeptical. Anyone that lived through the dot-com bust has heard these lines before and no company is immune if there’s a recession.”

Like him, the skeptical me went straight to the traffic acquisition costs (TAC), which is where I think the real story lies. If you look at the image below you’ll see that Google’s traffic acquisition costs have declined rapidly while its revenues have ballooned. TAC in general and AdSense specifically are like a black box – no one quite knows how much Google gives out. Sometimes it feels like Google can use this “black box” to come up with pretty much any numbers it wants to.

We’ll get a better sense of the overall health of the market when Yahoo reports its latest numbers, but the way I see it, things are sort of troubling. We wrote about this nagging problem back in May. I think that as we go forward things are only going to get worse — and even Silicon Valley can’t ignore what’s been going on in the overall economy.

The housing crisis is being replaced by a much scarier problem: the personal credit crunch. In a recent report, American Express noted that it has started to see a sharp increase in late card payments. Now folks, this is American Express, whose customers skew towards the affluent, especially compared to those of its competitors. The company has boosted loss provisions for its U.S. card business, profits have declined, and defaults are up.

Will these problems escalate? Probably. Consumers struggling with the housing crisis and rising fuel costs — and thus higher basic living expenses — will be forced to cut back on other spending, which will lead to slower sales and in turn, less money for advertising.

We know the housing and financial sector-related ads have already declined drastically, now we’re going to start to see other sectors cut back on advertising, too — and that is going to have a negative impact on everyone from large social networks to ad networks to Yahoo and Google to small startups, including weblogs like ours. I guess Provigil sales are going to take a nosedive in the Valley as we stay up all night worrying about everything.

Update: And there’s more bad news today. The Wall Street Journal reports that General Motors is going to sharply cut back on advertising. GM is one of the big spenders in U.S. — last year the company spent about 32 percent of its $2.3 billion dollar ad budget on newspapers and 11 percent on television networks — but it looks like those expenditures are going to get hacked. It’s not clear from the report how this move will impact Internet advertising.

Photo courtesy of ZDNet

Here’s a horror scenario for everyone on the content side of the Internet: A consumer comes to a web site to download a movie, work presentation, software update or photos, and just before they commit to the download they pause and wonder: Am I over my usage quota this month? How much will downloading this new HD movie from Netflix on my Xbox cost me?

We’ve all been there before — with cell phones, about a decade ago. Usage-based pricing tiers started out with very limited minutes and lots of overage charges. Competition in the market by innovative operators drove plans fairly quickly to a point where only exorbitant usage resulted in overage charges (and now there are flat-rate plans for those consumers, too).

Unfortunately, the usage-based pricing plans (starting at 5 gigabytes) being considered by AT&T, Time Warner and others will force us all to wonder about the size of our connectivity bill on a monthly basis. Further, the lack of last-mile (the infrastructure that connects the consumer to their Internet service provider) competition will not result in these plans changing in the near future. Today, true competition on the Internet last mile requires new copper or fiber to each consumer — a very costly proposition. Cellular competition, on the other hand, required a less costly (on a relative scale) deployment of cellular towers.

While it is true that the consumer can elect who provides services over their last mile, most of us have very limited choices. As an example, a friend of mine recently moved into a building in downtown San Francisco that had exactly one last-mile provider: AT&T. The 700Mhz wireless spectrum provided a hope for an alternative consumer last-mile option, but that dream quickly faded.

Competition and an aggressive last-mile build have resulted in reasonable usage-based pricing models in Japan. OCN, the carrier operated by NTT Communications, is planning for unlimited download bandwidth usage and a 30-gigabyte limit on daily upload usage capacity. By my estimates, that will be more than adequate for all but the largest consumers of Internet bandwidth and does not invoke any horror scenarios for the large content owners.

In fact, large content owners may help us all avoid usage-based pricing horror scenarios. They spend hundreds of thousands of dollars every month (assume $10/month/Mbps using 95th percentile on 10Gbps of traffic) with the same Internet service providers buying connectivity to their networks because they want to be connected directly to the consumers via the last mile.

If the Internet service providers start billing on usage-based pricing, it’s inevitable that large content owners will look for new ways to reach the consumer. It seems unlikely that they’ll be willing to pay the service provider for access to their last mile if at the same time the consumer is being motivated not to access their content. Why would Microsoft and Netflix pay Time Warner for connectivity to their cable Internet infrastructure consumers if those same consumers are being billed on usage and worry about their usage quotas before downloading HD movies onto their Xbox?

Like other large businesses, Internet service providers are looking for ways to extract more value from their customers. As a venture capitalist, I understand and appreciate that perspective. Usage-based pricing, however, at least as currently envisioned by the service providers, will not only change consumer behavior but will work against some of their larger customers.

As semiconductor firms get around the limitations of making individual processors faster by putting more cores onto a single chip, the mindset of today’s software developers and engineers mindset needs to adapt. For to really take advantage of multiple cores, a programmer needs to look at ways to make her code parallel, splitting jobs into different parts rather than the step-by step instructions delivered to single-core machines. There are also energy and communications issues that can constrain how far multicore can grow. Below are a list of startups that have the potential to stretch multicore processors to their very limit.

Tilera: Tilera, based in San Jose Calif., doesn’t make a software compiler, but rather a 64-core chip that can scale to thousands. It all comes down to the way the chip is designed, according to founder and CTO Anant Agarwal. Instead of the cores “talking” to one another through an on-chip bus interconnect, they’re in a mesh network where information travels faster. Agarwal has said he thinks there will be a Moore’s Law for cores that will lead to the number of cores on a chip doubling every 18 months and a data center in a desktop — a bold, energy-intensive prediction.

Interactive Supercomputing: Like Agarwal, Interactive Supercomputing of Waltham, Mass., is betting on multicore swimming into the mainstream fairly soon. The company’s development platform allows programmers to write in Python or Matlab and then paralellizes the code for them. Its vision is of 40-core or 60-core machines sitting on people’s desktops for intensive computing. If you had 60 cores and the right software on your home machine, your home videos would be much, much cooler.

Replay Solutions: This Redwood City, Calif.-based startup makes debugging software that, while not specific to a multicore environment, allows a programmer to replay exactly what happened the moment before a software crash so he can see what the problem is and fix it. The company calls it “TiVo for Software.” It’s useful because, let’s face it, it’s hard enough to follow and debug a single thread of instructions to a chip. Imagine splitting that code and following it across multiple cores. Or if the cores were in a cloud environment where the location of the software running on virtualized hardware varied. This is really just a neat startup all around.

Cilk Arts: Cilk Arts is essentially focused on extending one programming language into the multicore environment. In this case it’s C++. IBM, Intel, Nvidia and even Apple are all focused on varying ways to easily develop for multicore chips, but there is plenty of room for a small company with good tools to excel. Cilk, which is based in Burlington, Mass., uses a compiler to parallelize the code in a short amount of time without restructuring it. The first release, for x86 cores, is due out later this year.

RapidMind: This startup is also creating a platform to allow C++ programmers to make their code parallel but focuses on taking task-oriented code such as Monte Carlo stimulations and graphics rendering and parallelizes it. Waterloo, Ontario-based RapidMind works on x86 chips as well as graphics processors and IBM’s Cell processor.

image of the Cell Broadband Engine courtesy of IBM

I’ve been covering the VoIP space since 2004, and lately it seems like every other press release sent my way is from a company announcing the addition of an application programming interface (API) to its telephony platform. The promise of APIs is that they make it easy to integrate different services — even those provided by different vendors — into a single application. The press release from one carrier even went so far as to claim that its API would “boost innovation and development of new apps exponentially.”

But is simply providing an API to your telephony infrastructure enough to prompt the world to beat a path to your door? Don’t count on it.

To be sure, these APIs are necessary, particularly in the world of voice mashups. Voice mashups combine voice as well as data and applications across multiple systems to create a new, useful service.

One example of a voice mashup is Twitterfone, a free service that takes your voice, converts it to text and sends it to Twitter. MAXroam provides the overall infrastructure and inbound telephone numbers, Dial2Do does the speech-to-text part, and Zong provides some inbound SIP termination. APIs are needed all around — including on the voice side — to make this happen seamlessly.

Voice mashups can be useful in the business space. They can save a ton of money, and can help to enforce both business process quality and consistency. Imagine calling an airline and speaking to an interactive voice response (IVR) system. A certain percentage of calls could easily be handled by the IVR, which can ask all the correct questions to ensure customers have the right information.

There are, of course, times when speaking with a live human being is necessary. So imagine that all the data collected by the IVR about your call is then sent to a customer service representative so that by the time the two of you are connected, they already know exactly why you’re calling. The call could even be routed to a particular rep based on the reason you’re calling.

This is the power of a voice mashup — the ability to treat voice and data interchangeably. While large companies have been able to afford the cost of developing these custom voice mashups, tools and services are now becoming available that let you make your own.

Jaduka started out by providing a voice API to their telephony infrastructure, which is maintained by their parent company, NetworkIP. But Jaduka quickly discovered that while developers signed up for the API, few were actually using it to launch services. The company now offers customized voice-enabled applications to enterprise customers.

Jaduka’s customers currently use over 4 million minutes a month, a number that is trending upward. But that’s a drop in the bucket compared to the more than half a billion minutes a month their parent company serves.

Ifbyphone provides a number of voice-related small business services as well. They also offer a voice API, but it’s essentially driven by web forms, which makes it easy to integrate their telephony services into any web site without needing to be a programmer.

And while not everyone agrees that what Ifbyphone provides would qualify as a proper API, it does offer a range of useful services to small businesses, such as interactive voice response, intelligent call routing and voice broadcast. They are all designed to help small businesses interact directly with their customers in the most efficient manner possible.

Indeed, APIs enable some great solutions. But APIs aren’t solutions in and of themselves. Nor do they necessarily make money.

Consider Ribbit, a company whose business model is to make telephony available through APIs. The thinking is that they’ll make their money on revenue shares as developers create interesting applications.

If Jaduka’s experience is any indication, however, I don’t expect Ribbit will last too much longer without a complete change of strategy. Ribbit might have 4,000 developers, but how many of them are actually making applications on which Ribbit is able to share revenue? I don’t put a lot of stock in the rumor that BT has purchased Ribbit for $55 million.

Even where you’ve got more than just an API, such as the case with Jaduka and Ifbyphone, the prospects for making a pot of money just don’t seem that great. The combined revenue of Jaduka and parent company NetworkIP is thought to be north of $150 million a year. Assuming Jaduka’s share of minutes per month also translates into share of revenue, that suggests Jaduka is responsible for $1.2 million of the revenue. Ifbyphone would not disclose customer numbers or revenues.

I think the market has a lot of potential, but so far, that’s about it. Go ahead and make those telephony APIs available, but don’t expect the world to beat a path to your door, and don’t expect to make any money just by publishing APIs. Figure out who your customers are, find out what problems they have, and develop solutions to meet their needs. APIs can certainly be a part of the overall strategy, but relying on APIs alone to generate revenue is a pipe dream.

It could be my advancing years – I seriously doubt that – but every morning I dread turning on my MacBook Pro, fearful of the data deluge that it will bring and the day-long struggle to find the information I need to get things done that will ensue. And I’m not the only one caught in this quicksand-like avalanche of digital data.

According to market research firm comScore, in May the total number of Internet searches conducted in the U.S. alone was about 10.7 billion — up nearly 20 percent from 9.1 billion searches in May 2007. Those numbers make clear that we’re all searching for more information. What they don’t make clear is that often we don’t find what we’re looking for, and so end up trying again and again.

The problem is that there’s too much data coming online too quickly, and the traditional method of search that involves first finding and then consuming the information is not going to work for much longer. There just won’t be enough time for us to do that and still have a life. It’s a problem, and therefore solving it is an opportunity — a very big opportunity.

Earlier this week I was going through the digital detritus that has accumulated on my computer when I stumbled upon an old slide presentation made by Google back when they were still tiny. One slide estimated that by 2002, there would be about 500 million searches a day and between 3 billion and 8 billion web pages.  Now those numbers seem so last century, for every day the amount of information online continues to grow at an exponential rate. It’s nearly impossible to calculate the exact number of web pages that are out there, but a good yardstick would be data from Netcraft, which tracks the number of servers on the Internet and says that the number of active domains almost quadrupled from 2002 to 2007. The total number of web sites at the end of April stood at over 162 million.

Many of these new sites are courtesy of Web 2.0 technologies that have allowed for the easy creation of digital data. Blogs, social networks, RSS feeds, Flickr feeds, Twitter messages, video clips…the data just keeps growing and growing, much like the proverbial Energizer bunny. And the problem of data overload is going to get even bigger as devices such as the 3G iPhone, with their fast wireless connections, make the on-the-go creation and sending of videos, messages and photos to our friends even easier.

If someone can become the Dolby of the web — remove the noise and give us clear sound — then they are going to make a lot of money. And when I say sound, I mean data that is truly useful. But that would just be the start.

Pip Coburn, who runs his own investment firm in New York, recently pointed out that “It’s not data that’s important, but what you do with it.” A good example of that would be a tiny startup called Summize, which is reportedly being acquired by Twitter.

Summize has come up with a clever way of peering through Twitter’s vast data stream and finding out what’s hot, where and how. The results are essentially keywords — topic-, person- or location-based — and thus can be used to show contextual advertising next to the pages that show these results. In other words, Summize has developed an ability to monetize conversations without being intrusive.

The possibilities of what a similar service could do with this data are endless. Imagine a service that would scroll through all the Flickr photos, Twitter messages and marry them to data on the Internet, such as nearby mass transit stations, Starbucks, movie theaters and grocery stories.

All this information would show up on your phone, but you would only see the options in, say, a 100-meter radius that could be increased by zooming out. It would be the ultimate mash-up of various web data sources offered to you as an application, and such applications would make it possible to find, consume and share information — without even trying. 

Almost like serendipity! How’s that for a business model?

This post was originally published on BusinessWeek.com.

It was over a decade ago when I got my first broadband connection — by today’s comparison a very slow DSL connection from my then-local provider, Verizon Communications, which went by the name of Bell Atlantic. At $60 a month (not including the cost of the modem), the service, which got around 256 Kbps on a good day (vs. top speed of up to 640 kbps), was really a novelty.

With the exception of many who worked in New York’s Silicon Alley, not many cared about the expensive, always-on connection. Being a broadband nerd of sorts, I couldn’t care less about the price tag; I couldn’t wait to pay more to get more bandwidth.

I am reminded of that moment — of that thrill — of experiencing the web without delays, thanks to the new iPhone and its ability to connect to the 3G network. I already can’t wait for AT&T to upgrade their network from HSDPA to HSPA to HSPA+ to LTE so we can get faster and faster broadband.

For now, the best we can get on the iPhone 3G is HSDPA, which has a theoretical download speed of between 400 and 700 Kbps, though Apple on it site says it’s going to be 2.4x the speed of EDGE - about 100 Kbps. Still, I am going to go out on the limb and mark July 11 down as a red-letter day for 3G wireless.

Don’t get me wrong — it isn’t the day 3G wireless was first introduced in the U.S. Neither is iPhone the first 3G phone. I have had 3G phones, USB and PC Card modems for a while now. It isn’t the first time I have used 3G broadband; I am on old hand at using EVDO to connect my laptop to the web, or at connecting my Nokia e61 to a 3G network whenever I am in Europe, or using the Nokia N95 to snap-and-share photos and videos via one of the life-streaming services.

Yet this is the first time that a 3G connection on a non-computer device actually feels like a broadband connection. “This device is a true game-changer. Why? The immediacy of the data at your fingertips is huge. Imagine, looking up anything, anywhere,” is how AT&T Mobility CEO Ralph de la Vega told me in a chat earlier this year. In the U.S. especially, the iPhone is going to have a major impact, mostly because are a PC-centric society constantly search for web-like experiences. (So far, most of the carriers have made their money off 3G computer connections. I am wondering how the iPhone impacts (or not) 3G usage in Europe.)

I received the new iPhone 3G on Friday, and since then I have been tinkering around it — a lot. My first (and perhaps lasting) impression: The 3G speed is quite addictive and it doesn’t take long to slowly start switching your daily compute tasks to this device instead of reaching for your computer.

A lot of that is because the iPhone has a generous screen and is very easy to use, but more importantly it has a more than adequate browser, making it an ideal candidate for being a “cloud client.” All that was missing was a fast-enough connection that helped “off-source” some (or, in the case of others, many) tasks from their computers.

The briskness with which I can surf web pages means it has become easy to keep and eye on this and our other network blogs. The email shows up in the inbox as quickly as on my desktop. NetNewsWire’s iPhone App has already become my preferred way to read RSS. Its ability to sync with the desktop client over the web only adds to its utility. Facebook on the iPhone is almost infinitely more usable than its web counterpart. (John Markoff is marveling at the pocket-sized experience as well.)

Truphone’s new iPhone app makes it easy to place VoIP calls on the iPhone, thereby making it less necessary for me to fire up the old computer to call mom. It sure would be nice to see a Skype client for iPhone. I am sure that over a period of time other habits will form — including watching YouTube videos - which just got bearable, thanks to a faster connection.

More importantly, 3G has freed me up from thinking about the availability of a Wi-Fi connection. Of course, if everyone else gets into the same habit, as I suspect they will, this is going to put some stress on AT&T’s 3G Network.

Going back to the early days of broadband, the thrill of doing mundane web tasks faster and without tying up a phone line didn’t seem as great in the beginning, but acted as a spark for the broadband revolution. It wasn’t till Shawn Fanning unleashed Napster that broadband demand took off, eventually leading to innovations like Skype, YouTube & Facebook.

I think that from that perspective, the iPhone 3G is going to provide a similar spark for wireless broadband. Just like touch and big screens are becoming increasingly commonplace in high-end phones, over the next 12 months I wouldn’t be surprised to find mobile device makers focusing heavily on the Internet, all while waiting for the elusive killer app, which none has seen just yet. Despite the tight control of carriers on wireless spectrum, this could be the start of a new wireless wave.

Photo of iPhone & Safari courtesy of Apple.

If this story interests you, check out our upcoming conference:
Mobilize — Mobile Web Today and Tomorrow

About six months ago, I heard that Yahoo was contemplating offering its entire search platform as a web service, much like Amazon’s S3 storage and EC2 computing services. Since the rumor was short on details and Yahoo was already in the midst of a gut-wrenching upheaval, I didn’t put much stock in it. Apparently I should have, for Yahoo today announced the beta version of BOSS (Build Your Own Search Service), which essentially turns its core search and other related technologies into a free web service that can be used by anyone who wants to build their own search engine.

This isn’t simply access to Yahoo’s search results; Google did that ages ago, though I wonder if anyone actually uses it. Rather BOSS will allow anyone to rank, arrange and display search results that befit their own algorithm, without as much as acknowledging that the results are coming from Yahoo. 

Yahoo News Search, Image Search and Yahoo Spell Checker services will all be offered as part of this effort. Combine this with Yahoo’s recently introduced SearchMonkey tool, and you could build a search engine that is entirely your own.

Prabhakar Raghavan, chief strategist for Yahoo Search, said it typically costs around $300 million to build a search engine and its related infrastructure, which is why there are so few players. He has a point: Powerset recently sold out to Microsoft for precisely those reasons.

Raghavan hopes that BOSS could help foster a lot of experimentation around search, and more importantly, around the search experience, because startups will no longer have to spend millions on infrastructure. “The opening up of our search is a philosophical shift, and we are saying that if you can be better than us, so be it,” said Raghavan. “There is no shortage of search ideas, though the barriers were only a few hundred million dollars. You have to be willing to have your lunch eaten in order to disrupt.”

The BOSS service is being offered for free, though as part of the deal users will have to use Yahoo’s Search Advertising. Yahoo believes that by boosting query volumes, it can create more volume for its search advertising and thus begin to grow against its nemeses: Google & Microsoft.

It’s a very bold move by the hobbled online giant, as it puts its own search business at risk. “We are trying to disrupt the market by allowing people to come and build on our platform,” Raghavan admitted. Two startups, Hakia and Me.dium, have already signed on for the service.

But I think it’s a risk worth taking, for it will shake up the search status quo and offer a way in for the little guys and all their creativity. Far more importantly, however, it helps people to think of Internet search beyond the tried and tired paradigm of proactively “finding” information.

Unlimited queries, the ability to mix with other content including news, and research from universities and other such repositories could really change the game. By allowing folks to use its engines in tandem with their proprietary data (such as a proprietary social graph), Yahoo will allow them to build a different kind of user experience. “We don’t need to see proprietary data but work with them,” Raghavan said.

This isn’t a slam dunk, however. Yahoo still has some serious challenges ahead of it. The company’s hope is to show big gains in search queries and search-query related advertising revenues. Just like I hope to be the starting pitcher for the Yankees.

Yahoo executives didn’t answer my repeated questions about the potential impact on their business. Notably, they are asking startups to sign up for their search monetization system — the very same system that is going to use Google to drum up ads. That isn’t a very confidence-inspiring move. And if this monetization tool was so great, Yahoo wouldn’t be in the kind of trouble it’s in. If you’re a startup, do you want to hitch your wagon to a wanna-be ad system?

My reservations aside, this is a big, gutsy move by Yahoo to emerge from the stupor that has enveloped the company and the search industry at large. I’m looking forward to seeing the results of this experiment.

Yahoo’s Blog has more details on the new offering.

Update: I finally got home this morning and am now catching up on comments and emails. Lots of interesting comments about this post. Robert Scoble pointed to comments by Paul Buchheit on FriendFeed, where he has done some verbal gymnastics defending what Allen had reported and disagreeing with what I wrote. Of course, there are many who disagree with me, though it’s hard to argue with the fact that the word friends doesn’t mean what it used to mean. Thanks Russ, for pointing that out, even if it seemed obvious.  

Original post follows: I’m sitting in the Philadelphia airport, wondering when my connection to San Francisco is going to actually take off. The good news is that my EVDO modem is working, my Macbook is plugged in and I watched the Red Sox-Yankees rubber match on ESPN.

Whew…that was a nail biter. The Red Sox are a really good team, despite the injuries. We are a terrible team because of the injuries. The upside to the connection: I got to see this fantastic video by Allen Stern over on Center Networks. The video exposes the flaw in FriendFeed, a life-streaming aggregation startup, and the buzz around it.

Essentially the company is well-known because it was started by some ex-Google guys, including Paul Buchheit, who made his name working on Gmail. And it’s been attracting people who are dissatisfied with Twitter and its constant outages.

FriendFeed’s profile has improved in the last few days because some of the more well-known Internet names have started writing about the company, noting how quickly they are getting more people “following” them on FriendFeed. Such articles beget more such followers, making it all a self-fulfilling prophecy, even if it takes FriendFeed away from its founding principles.

However as Stern points out, these very famous Internet people are being offered as “default” on new Internet accounts. (Of the many, Robert Scoble is an extreme user of FriendFeed, has been for a while, and from the looks of it, a totally true believer.)

Anyway by putting some of my good friends on the default list, the company is basically ensuring positive attention to its service — the fact that it takes the “friend” out of FriendFeed, be damned! I mean, just because you’re following Loic Le Meur, that doesn’t mean he automatically becomes your friend. Allen puts it well when he says, “Defaults don’t just mean more followers, they mean more traffic to the supporting content sites.”

When I asked FriendFeed co-founder Paul Buchheit about this, he said, “you are correct however that we should tweak the algorithm to increase diversity when browsing popular feeds such as Scoble’s — FriendFeed has grown by a few orders of magnitude since the algorithm was originally created and so it probably requires some updating.” When I spoke with Paul, I hadn’t yet realized that there was this also default nine-person set.

From what I understood, FriendFeed was about aggregating and sharing specific kinds of information with your friends and talking about it. I thought it was me who would invite my friends and get them to share stuff with me. Or someone else would invite me, and we would share. Where the hell did defaults and “discovering” others become part of the whole service?

Robert Scoble in his comment on FriendFeed points out:

The real problem is these services are really lame if you have no friends. This was an attempt to fix that problem. I agree though that FF should only recommend participants on the first few screens. If you aren’t participating why would FF want to feature you?

Liz Gannes in her post about the company pointed out that:

The funny thing is, in some ways FriendFeed makes the web less social — stripping away the community features that make specific sites special. But it also makes the web more social, by emphasizing your real-world connections rather than relationships built around common interests or objects, and bridging together the little online islands where we express ourselves.

In the words of Iminta founder Aaron Newton, these life-streaming services are the watercoolers of the 21st century. In the past you’d discuss “Seinfeld” episodes around the office; now you can do that online at Iminta or FriendFeed. But try doing that with thousands of followers — there isn’t much of a conversation left. What you have is a call-in radio talk show.

Not that there’s anything wrong with that — just that you can’t call yourself a FriendFeed when you take the focus away from friends. I know a lot of people, and at best they have about 100-150 relationships, tops — including casual ones at work or with the neighborhood barista.

FriendFeed isn’t the only startup that seems to have moved away from the whole notion of friends and the personal web. Twitter is another example: What started out a simple alert service for a group of friends became a personal soapbox where the noise started to drown out the signal.

FriendFeed needs to learn from Twitter. Of course, maybe all they want to do is attract attention and sell the company to Google. Building a business — that’s so old-fashioned.

Time to catch that flight. Hopefully I will be home by 5 am!

According to AT&T, Time Warner and others, usage-based pricing is coming to your Internet connection. While the reasons for this change in pricing model are varied, both in terms of technology and politics, it’s clear that consumers used to an “all-you-can-eat” buffet of streaming video, photo-sharing and podcasts are headed for a lean diet of Web 1.0 and email. Unless, of course, you want to pay a lot more for your Internet connectivity.

How much more? While the service providers have not announced their pricing plans, it seems clear that usage-based pricing will be based on the number of bytes you send and/or receive from the Internet on a monthly basis. Time Warner has suggested that usage-based pricing will be tier-based, with tiers at 5, 10, 20 and 40 gigabytes and overage charges applied for bytes that exceed them.

To put those numbers in perspective, here in the Bay Area I subscribe to AT&T DSL for $24.99 per month. I can download at 1.5 megabits per second and upload at 512 kilobits per second, which means I am bit-rate limited to downloading 500.2 gigabytes per month, or about 20 gigabytes per dollar. That same $24.99 per month also allows me to upload 165.9 gigabytes per month, or about 6.6 gigabytes per dollar. But to keep the pricing simple, let’s assume that I’m currently paying 5 cents per gigabyte sent or received. Granted, I may not consume all of these gigabytes every month, but in theory, I could.

I think it’s safe to assume that the service providers will price their usage-based tiers at amounts comparable to today’s monthly fees. They’ll want to lure in customers to the lowest price tier and then gouge them with overage fees. So let’s assume that the lowest priced usage-based tier, 5 gigabytes, costs $10 per month. That equates to an increase in my current fee of 40 times, to $2 per gigabyte. The highest tier, 40 gigabytes, will undoubtedly cost the same or more per gigabyte. If we assume that this tier will be priced at the same cost per gigabyte, then that equates to $80 per month. And again, that’s without overage fees, which will undoubtedly be as hefty as the surcharges on cell-phone plans.

As a rough reference, 5 gigabytes is the equivalent of doing one of these activities over the course of a month:

• downloading about 1,000 songs from iTunes (assuming about 5 megabytes per song)
• downloading five full-length movies from iTunes (assuming a two-hour movie)
• watching about 500 minutes of YouTube video (a quick test I just ran shows that a 2.5-minute video is a 5-megabyte download)
• sharing about 2,500 two-megabyte pictures (as normally produced by today’s typical 8-megapixel camera)

These references are estimates and do not account for other ways we typically use bandwidth during a month, among them file backup and recovery; VPN connections to the office; IP video conferencing; downloading Microsoft software upgrades and patches; use of cloud computing sites such as Google Docs and Amazon’s EC2; and so forth.

Of course, service providers will argue that in reality I do not consume 500.2 gigabytes of data each month, that my effective cost per gigabyte is higher than 5 cents and closer to the usage-based prices. And if I’m only browsing the web, doing email with small attachments and downloading the occasional picture, then my usage should fit in the 5-gigabyte usage tier and my monthly bill could actually go down. But that’s not the point — the point is that the unit economics of the Internet have changed and consumers are going to increasingly pay more for each byte of data delivered to them.

Why have the unit economics of the Internet changed so dramatically? “We built a road that was well-suited for bikes and cars and spent the money to build and maintain that more or less properly,” was the way one service provider executive explained it to me. “Now we have folks landing planes on the road, tearing it to shreds and making it unusable for others. So we need to spend lots more to maintain the road for bikes, cars and planes.”

Infrastructure technology like terabit routers, 60-gigabit backbone connections and multimegabit broadband connections do exist to support bikes, cars and planes — but the service providers have failed to spend the money from your Internet connection fees to invest in that infrastructure. Instead they have spent it supporting their bloated organizations and devising new pricing models to extract more money from consumers for less service delivery.

And therein lies the rub: The Internet has evolved and has enabled new applications such as peer-to-peer and video streaming that are increasingly being used by the consumer. Unfortunately, the infrastructure evolution of service providers like AT&T and Time Warner are working at a significantly slower pace. And that slower evolution costs them money, because their infrastructure cannot handle the new Internet applications, so instead of building efficient organizations that can evolve and deploy infrastructure faster they are looking for more money from the consumer in the form of usage-based pricing.

One day soon, when you get your Internet connection bill and it is much larger than you expected, don’t blame Hulu or Microsoft for offering you funny videos or a new security patch, blame your service provider for not evolving with the Internet.

A new report from Pew Internet shows that broadband growth in the U.S. has slowed down to a crawl, a sign that U.S. broadband carriers would have to work hard to find ways to grow their overall businesses. Pew points out that 55 percent of adult Americans have home broadband connections.

According to some estimates there are over 64 million broadband connections in the U.S. Some additional interesting bits from Pew’s report:

The research group finds out that low income groups — households with annual incomes of less than $20,000 — have started to cut back on broadband spending. Their broadband adoption rate had dropped to 25 percent in 2008 from 28 percent in 2007. It isn’t much of a surprise, because the economic downturn is forcing people to control and cut back their spending.

Earlier this year, telecom operators like Qwest & AT&T, pointed out they were experiencing the impact of this penny pinching. Of course, what didn’t help was the fact that it was their geographic footprint that played host to the housing bubble. New home sales drove the demand for broadband connections and as foreclosures started, the broadband party also started to wind down. The net new additions for the second quarter 2008 will tell an interesting story.

My feeling is that this is hurting the DSL providers more than cable companies and they are scrambling to respond by offering higher speeds. The smaller providers like Embarq & Windstream could be impacted the worst by the slowdown.

There is some research that shows that speed bumps are not quite the panacea for these carriers, though they might provide some temporary relief.

Bruce Leichtman recently conducted a survey and found out that nearly 72 percent of cable broadband subscribers, and 62 percent of telco broadband subscribers are happy with their broadband connection’s quality and speed. Only 24 percent are interested in getting faster connection and a mere 11 percent of broadband subscribers would pay an “additional $10 per month to double their Internet speed.”

In comparison, Pew’s report shows that 35 percent of dial-up users want broadband prices to decline further — fat chance of that happening when most carriers are dreaming of tiered Internet plans. Overall 62 percent of dial-up users say they are happy to be Slowskys. (That should make AOL and United Online rather happy.)

Download Pew’s Home Broadband Report (pdf.)

When visiting Israel in the middle of summer, it’s generally not a good idea to go for a walk in the afternoon, even if it is along the sea. The heat and humidity sap your energy, making you feel as if you spent nearly three hours in the gym. But that wasn’t enough to stop me from writing a post about Microsoft buying Powerset for what is rumored to be around $100 million.

I’ve been unable to stop wondering why founder Barney Pell decided to take the money and run — after all, he used to turn blue in the face telling people how superior Powerset’s approach to search was. If it was so superior, Mike Masnick of Techdirt put it best when he wrote that “[T]he exit certainly falls well short of the hype around Powerset. If Powerset was actually seeing any traction at all it never would have agreed to sell at that price.”

To some extent, Mike is right, but I would add another reason: infrastructure, specifically how expensive it is to build. At our Hadoop meet-up earlier this year, Chad Walters, director of engineering at Powerset, noted that their search “requires 100 times more processing than simple keyword searching and indexing (about one second per sentence is required for processing).”

Powerset used some pretty nifty technologies to build out their system, but in order to really scale, they would have needed more money — a lot of it.

And Powerset would have had to scale; there’s no other way to compete with search’s 800-pound gorilla, Google. That’s why Microsoft is building a gigantic data center in the Chicago area focused almost entirely on search. (Which it can now use to help roll out Powerset’s search technology to a larger audience.)

This is an abject lesson for every startup looking to get into the business of search: No matter how good your algorithms are, you still have to deal with the cost of queries, which need to be low enough to be offset by some kind of advertising in order to make a profit. (The conspiracy theorist in me says that if your results are really good you won’t be able to generate enough inventory to serve up ads that bring in the dollars, but maybe I’m just too cynical.)

One of our readers believes that it is possible to build a search engine that surpasses Google’s. Nevertheless, as I’ve noted in the past, “[P]rocess-optimized infrastructure ensures that Google’s cost of executing a query keep going down” — and that allows the company to wring more dollars from the system.

Given all that, Powerset has done a good job of wringing a hundred million from Microsoft. Not that there’s anything wrong with that.

Bonus Link: Don Dodge of Microsoft explains the logic behind the deal.

Many entrepreneurs today have their heads in the clouds. They’re either outsourcing most of their network infrastructure to a provider such as Amazon Web Services or are building out such infrastructures to capitalize on the incredible momentum around cloud computing. I have no doubt that this is The Next Big Thing in computing, but sometimes I get a little tired of the noise. Cloud computing could become as ubiquitous as personal computing, networked campuses or other big innovations in the way we work, but it’s not there yet.

Because as important as cloud computing is for startups and random one-off projects at big companies, it still has a long way to go before it can prove its chops. So let’s turn down the noise level and add a dose of reality. Here are 10 reasons enterprises aren’t ready to trust the cloud. Startups and SMBs should pay attention to this as well.

1. It’s not secure. We live in an age in which 41 percent of companies employ someone to read their workers’ email. Certain companies and industries have to maintain strict watch on their data at all times, either because they’re regulated by laws such as HIPAA, Gramm-Leach Bliley Act or because they’re super paranoid, which means sending that data outside company firewalls isn’t going to happen.
2. It can’t be logged. Tied closely to fears of security are fears that putting certain data in the cloud makes it hard to log for compliance purposes. While there are currently some technical ways around this, and undoubtedly startups out there waiting to launch their own products that make it possible to log “conversations” between virtualized servers sitting in the cloud, it’s still early days.
3. It’s not platform agnostic. Most clouds force participants to rely on a single platform or host only one type of product. Amazon Web Services is built on the LAMP stack, Google Apps Engine locks users into proprietary formats, and Windows lovers out there have GoGrid for supporting computing offered by the ServePath guys. If you need to support multiple platforms, as most enterprises do, then you’re looking at multiple clouds. That can be a nightmare to manage.
4. Reliability is still an issue. Earlier this year Amazon’s S3 service went down, and while the entire system may not crash, Mosso experiences “rolling brownouts” of some services that can effect users. Even inside an enterprise, data centers or servers go down, but generally the communication around such outages is better and in many cases, fail-over options exist. Amazon is taking steps toward providing (pricey) information and support, but it’s far more comforting to have a company-paid IT guy on which to rely.
5. Portability isn’t seamless. As all-encompassing as it may seem, the so-called “cloud” is in fact made of up several clouds, and getting your data from one to another isn’t as easy as IT managers would like. This ties to platform issues, which can leave data in a format that few or no other cloud accepts, and also reflects the bandwidth costs associated with moving data from one cloud to another.
6. It’s not environmentally sustainable. As a recent article in The Economist pointed out, the emergence of cloud computing isn’t as ethereal as is might seem. The computers are still sucking down megawatts of power at an ever-increasing rate, and not all clouds are built to the best energy-efficiency standards. Moving data center operations to the cloud and off corporate balance sheets is kind of like chucking your garbage into a landfill rather than your yard. The problem is still there but you no longer have to look at it. A company still pay for the poor energy efficiency, but if we assume that corporations are going to try to be more accountable with regard to their environmental impact, controlling IT’s energy efficiency is important.
7. Cloud computing still has to exist on physical servers. As nebulous as cloud computing seems, the data still resides on servers around the world, and the physical location of those servers is important under many nation’s laws. For example, Canada is concerned about its public sector projects being hosted on U.S.-based servers because under the U.S. Patriot Act, it could be accessed by the U.S. government.
8. The need for speed still reigns at some firms. Putting data in the cloud means accepting the latency inherent in transmitting data across the country and the wait as corporate users ping the cloud and wait for a response. Ways around this problem exist with offline syncing, such as what Microsoft Live Mesh offers, but it’s still a roadblock to wider adoption.
9. Large companies already have an internal cloud. Many big firms have internal IT shops that act as a cloud to the multiple divisions under the corporate umbrella. Not only do these internal shops have the benefit of being within company firewalls, but they generally work hard — from a cost perspective — to stay competitive with outside cloud resources, making the case for sending computing to the cloud weak.
10. Bureaucracy will cause the transition to take longer than building replacement housing in New Orleans. Big companies are conservative, and transitions in computing can take years to implement. A good example is the challenge HP faced when trying to consolidate its data center operations. Employees were using over 6,000 applications and many resisted streamlining of any sort. Plus, internal IT managers may fight the outsourcing of their livelihoods to the cloud, using the reasons listed above.

Cloud computing will be big, both in and outside of the enterprise, but being aware of the challenges will help technology providers think of ways around the problems, and let cloud providers know what they’re up against.

A few minutes after she delivered a speech at our Structure 08 conference in San Francisco, I caught up with Microsoft’s corporate VP of global foundation services, Debra Chrapaty, for a video chat. I think a more appropriate title for her would be Mr. Softie’s Internet Infrastructure Czar. I found her very knowledgeable, engaging and open with her opinions. “We have some new innovations up our sleeve that are going to knock the socks of anything anyone is doing, including our friends down south,” she told me. She didn’t name Google, of course, but we all know who she was talking about.

Her candor was one of the reasons I wanted decided to share the video with you guys. The common theme of the conversation: Microsoft is spending liberally to build out its Internet infrastructure, including upgrading its backbone network and scaling out its data center infrastructure by adding new technologies.

When I asked her exactly how much Microsoft was spending on it, she dodged the question, saying just that it was a big number. This much we do know: Two years ago, the company was spending close to $2 billion on its infrastructure; it has since undertaken the development of six data centers, with parts of two networks already online.

Watch the video to get the full low-down, but if you’re in a hurry, here are some highlights, including her quotes from our conversation.

• “We are building data centers but I don’t want to say not just data centers. We are already on to our second generation data centers. More utilization, better density and more power efficient.” For Chrapaty, power efficiency is not just talk, it’s her mission — she is the driving force behind Microsoft’s server utilization.
• “Infrastructure is a differentiator. I use FedEx as an example. They are world’s most predominant distribution company. It wasn’t that they had a great brand or they had all these plans. No, what they did was find these strategic landing fields where they could get in and out quickly to key distribution points across the globe. It defined their company. I think the same is true in the infrastructure now. Data centers are already becoming a scarce resource.” Google realized this a long time ago; Microsoft is now demonstrating how it can put money to work and build an advantage over others.
• Like Google, Microsoft is taking the design of servers into its own hands. “We are doing some unique things in the mother board designs, server designs, and because we are Microsoft, operating systems.”
• She’s a big champion of container data centers, which essentially act like the trailers on long-haul trucks, optimized and packed with all sorts of gear — servers, switches, storage systems — that’s wheeled in and plugged into the power grid and the network. Sounds like Rackable Systems and Verari are major suppliers of these containers to Microsoft; the company is making extensive use of them in their Chicago facility.
• Her comments indicate that Microsoft has plans to offer managed services to large corporations.
• She lets us know first that they are building a IOWA data center, which is huge for Iowa. Google has one in Iowa too.