At the same time, Goldman Sachs invested $450 million of its own money and $1,500 million from its clients (and they can’t sell their shares until 2013) in Facebook… boosting the company valuation to over $50 billion.

Yes, Facebook, Groupon, Linkedin and others are revolutionary in that they are facilitating fast behavioral changes among people and are growing at astronomical rates. Groupon filed documentation on June 2nd indicating an imminent IPO, revenues of $644.7 million in the first three months of 2011 and over 83 million users in 43 countries! They intend to raise $750 million even as some question margins and financial performance to date. The Linkedin IPO, for instance, indicated a valuation of 18 times its revenues… as compared to 15 times of Google and Apple.

Why are Facebook, Groupon, Linkedin and others such sought after investments? Are they really revolutionary in nature? Are they poised to create and capture tremendous value for investors and customers?

Honestly, I am not sure. I believe the high investment costs swirling around these internet companies reflect the bets and rewards in figuring out new business models in an evolving world for communications, media and e-commerce… High risk is inherent to high reward or high loss… and we all know there is uncertainty around the future of business models: Will people pay subscription fees? To whom? Will advertising revenues be enough? Who will be the suppliers of other potential services that can be monetized? Will business models be the same for every screen (TV, smartphone, PC etc)?

The key question for application providers focused on advertising revenues is: will advertising revenues be sufficient to deliver the kinds of returns investors expect? Will Facebook, Groupon and others be able to grow revenues by only focusing on advertising? Most likely they will need to diversify and add new options to create new revenues. So if they do have do diversify, what can they do?

These are questions keeping stakeholders in the communications, entertainment and media industries busy as the impact of next moves by these players influences not only the application and platform creators but the entire industry… people creating content such as video… people creating APIs… people providing communication services which today can be broken down into potential APIs and so on. Creating and capturing value with emerging business models is where there are significant opportunities and challenges and hence strategic thinking and decisions will be required.

So it is interesting for strategists to think about potential moves of major internet and apps players…in what areas could Facebook and Groupon invest to add to their current portfolios? If they were to expand beyond advertising, which other areas could provide good potential returns and support their relationships with current customers?

One of the ways these players may seek growth is by getting into communication-service type revenues. For instance, they could put a call button on their sites and extend the communication revolution even beyond what we have seen today. Facebook’s interest in acquiring Skype (now part of Microsoft) in the recent past may have been a hint of that. Microsoft’s $8 billion purchase of Skype also indicates the value of communication features and services to virtually anything from game consoles to software as a service. A new communication revolution may start as the virtual and real worlds incorporate new communication features…

But even Goldman invested in companies that never took off during the internet boom—for instance $100 million in the later bankrupt web grocer Webvan—the reality is no one has a crystal ball and placing bets is just the nature of the beast when you are investing in anything new… from new companies, new services to emerging business models. What is important is to keep moving… not doing anything is a sure way to be out of the game. It is important to take calculated risks and make investments in potential areas of interest and high impact innovation—including but not limited to APIs, services, video offers, developer programs, partnerships & alliances, etc.

Whereas some would have expected most companies to put the most focus on customers, according to our study, some of today’s most innovative and successful organizations actually put their employees at the forefront of their attention (the expectation being that these employees will then respond in kind to their customers). In such a culture, this focus, or “employee engagement”, becomes more and more important as it dramatically impacts the workforce’s willingness to directly contribute to organizational productivity and profitability.

When you look across a general mix of industries, one of the more preferred service offerings we tested provided “a service that allows employees to dynamically and seamlessly shift from multiple modes of communication (including IM, email, text, phone call, and video conferencing) with the click of a button.” In my opinion, this points directly at employees that are deeply influenced by their own consumer habits and who are no longer willing to accept any difference in their office lives. It is also evident that the shift from voice-centric communications to (native) multimedia, multi-device conversations is about to take place in the enterprise arena.

I’m looking forward to the day where shifting in context from one device to another, from text to voice to video and back again, will be as easy as using different pencils for drawing. Thus, changing the interaction from an old-fashioned black & white communication to a more colorful, interactive, and more fully engaged conversation.

Enterprise collaboration is the present and the future. I can’t imagine working like I did two years ago, without easy access to several communities of experts who can provide their 2 cents or the help solve critical problems. At Alcatel-Lucent, we launched a key collaboration tool in April 2010 and in less than a year, 47 thousand people from 106 countries signed up to use the tool, 50% log in and consume content regularly and 16% actively contribute to content creation and discussions.

A revolution
Enterprise collaboration starts with the use of typical IT tools but ends up transforming how people communicate and work together. It changes how we do our jobs and who we work with… Collaboration tools bring fast and profound changes to company cultures and work and personal communities.

Enterprises need to do it for the right reason
Don’t go and implement enterprise collaboration just because it offers a set of cool tools that generation Y wants. As mentioned in a recently published article in InformationWeek Gen Y can kill collaboration projects, that is a recipe for disaster.

The implementation of collaboration tools just to satisfy a young, emerging workforce is a mistake – Geoffrey Moore (of ‘Crossing the Chasm’ fame) calls that the ‘worst possible reason”. So be sure to do it for the right reasons.

At Alcatel-Lucent, a collaboration tool was just the right next move to make collaboration a central theme for our company culture. We implemented collaboration so employees could reach more people, find information faster, and be more aware of others and the business. Ultimately, the goal was to foster innovation, better support customer interactions, and overall work transformation.

In less than a year, it feels like I work in a very different company. Adoption has been incredible. You can post a question online and people from all over the world volunteer to offer their knowledge, their point of view. Talent and collaboration emerged. The collaboration tool and its implementation changed dramatically the way we worked, our circles of influence and contribution. It also allowed us to communicate with a lot more people faster.

Why do service providers need to think of enterprise collaboration?
For service providers, collaboration tools will ultimately impact what service providers sell, how they package and price what they sell. Cloud computing is pushing the revolution further by impacting how these services can be delivered to consumers and enterprises.
The revolution starts with a work collaboration tool and as people engage, they expand into on and off-line conversations. The next wave will involve integrating collaboration tools with traditional communication capabilities such as voice calling, instant and text messaging and even document repositories in a secure way.

As a consumer, I am less interested in having a cell phone or a land line and more interested in having voice capabilities, maybe an API I can connect to all my apps and tools from a service provider I trust. Enterprise IT professionals are interested in getting modular capabilities, APIs to plug and play to their enterprise tools and apps and in some cases, large enterprises will be interested in a service provider customizing or doing the integration for them.

Service providers can play a role in offering collaboration tools in the cloud, offering communication capabilities and integration expertise. Reliability and security are key features consumers and enterprise value, so enterprises and consumers will be willing to pay for those capabilities as seen in our Shift research.

Service providers who can do it in a modular and plug and play way such as with APIs will be able to support enterprise customers in an easier, faster and more cost effective way. The more cost effective, the larger the number of enterprise market segments offer can be appealing to–from the small home offices to the large enterprises. In the business model research we have done, we have seen examples of several service providers moving in this direction.

At a minimum, service providers must think how to offer voice calling capabilities as an API that can be easily integrated and charged as part of other applications. This will cause yet another revolution in the way service providers do business and capture value in the new and evolving communication value chain.

Luckily, despite the countless meetings, interviews with international press and analysts, and multiple “meet the author” sessions, I was able to spend some time on the show floor and sit in on some sessions as a participant and not a presenter. One of these sessions – “Real Applications from the Real World: Is the Network just about Connectivity or is it the New Application Platform?” – really stuck with me. One of the panelists was the Chief Operating Officer of a company focused on building healthcare applications designed to aid consumers and healthcare professionals in early detection and post-clinical monitoring of a variety of conditions. One of the applications he discussed leveraged location-based services to detect when an end-user entered a specific restaurant. The application would then provide appropriate menu choices based on the end-user’s specific medical condition, diet parameters or overall health goals.

In Chapter 1 of The Shift, we talk about the Baby Boomer generation and how “…by 2030 six out of ten Baby Boomers will be managing multiple chronic illnesses, with diabetes affecting one in four.” Imagine, if you will, the opportunities available to mitigate these health risks through the mass adoption of the type of application described above. Talk about technology having an immediate and important impact on someone’s daily life! This is a service beyond entertainment, beyond providing information services and beyond connecting someone with their friends and loved ones. Applications like these are actually focused on changing a person’s behavior and improving their overall quality of life.

The key to delivering these types of life-changing applications lies not only with the application developers themselves but in the capability of the entire ecosystem to create new collaborative approaches to improving the overall end-user experience.

In my family we have 3 iPads and a Wii that we use to consume web content mainly from Netflix and Hulu. My wife’s parents are pretty tech savvy and do the same via an iPad and Roku. I don’t think we are on the bleeding edge of online video consumption, but we are early adopters.

Similar to my family, others have started to consume online video and impact the Multiple System Operators (MSO – Cable, Satellite, etc.) businesses as manifest through modest subscriber losses to date. Let’s look at a few scenarios that could magnify or diminish that impact in the next several years.

1. Online Video may not be as cheap as people think. In fact, comparing free online video versus $100+ a month is not informative or useful. Let’s look at some real figures. Currently the combination of a Netflix ($9), Hulu ($9), and broadband only subscription ($60) runs about $78 per month which is significantly less than a pay TV subscription ($70) and broadband ($45) which runs $115 per month. Someone who cuts the video cord will save $37 per month and get video on demand, but will have less content to choose from.  If they added more content such as an ESPN package for sports and baseball package (mlb.com), their savings are reduced. Further reduction in savings may also come as bandwidth caps are implements such as Comcast’s 250GB limit. Make no mistake, that is A LOT of bandwidth and I don’t think anyone except the peer-to-peer file sharers have anything to worry about in the near future. That said, if the average individual cut the cord and watched 100% of their current TV consumption online, it would equate to 140 hours per month (households would be higher with multiple streams) before any regular internet usage. For cord cutters it becomes more possible to approach the bandwidth limit and incur addition expenses for broadband in the future (although this could be eliminate by better compression algorithms).

2. MSOs acquire content rights. Several cable companies already own a library of unique content. The most recent example of such a move was the Comcast joint venture with GE that created NBC Universal. (For completeness, I should also note there are examples of spinoffs of media companies as well such as Cablevision and Rainbow Media) To date, these companies have been experimenting with releasing and managing their content online. If their revenues streams become seriously threatened by cord cutters, these companies could pull their content, possibly inviting further legal or regulatory scrutiny, or look for additional compensation via consumers or advertisers.

3. MSOs distribute content anywhere/everywhere. One of the main attractions of online video is the ability to consume it anywhere and everywhere, regardless of device. The explosion of tablets and smart phones have increase consumer demand for anywhere/everywhere video consumption. In response, cable companies have launched TV Everywhere (e.g. Xfinity brand name from Comcast). TV Everywhere allows the consumption of cable from any device or location (assuming network connections are available). While it is still early, recently it has been suggested that Comcast’s slowing subscriber losses are due to Xfinity.

This is an exciting time in the television and content world. There are so many unknowns and disruptions to a long standing industry structure and model. There are exciting new services and ways to consume content for people like you and I. No one knows how the business model between MSOs and Online Video will play out, but I know that the end result must be a new industry equilibrium where each player is compensated commensurate to the value they invest and contribute to the overall consumer experience.

Some in the U.S. government have discussed forming a sort of online Bill of Rights, setting defined limits on what can be done with the data. The suggested Fair Information Practice Principles (FIPPS) is based on the Privacy Act of 1974, which establishes some key principles on how the government can use information, including:

• Agencies must give public notice of the collection and maintenance of records containing personally identifiable information

• Disclosure of that information can only be done with express written consent of the person (with certain notable exceptions, including data required to be publicly available by the Freedom of Information Act, certain uses by law enforcement, and statistical research and census data)

• Individuals have a means to access and amend their records

In essence, these rules still treat the information as property that is kept and used by an agency – in this case the government – but still belongs to the individual.

An individual’s 2.0 identity, however, isn’t just property, and it goes beyond data, records, and information. Consider the case at Rutgers where a college student videoed his roommate engaged in sex and then streamed that video on the Internet. Treating such a violation as a property crime – where the electronic representation of the person is simply an object that has been stolen and misused – seems insufficient. Leaving aside the transmission of the person’s actual image, how about transmission of a person’s patterns of personal behavior? For example, a Duke student’s emailed PowerPoint presentation intended as a joke went viral, detailing her sexual activities with other students in a way that personally identified her partners to the world.

Much of consumers’ concerns about privacy and identity management stem from the feeling that somehow consumers should be protected and have legal recourse beyond seeing the attack on or misuse of their identities as property damage or even as damage to their reputations, such as with slander or libel. In cases like these, it may feel more like a personal assault. Even in cases of identity theft, victims may perceive the violation as more deeply personal than the loss of money or credit. At the same time, it’s a matter of personal choice and freedom if a person wants to barter aspects of their identity for some gain, whether it’s streaming their own reality show on the Web for money or “just” letting Facebook mine their profiles to serve up advertising. Ideas that seem unthinkable to one person may make another see dollar signs.

That’s what makes the question of privacy in a 2.0 world so difficult. Defining the 2.0 identity (or aspects of that identity) as property or a person is as variable as the vagaries of each individual person’s concept of self. What representations of themselves or their behaviors do they consider personal to the point of being an extension of their physical being? What’s merely private? What’s private but limitedly public for a price? What’s public?

We’re attempting to legislate an issue rooted in an individual’s sense of self and establishing appropriate penalties commensurate with the level of personal violation. And doing so not just within one country or culture, but across international boundaries and cultures. Much like with the Privacy Act of 1974, transparency and putting individuals in full control of their data is definitely at the heart of solving this dilemma. But that is a monster task – maybe even impossible.

For one, it depends on ensuring that there is public notice from all parties in the ecosystem of what is being collected and by whom. It also requires providing a means for individuals to access their “records” and make changes to the information itself or its availability. The overwhelming volume, granularity and diversity of that data complicates the matter even further. The question remains: How can technology enable and assist the individual’s the navigation, understanding, and management of this mountain of information?

Today is the day that we officially introduce the second edition of The Shift.

The Shift was originally released in August of 2010 and contained primary research across end users, advertisers and developers in North America to measure their interest in and willingness to pay for network-based capabilities.  For the second edition, we have taken our research efforts further to explore the critical emerging markets of Brazil and Mexico in Latin America and identify commonalities with and nuances from their developed market counterparts.  Specifically, this new edition contains:

• Three new chapters focused on Latin America, including interest in and willingness to pay for services or functionality (APIs) augmented by network capabilities – across consumers, small businesses and developers.

• The types of business models favored by consumers, small businesses and developers in these markets for those attempting to serve them.

• The preferred marketing and support options most appealing to these users and developers.

• Plus, since The Shift also relies upon scores of market statistics and trends, the Second Edition also provides updated market information in the North American chapters to reflect the latest data at the time of writing.

I’m currently in Barcelona attending Mobile World Congress, one of the premier events in the mobile industry, meeting with service providers, application developers and other stakeholders from across the ecosystem to discuss the opportunities that present themselves when intelligent network capabilities are exposed to improve the end-user experience. It’s exciting to be able to share our findings with our friends from Latin America and show them how they too can benefit from the emerging business models set to benefit all of those across the value chain.

The Shift argues that 1.0 business models are simply insufficient in this 2.0 world.  Using scores of market examples and supported by primary research directed at over 10,000 respondents from across the ecosystem – including consumers, enterprises, developers and advertisers in North and Latin America – it compiles the case for developing new relationships between these important ecosystem players such that incremental value can be created and passed on to end users.

Be sure to get your copy of the second edition of The Shift and let us know your thoughts.

But what will change over the next year? As many great things have happened with the virtual world, there are still many opportunities to improve it and satisfy old and new needs and desires we have. Here is my wish list (aka the beginning of THE 2011 end-user manifesto) based on my online experience over the last two weeks as I embarked on a holiday trip to visit loved ones abroad.

- I’d like to be able to use my credit cards securely on the web everywhere I go or even better use my cell phone as the ultimate credit card. Case in point; during this past holiday abroad local web sites asked for a ridiculous quantity of personal data to allow me to buy a domestic plane ticket. After all the effort, I learned that only local credit cards were accepted. I had a similar experience when getting train tickets in Europe earlier this year! I had to physically walk to the train station to buy tickets because I could not pay for them online… I’d like one trusted company I do business with to manage my data and ensure its privacy and security as I transact online.

- I really don’t care whether Steve Jobs likes or dislikes Flash and what the future of Flash will be. All I know is that I could not complete purchases online nor could I check in for flights using my lovely iPad because of compatibility issues. I’d like a consistent shopping and online experience.

- I’d like apps, content providers, banks and my credit card providers to figure out a way to provide me a single sign on… I have often forgotten passwords and ended up having created a cheat sheet with over 30 different log ons and passwords, each with its own rules for what a secure password is and with a different policy as to how often I need to update it – very tiresome and annoying. Interestingly, when we interviewed key execs in 20 different app and content providers two years ago, all seemed to think that providing the end user a single log on to their app or content was satisfactory… Well, not from the end user point of view!

- Last (well, not really last, but last for the sake of this post), I really would like to to have easy access to my content anywhere I go. It was really not fun to wait for our iPad to load pieces of the last season of Survivor on YouTube when we were on holidays with family… It was also not fun to get to some of the TV networks sites and learn that I could not access content in the country I was visiting… Especially as I know that the same content is sitting on my PVR waiting for my return home.

So, interestingly, what I want does not depend on any technological revolution, it can done with technology we have today… What will it take for us to work out the kinks of a secure, consistent, private web experience collectively? Multiple industries, players, regulators, and countries are likely to be involved in the solution because the world wide web really is worldly and cannot wait for the next tech revolution.

Recently Saturday Night Live did a comedy skit where the central figure of the “Story Of The Year” argued that he should have been Time Magazine’s “Person Of The Year”.  While the skit was comical, it made me think about what those two men really have in common.  On the one hand you have Julian Assange the spokesperson and editor of WikiLeaks.  Depending on where you sit and what you believe, Julian is either a terrorist or a hero for the documents that WikiLeaks released this year.  On the other hand, you have the Time Magazine’s person of the year in Mark Zukerberg, the founder of Facebook who is almost universally considered a very likeable gentleman.

On the surface there is nothing in common about the two stories or the men behind them, but if you go deeper, they are connected by the value and the need for network security and privacy.  As WikiLeaks came under assault this year, a cyber battle broke out between those that support the site and those that oppose the site.   Each side has used various forms of malicious behavior such as denial of service attacks to stop and harm the other side.  Because I use several of the services and websites under attack, the personal risk for me is access to my financial resources and protection of my financial information.  I sure hope that there is the high level of security and threat detection and protection on the sites where I have personal data.  At those sites I value security and privacy very highly and if a bank or payment processing company has extra security so the battle over WikiLeaks and others like it don’t impact me, I am more likely to use that companies services.  I want those services up and working 24×7 with the highest level of protection possible.

Then there is Mark Zuckerberg and Facebook, a company whose elusive business model is somehow based on having me agree to give them personal information that they can sell or monetize through advertising.  I freely share information about my location, my family, and my life on Facebook.  To top it off, after I share all that information, I am surprised by how well Facebook predicts what I am interested in, and how it can cut out pictures of my kids from photos I post and put them in the advertisements it is serving me.  I admit for a split second it does make me rethink how I value my privacy on Facebook (in addition to creeping me out).

So as 2010 comes to a close, there is consistency between the story of the year and the person of the year.  Both revolve around all of our individual security and privacy and what we can expect from the companies we do business with over the network.  They need to provide an end to end level of service and protection that I want, which differs based on what I am doing (finances versus Facebook) and differs between myself and everyone else who may place different values on their privacy and protection.  This is what the Shift is about and I sense that my personal preferences in areas such as these will become more and more important in 2011.

1)     The Internet of Things gives way to the Internet of Identities.  Just over ten years ago, MIT predicted a world of Internet connectivity across everyday objects.  True to Gates’ axiom, that world’s time has come.  But, with the proliferation of devices connected to a network comes a world where one’s digital footprint covers far more territory.  Want to know if Grandma touched her pill bottle today?  Device and network intelligence can tell you.  Want to know where I’ve been?  My mobile device has been able to tell you that for some time.  Want to take a picture of me – perhaps without my knowledge – and post it for all to see?  Digital cameras and camera phones make it easier every day to do so.  I’m not suggesting that the Internet of Identities becomes a major force in 2011, but we’re already seeing the privacy concerns heralded by advocates worried we are exposing too much of ourselves in a virtual world.  And, the advent of new identities, such as the EHR, magnifies these privacy concerns and will raise the collective consciousness of digital natives and immigrants alike.  The debate will intensify in 2011.

2)     Cord-Cutting is More than a Sign of the Times.  For all of the headlines surrounding video cord-cutting, critics would argue it’s much ado about nothing.  After all, only a fraction of households have completely cut the cord on paid television.  And, many would argue that this anomaly is merely a reflection of the recession, with these cord-cutters soon to return to paid television services when their means to do so also comes back.  While it may be true that cord-cutters are the current exception to the rule, there are echoes in history protecting establishments that have since seen radical transformation (with the erosion of landline voice and the digitization of music content being obvious examples).  2011 will be the year that defines cord-cutting as more than a recessionary blip.  While complete cord-cutting may still be relegated to the niches, consumers will increasingly look for more cost-effective alternatives to premium content options.   The impact to the broader ecosystem of content providers, service providers and advertisers remains to be seen, but given the complex business arrangements between these and other stakeholders solidified in an industry more than 60 years in the making, one can expect the shifts to make landline voice erosion look like a non-event by comparison.

3)     Cloud Gets Serious.  We have literally been talking about cloud computing as an industry for decades.  Yet, even mentioning X-as-a-Service has been likely to provoke a roll or glazing-over of a CIO’s eyes.  Security issues have been the primary stumbling block in the past (do I really trust a provider to warehouse my most sensitive data or be responsible for my computing resources?).  Those issues remain and have reached a fever pitch in light of the latest cyberterrorist attacks associated with the WikiLeaks crisis.  However, the need for more economic business models – those governed by opex models that allow an organization to flex its IT resources – is becoming more important in a recessionary time.  Further, with Millennials entering the workforce ranks and expecting to bring any device with them, the notion of restricting employees to a certain device portfolio (yet alone limiting what they download to these devices) is becoming more problematic.  This challenge coupled with the proliferation of enterprise multimedia content cited above, creates a market for virtual desktops and associated content delivery networks to become increasingly relevant to the enterprise.  To foster this growth, the cloud must become more secure and intelligent.  Technology exists to accommodate these challenges and 2011 will be the year opportunistic providers enter this space with greater vigor.

4)     A “New” Economy Gets Mobile Fuel.  Consumers proved in 2010 they rely on their mobile phones for commerce.  For example, eBay recently reported it saw sales in the US from its suite of mobile applications nearly double on Black Friday.  More interestingly, the company is making news through its PayPal service, which accounted for 37% of the parent’s company revenue in the third quarter of this year.  And, the new frontier of microtransactions is the mobile device.  Not only has PayPal set its sights on mobile, but Google and Apple have also signaled the same.  Add to that a new joint venture formed by AT&T, T-Mobile and Verizon called Isis, which uses near-field communications to allow consumers to pay with their mobile device by waving it at a checkout terminal, and you now have a horse race of companies seeking to introduce their own mobile wallet.  The trend is even more relevant in places like Latin America, where the access to a mobile device exceeds that of a bank account.  Perhaps that helps explain why incumbent mobile operator America Movil recently announced its intention to offer financial services to about 50 million people in Mexico who fall in this category.

5)     Broadband Gets Untethered.  For those of us old enough to remember the screeching sounds of our dial-up modems as we waited what seemed like eons for basic websites to load, we also celebrate the day we surfed unencumbered with broadband speeds.  And, the evidence of how such speeds have transformed our digital lives is readily apparent.  The impact as wireless networks move to 4G capabilities will be even more profound to our collective transformation as was the wireline movement from dial-up to broadband.  And, with major providers like AT&T, Sprint and Verizon committing network buildouts and an equally burgeoning arsenal of 4G-capable devices entering the fray, 2011 will be the year we see wireless transformed.  Consumers will get the much needed boost they have been craving to download and upload multimedia content without speed bumps in their way.  But, perhaps more importantly, enterprises will benefit from enhanced productivity gains yet to be realized.  And, in an economy stretching for efficiency in every dollar, that’s a welcome story for all of us.

In referencing Bill Gates’ famous words once again, “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.”  Even if I’ve fallen victim to Gates’ prophesy in potentially overstating what will likely happen in the near term, the same holds true that these predictions (and more) will transform our world in just a decade.  That’s something to reflect upon as we write history in 2011.