Now Every Company is a Software Company
David Kirkpatrick, author of the Facebook Effect, writes in Forbes: “The era of separating traditional industries and technology industries is over—and those who fail to adapt right now will soon find themselves obsolete… Regardless of industry, your company is now a software company, and pretending that it’s not spells serious peril.”

As an example, Kirkpatrick (who also runs the excellent Techconomy conference – video excerpts here) cites Venkatesh Prasad, a senior technical leader at Ford who increasingly sees the auto giant as a firm that produces “sophisticated computers-on-wheels.” Today’s Ford cars are mobile Wi-Fi hotspots.  Software manages fuel efficiency and safety systems.  Sensors and software combine to automate parallel parking. Tech runs systems from navigation to entertainment. And data from smart vehicles not only feeds actionable performance data in real-time (tire pressure, breaking, and more), data fed from cars back to Ford also provides direction for engineers designing improvements for new models.  Still have doubts about that ‘computer-on-wheels’ analogy?  Ford is mailing out a quarter-million USB devices containing a new interface upgrade for vehincles.  Now think beyond Prasad’s statements – what does this mean for today’s manager?  All of a sudden issues of security, privacy, the implications of technology failure, the ability to digitally partner with others, and opportunities to create platforms for new industries – all enter the modern executive playbook.  The manager who can’t think in these terms is ill-equipped for leadership in today’s environment – period.

Kenya Has Mobile Health App Fever
50% of all Kenyan banking is done on mobile phones, and many Kenyans enjoy pay-by-mobile services unavailable to most Americans.  During an August visit to Nairobi I noticed that it was common to see everyone from shop keepers to cabbies swapping virtual cash via SMS text messages over the M-Pesa system offered by billion—dollar local telecom provider, Safaricom (while in Nairobi I was extremely fortunate to have had an opportunity to keynote a conference that also featured Safaricom CEO, Bob Collymore, and I’m a huge admirer of the firm).

But Kenya-tech isn’t just about banking – Technology Review points out that Kenya is paving the way in other areas, including potentially high-impact mobile health apps. MedAfrica from Nairobi-based Shimba Technologies (co-founder Steve Mutinda Kyalo is pictured) offers critical tools to a nation where only 7,000 doctors serve a population of 40 million. The MedAfrica platform offers up real-time health information, aggregating multiple sources such as first-aid treatment and health alerts from local hospitals. The firm also plans to tap into data from NGOs and the national Ministry of Health to support coverage of disease outbreaks and exposing counterfeit drugs. And customers can use the app to find medical practitioners in their area. MedAfrica hopes to keep services free and ad supported, with for-fee premium services offered in the future.  The app is currently being downloaded at a rate of about 1,000 new users each day, with 60% reporting active use.  And a partnership with Safaricom, Kenya’s leading mobile provider, will help bring the effort to the nation’s 25 million mobile phone subscribers.

Safaricom is also working with the startup Call-a-Doc, which allows the telecom firm’s 18 million mobile subscribers to make advice calls to ­doctors for about two cents a minute.  Another effort, Mpedigree, is rolling out an SMS-based service at health-care centers to provide a way to check serial numbers on drugs so that counterfeit meds aren’t used. And don’t forget Boston-based Sproxil (where one of my former students works), also a key player in combating drug counterfeiting. Beyond Kenya, Africa Aid offers MDNet – a system that has logged over a million free voice calls (texting is also supported) linking patients with a network of 1,900 physicians in Ghana. Moore’s Law fuels cheap cell phones and just might extend life spans by providing the equivalent of a doc in the pocket of millions that are currently under-served.

Facebook vs. Google
Social networking is now the world’s No. 1 online activity, occupying 20% of online time.  Four years ago, that figure was just 6%. And the war over social is fodder for a recent Fortune cover story on Facebook vs. Google (bonus at link above: scroll for video of Google exec Marissa Mayer on privacy, & Facebook’s Mark Zuckerberg topping the ’40 under 40’). Both firms are surging, and each is building a rock-solid set of strategic assets.  Says Fortune “rarely has there been a battle as competitive as the raging war between the web’s wonder twins.”

The overwhelming majority of profits from both firms come from ad dollars. Google is a behemoth- taking in some 41% of the U.S. online ad market.  Facebook’s estimated $4.3 billion in ’11 revenues are less than half the $9.6 billion Google brought in last quarter, and Larry Page’s firm is estimated to snare $38 billion in ‘11.  But Facebook’s revenues more than doubled in size in 2011, while Google’s should grow by 30%.  That’s slower growth, but in dollar terms, Google is still growing by adding more than an entire Facebook’s-worth of revenues in 2011.  These are remarkable numbers given the horrendous global recession, but at some point all markets mature and as one analyst says, it’s highly unlikely that either firm “could grow by the billions that investors expect… without engaging directly and stealing market share from the other.”

Google search is a rifle-scope targeting ads when you’re on the hunt for information.  But Facebook is a microscope exposing who you are and what you’re up to. If we opt into Facebook’s deep integration with other apps, we tell Facebook what we’re doing – listening to tracks on Spotify, watching videos on Netflix, using RunKeeper to train for that 10k – and all of that is advertising gold.  Even worse for Google – most of the content on Facebook is in the ‘dark web’, un-crawlable by Google’s search spiders because it lies protected behind a Facebook login. Developers dig how Facebook helps spread the viral love of their new offerings, and with each new adoption, it’s an opportunity for Facebook to reveal even more of you under that microscope.  It’s worth noting that Facebook’s login credentials are becoming a real catalyst for web innovation.  One might bail on a new site if it required a new password, but might try a site if it accepts the Facebook login.

The importance of social isn’t a new realization for Google – but nearly all of the firm’s prior efforts were dismal failures. You’ve likely never used (or perhaps even heard of) Google’s Orkut unless you were in Iran or Brazil – two of the only places where it dominated.  Google Buzz was a poorly-tested, privacy-exposing failure that prompted an FTC investigation.  And the much-touted Google Wave bombed – pulled within months of launch.

But the June launch of Google+ is described by Fortune as “a network that cloned much of what people like about Facebook and eliminated much of what they hate about [it]”. Google+ users get profile pages, games, photos, status updates, and a +1 that mimics Facebook’s “like”. But Google also offered features to manage privacy & share updates only with “circles” of contacts that you curate (e.g. posts for groups like friends, family, co-workers, or the public).  And while Facebook charges app developers 30% of revenue, the Google vig is just 5%.

Google’s approach to innovation has been widely criticized, but Larry Page sought to lead the effort top-down, and create accountability for social. “Page moved his office and much of the executive suite to the building where the Google+ team was sequestered”, and he tied a significant portion of employee bonuses to metrics tracking the success of social.  Page even made demands on design – pushing simplicity like one-button photo uploads.  Says Google’s other co-founder Sergey Brin, the firm still wants to be flexible enough that a thousand flowers can bloom, but “once they do bloom, you want to put together a coherent bouquet.”  Google+ has been growing like gangbusters.  Already at 60+ million one bullish report suggests it’ll be at 400 million users by next year if the firm can keep up with the current pace of adding 625,000 users a day.

Facebook didn’t stand still. Shortly after the debut of Google+, Zuckerberg flicked a switch on the pink neon “lockdown” sign at Facebook’s HQ, signaling the troops to “work around the clock” pushing Facebook’s rollout forward and cutting off some of the edge some saw in Google+.  By September, Facebook had rolled out a group-curation tool to counter Google Circles, plus a whole slew of enhancements designed to embed Facebook at the center of the social web.  This shows the challenge of competition on the social front – technology can be easily matched, so unless it comes with a way to create or counteract advantages of user base (e.g. network effects, data) then upstarts will struggle to displace incumbents.  Google has a vast ad network serving ads from sites ranging from BusinessWeek to small-time blogs, lots of cash, and killer platforms for integrating & distributing social (search, Gmail, YouTube, Android, and more). Whether or not this is enough to create an enduring reason to spend more time outside the Facebook social monopoly remains to be seen.  But Google may not need to win outright –a strong second-place showing in social could still mean more data for better ad targeting and improved services throughout the firm’s properties.

The battle is also playing out in a talent war.  Over 10% of Facebook employees are so-called xooglers (ex-Google employees), including four of Facebook’s top eleven executives, as well as the Google engineer considered the father of Google+’s Circles feature.  Still, Google remains one of the most sought-after employers, and the firm has added nearly as many employees in the recent quarter (2,600) as Facebook has on its entire staff.  Facebook will soon lose a key weapon in the talent war – the chance to get a slice of pre-IPO equity and the possibility of liquidity-event coin. Once Facebook goes public, the firm’s stock price will be subject to market whims just like Google (which, incidentally, is up about 7.5 fold in the seven and a half years since going public). Hot-money heat-seekers may follow the next big IPO candidate (Twitter? Xooglers are about 13% of their workforce).

Facebook vs. Google is a very fun place to research and write about. Those interested in diving in with more details can see the January 2012 release of the Facebook and Google chapters in my textbook.

Why Netflix Customers Who Haven’t Bailed Probably Won’t
For those thinking Netflix has backed off plans on its full-steam-ahead streaming future, check out CEO Reed Hasting’s comments from last month’s UBS Media Conference: “We’re going to try to not hurt [the DVD-by-mail business], but we’re not putting a lot of time and energy into doing anything particular around it… We’re focused on, how do we take advantage of this incredible global streaming opportunity.” Even if you used to get both DVDs and streaming videos from Netflix, the company will only tell you about its streaming plan in its “come back!” emails, as far as Netflix marketing goes, it’s as if the DVD biz doesn’t exist. And the firm no longer allows you to ‘gift’ someone a DVD subscription – gifts are streaming-only. Hastings has even called DVDs “Old fogey discs”.  Sure DVDs are a billion-dollar-a-year business servicing millions of subscribers, but its days are numbered.

It’s been a tough year for Netflix.  The firm’s stock price plummeted from $300 to below $80, and it’s customer service rank (which regularly topped leading surveys) has plummeted.  The most recent Forsee index ranked rival Amazon as number one (although it’s worth noting the survey compares a firm’s entire e-commerce offering, so it’s not just a streaming-to-streaming comparison). Some 900,000 Netflix customers bailed the prior quarter.  Those numbers are grim, but a Citigroup survey of customers remaining with the firm suggests most will stay and that growth should be looking up.

57% of current customers reported they were either “extremely satisfied” or “very satisfied” with Netflix.  ‘Extremely satisfied’ customers are down to 18%, from 50% in May. But the survey also reveals that most of the firm’s customers don’t see many other decent options.  Only 15% of Netflix customers report using Hulu to view movies or TV shows – no other site cracks 10%.  These results echo a similar study by PC World showing that even with the price hike, Netflix was still the best value in both video streaming and DVD-by-mail.

That latter stat also made it into the January ’11 update of the Netflix chapter in my book.  The update also includes a chart comparing the DVD-by-mail and streaming businesses – I hope you find it to be a good teaching aid for fueling class discussion around atoms-to-bits shifts and technology disruption.

Bonus: those following Netflix will likely find talks by the firm’s engineering honcho (who tweets at @adrianco) to be fascinating.  The blog post “How Netflix gets out of the way of innovation”, offers a number of gems below – they’d likely generate useful class discussion as well as insights for the entrepreneur.   Nuggets from the blog post cover “how did we keep making big strategic moves, from DVD to streaming, from Datacenter to Public Cloud, from USA only to International, all in very short timescales with a fairly small team of engineers.”  Other highlights:

• “Netflix is now one of the largest sites that runs almost entirely on public cloud infrastructure. We have become a poster child for how to build an architecture that takes full advantage of the Amazon Web Services cloud.” Recent problems are blamed on ‘Roman Riding’ – still having a foot in old data-center architecture while migrating to the cloud.
• “It’s the things you don’t do that make the difference. You don’t add innovation to a company culture, you get out of its way.”
• “Who has junior engineers, graduate hires and interns writing code? We don’t. We find that engineers who cost twice as much are far more than twice as productive, and need much less management overhead.”
• “Reducing management overhead is a key enabler for an innovative culture. Engineers who don’t need to be managed are worth paying extra for.”
• The firm doesn’t have an architecture review board or centralized coding standards.  Instead, engineers are free and responsible for figuring it out for themselves. Peer pressure helps keep quality high.
• On the cloud “AWS takes about 5 minutes to allocate 100 servers, it takes longer than that just to boot Linux on them.”
• “We don’t pay bonuses. We don’t have grades other than senior engineer, manager, director, VP. We don’t count the hours or the vacation days, we say “take some”. Once a year we revise everyone’s salary to their peers and current market rate – based on what we are paying now to hire the best people we can find.”
• “We also have what sounds like a crazy stock option plan that grants options every month, vests the same day, and they last 10 years even if you leave Netflix.”

Those interested in engineering and public cloud topics might also hunt out Adrian’s talks on on YouTube.

Last bit of Netflix news (of particular interest to my students who are visiting with our alumni connections in the Xbox group next week), a new version of streaming over Xbox 360 allows users to use voice and gestures to control the app.

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Big Numbers, Questions Surround Latest Facebook IPO talk

• For comparison, Google’s 2004 IPO raised $1.9 billion, valuing the firm at $23 billion.
• There have only been 13 IPOs that have raised at least $10 billion.  The list includes Visa, GM and AT&T Wireless Services & none from a 7 year old firm started by a 19 year old.
• Facebook’s projected 2011 revenues of $4.27 billion are already bigger than Yahoo’s and growing at a much faster rate.
• A $100 billion valuation is 23 times Facebook’s projected ’11 revenues. For comparison: Google comes in at 6.5 times revenues, Apple at 2.6 times, and Microsoft at 2.8.
• This valuation would make Facebook worth more than all but four Silicon Valley tech firms: Apple (worth $350 billion), Google ($190 billion), Oracle ($152 billion), and Intel ($121.2 billion).  More perspective: HP is valued at $54.5 billion & Cisco at $96.9 billion, and Seattle’s Microsoft and Amazon are worth $213 billion and $89 billion respectively.
• If these numbers hold up, Zuck would be worth about $24 billion.  That compares to about $20 billion for Sergei and Larry of Google, $39.5 billion for Oracle’s Larry Ellison, and $56 billion for Bill Gates.

Click the image below for a neat WSJ interactive graphic comparing prominent tech IPO market capitalization growth.

Going public is a near certainty for Facebook next year.  Since Facebook will cross the 500-shareholder limit later this year, it’ll be forced to make its financials public by April.  And there’s little incentive to “open the kimono” to disclose financials to potential competitors without also using public markets to raise cheap capital and fuel expansion.

How will markets treat Facebook after the IPO?  It’s tough to say.  Facebook has potential in yet-to-be created businesses. As this blog has pointed out before, unlike Google, Facebook doesn’t yet have an ad network, and the appointment of Netflix CEO Reed Hastings to Facebook’s board was likely done as the firm considers baking Facebook into all sorts of consumer electronics, perhaps lucratively bringing social and ad targeting to television.

But this year’s tech IPOs haven’t done well after issue. Groupon was down 42% in the five days after it went public, and LinkedIn, whose stock doubled the first day of trading, has fallen 36% since then. Zynga, you’re up next, and Yelp will likely follow close behind.

On another note, Facebook recently settled with the FTC, agreeing to 20 years of privacy-related auditing.

The Empire Strikes Back – Big Firms Get Disruptive
Being big can be brutal.  In the past 10 years, 40% of the Fortune 50 have changed.  Implosions have been dramatic and often tragic (think Sun, K-Mart, Enron). The list of stumbling giants rocked by technology disruption is a long one (Borders, Blockbuster, Nokia, Sony, RIM, the newspaper industry, the music business, and more). While their earlier research showed that smaller firms were most likely to disrupt giants, Scott Anthony and Clay Christensen (the Innosight team consulting team behind the latest books on “Innovator’s Dilemma”) are finding trends showing that an increasing number of big firms are learning to be disruptive, too.

The team finds that while during the 1980s and 1990s, only about 25% of disruptive innovations came from big incumbents, during the last decade that number jumped to 35%. Anthony & Christensen offer several examples of the new incumbent innovators, including: GE’s undercutting its own high-end EKG equipment and developing low-end products for emerging markets. GM & Nissan developing affordable electric cars, potentially disrupting the business of oil companies. Dow Corning disrupting its own commission-based sales force by developing Xiameter, a self-service, Web-based distribution channel. While some of the examples might not fit exactly with the original Christensen definition of disruptive tech (lower performing products that become good enough to invade established markets), trends seem to show that giants recognize they need to continually innovate or risk extinction.

The search to enter developing markets that may value lower performing but far cheaper offerings, is one reason why big firms are thinking disruptively.  Those wanting growth need to be willing to undercut their high-priced, over-featured mature-market offerings (e.g. the GE emerging market EKG). Authors cite three other factors seen among large firms that successfully transform through disruptive innovation: 1) Pushing beyond core competencies (think Amazon moving from e-commerce retail to develop an eBook reader, cultivate the eBook market, and become a leader in cloud computing). 2) Embracing business-model innovation (Apple, with iTunes, App Store, and Apple Retail as a poster child for success). And 3) Managing the old and the new differently (IBM evaluates Emerging Business Opportunities teams largely on whether managers learn from failure and respond with adjustments).

Palantir: The War on Terror’s Secret Weapon
“It’s like plugging into the Matrix… The first time I saw it, I was like, ‘Holy crap. Holy crap. Holy crap.’ ” That was the reaction of an Afghanistan-based U.S. Special Forces operative when using software from Palo Alto-based Palantir (BusinessWeek once asked if the firm is “The Next Google?”).  Based in the former digs of Facebook, and funded by In-Q-Tel (the CIA’s VC), Palantir has become the darling of intelligence agencies, law enforcement groups, and banks.  The firm’s big trick is making sense of “Big Data” – offering tools that connect & mine the oceans of data produced by disparate and unconnected information technology. Says a Gartner analyst, ” The company’s software pulls off one of the great computer science feats of the era: It combs through all available databases, identifying related pieces of information, and puts everything together in one place.”

The firm’s customer list includes the U.S. Defense Dept., CIA, FBI, Army, Marines, Air Force, the police departments of New York and Los Angeles.   The CEO of the National Center for Missing and Exploited Children says  Palantir “gives us the ability to do the kind of link-and-pattern analysis we need to build cases, identify perpetrators, and rescue children.” Financial institutions are using the firm’s tools to ferret out bank fraud and shut down organized crime networks.  The CIO of JPMorgan Chase says the firm’s technology turns “data landfills into gold mines.” The BusinessWeek cover story linked above offers a fictional national security example to illustrate Palantir’s abilities where a speeding ticket triggers an alert, allowing a name to be connected to fingerprint and DNA evidence gathered by CIA operatives, surveillance video from an ATM, shots of a rental truck’s license plate at a tollbooth, phone records, and map pinpointing suspect movements across the globe, all displayed on a “Mission Impossible”-style graphical display.

Anyone who’s worked at integrating databases knows how challenging it can be to link disparate systems, but Palantir claims they can be “up and running in a bank in eight weeks… instead of waiting two to three years with our competitors.” Palantir certainly is different from the Beltway Bandits that typically serve government agencies.  The firm’s offices include murals of CareBears, teams of geeks wearing My Little Pony t-shirts, and CEO Alex Karp has a Ph.D. in Philosophy and studied under one of Europe’s leading neo-Marxists.  Contrast this with the firm’s security staff, whose black gloves and Secret Service-style earpieces make “downtown Palo Alto feel, at times, a bit like Langley.”

Most clients are mum about specifics of their Palantir implementations, however the firm’s revenues have grown three fold a year, suggesting clients are impressed with what they’re getting.  A typical deal ($5-$100 million) is paid for 20% upfront, the rest delivered only after the customer is satisfied.

This kind of access is a godsend to some, and creeps out others.  Palantir tries to ease concerns, claiming its software creates audit trails, detailing who has seen certain pieces of information and what they’ve done with it, and that it has a permission system to make sure that staff can access only the data that their clearance levels allow. Still, it’s yet another example of technology advancing faster than law is able to balance issues of public safety and civil rights (for more on that topic see the recent broadcast of NPR’s Fresh Air on “Interpreting the Constitution in the Digital Era”

The Big Data Boom is the Innovation Story of Our Time
MIT’s Erik Brynjolfsson & Andrew McAfee say that breakthroughs in innovation often rely on breakthroughs in measurement.  And increasingly we’re measuring just about everything – web monitoring, app analytics, inventory hops via RFID, and more. But “Big Data” becomes valuable when it’s turned into “Big Information”.  And tools like Palantir (above), the cloud, and the like are putting data crunching capabilities in the hands of the masses.

The results are huge  As Microsoft’s Ron Kohavi puts it “objective, fine-grained data are replacing HiPPOs (Highest Paid Person’s Opinions) as the basis for decision-making at more and more companies.”  Firms aren’t just analyzing data they receive, they’re running A-B experiments to collect real-time insights for constant improvement.  Our TechTrek students have heard this from Amazon’s P13N (personalization) team members. Says one Amazon exec: “To find high impact experiments, you need to try a lot of things. Genius is born from a thousand failures. In each failed test, you learn something that helps you find something that will work. Constant, continuous, ubiquitous experimentation is the most important thing.”  Google (another TechTrek host) runs some 100-200 A-B-style experiments a day, trying out new products and services, tweaking algorithms and tinkering with designs.

Brynjolfsson & McAfee are also authors of the book Race Against the Machine, and were recently featured on a segment of NPR’s OnPoint Radio.  Folks interested in a primer on data, analytics, and brief case studies on how firms like Tesco, Caesar’s Entertainment (formerly Harrah’s), and Wal-Mart use “Big Data” can also see the chapter “The Data Asset: Databases, Business Intelligence, and Competitive Advantage” from my book.

Inside P&G’s Digital Revolution
Robert McDonald, Proctor & Gamble’s CEO, wants to make his firm “the most technologically enabled business in the world.” His interview in McKinsey Quarterly offers several examples.  P&G employees help design their own operational “cockpit” interface.  When metrics move outside acceptable tolerances an alarm goes off. Managers can then drill down, find out what’s going on, and make decisions based on this real-time data. The firm has a “baseline digital-skills inventory that’s tailored to every level of advancement in the organization.” Says the CEO, “we’ve got to have the standards for everyone because otherwise we’ll dumb the organization down to the lowest common denominator.” A believer in assessing the “consumer pulse” via social media, P&G managers also use monitoring tools to scan online mentions and puts relevant brand references front & center in real time.

P&G is also pioneering new financial systems, with McDonald stating “accounting systems aren’t designed today for operations—they tend to look backward.” But new efforts will link real-time operational systems to financial tools to allow managers to see product costs in real time, enabling more nimble decision-making.  As one of the nation’s top trucking users, P&G also leverages data analysis to optimize its fleet, reducing so-called “deadhead” movement (empty or under-filled trucks) by roughly 15%.

When a study found that 70% of orders between retailers and suppliers had errors, P&G developed a common, sharable data warehouse that reduced ordering errors to “virtually zero” and saving millions of dollars.  In order to ensure security and privacy when working with partners the firm establishes “very clear firewalls between one retailer and another and strict policies”, including an employee “cooling off” period in between projects with different retailers.  Partner tools are adapting to emerging economy technology.  For example, in nations like the Philippines, where smaller retail operators are more likely to use mobile phones than PCs, P&G has deployed mobile phone systems that allow retailers to order.  Phone systems also make recommendations on store layout, with data-driven suggestions on how retailers can rearrange inventory to optimize their sales.  Even the suds get the geek treatment. The firm’s R&D chemists have used computer modeling to predict how moisture would excite various fragrance molecules to deliver specific fragrance notes at specific stages in the washing cycle. This isn’t conventional lab work, it happens entirely in computer simulations.  From all ends of the firm’s value chain, P&G is leveraging and embedding technology to drive results.

SANERGY TALK POSTPONED: But David will be back next semester – stay tuned:
Social Entrepreneurship Standout Sanergy On Campus

Anyone interested in social entrepreneurship & how business principles can create sustainable good will want to hear David Auerbach speak at BC in Gasson 305 at 4;30pm on Dec. 7th.. Auerbach is co-founder of Sanergy, a firm that improves health conditions and quality of life by providing innovative toilets to desperately poor urban areas that lack plumbing.  The ‘waste’ from their devices is turned into biogas & fertilizer that is then sold, with profits generating funds for more toilets.  The firm has already deployed in slum areas of Nairobi Kenya.  Come hear David’s compelling story.  Sanergy is the winner of the prestigious MIT $100K and Mass Challenge $100K Diamond award.  The firm also received a significant funding commitment from USAID.

The event is brought to you by BCSEED – The BCVC sub-group on social entrepreneurship. To learn more about BCSEED, the social entrepreneurship track of BCVC, & to get on the group’s mailing list, e-mail PlantChange@gmail.com and follow them on Twitter @bcseed.

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More Student Press
The BC community may be interested in recent press coverage of several firms started by current and former students of mine…

• Boston Herald on BCVC ’11 Winners Jebbit.com: “Startup helps brands get more bang on Web.” Follow the team on Twitter: @jebbitinc @petercasinelli @tomcoburn1 @Jebthomas
• Boston Business Journal on Applied Power Innovations: “Class Act: Product monitors energy usage by the dashboard light“. You can see Rich & CJ (BCVC exec committee & TechTrek ’12) in this year’s Boston College PSA, and can follow the team on Twitter: @apinnovations @CJ_Reim @richrines
• CNet covers Bill Clerico (TechTrek Alum & BCVC co-founder) & Rich Aberman’s WePay “WePay planning…” an astonishing, break out year. Follow @WePay @billclerico @richaberman
• BostInnovation covers TechTrek alum Phil Dumontet: “Dash Deliveries: Bringing Boston’s Best Food To Your Doorstep in 45 Minutes or Less“. Dash is expanding to 6th city this month, all without raising any venture capital! Follow Phil on Twitter: @PhilipDumontet

Keep at it, Eagle Entrepreneurs & be sure to visit http://bcvc.org & follow @BostonCollegeVC.

And as an extra bonus for folks interested in campus activities, check out BC Chronicle coverage of the new BCTalks series – TED-like lectures by our undergrads; and see BostInnovation press & BC Heights coverage of the latest BC Splash, where over 150 BC students designed and taught weekend lectures for over 800 visiting high school students.  I’m hugely honored to be faculty advisor to both efforts. For more info see the web pages for BC Splash and BCTalks.

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Aniphon: Coming Soon!
For the past few weeks two of my kids (Ian, age 11, and Maya, age 6) have been beta-testing a new iOS game called Aniphon created by Moglo Apps. And every day since we’ve got the super-secret beta, the kids have woken me up each morning, asking to play this game.  Some of you may know Moglo as a finalist in last year’s Boston College Venture Competition.  Matt Ricketson, ’13, a lifelong Apple fanboy, skipped a dream internship on Apple’s mobile development team, opting instead to work on Aniphon (that’s commitment & belief in what you’re building).  John Bacon, ’12, wrote his first Android app while in high school & gave a recent BC Talks lecture on entrepreneurship. Spencer Frazier ’11, is now a Comp. Sci. Ph.D. student at USC. The team has chops (Matt & John are also TechTrek alums).  If you’ve got an iOS device, you’re a gamer, or know someone who is, sign up for release info at http://aniphon.com.  You can also follow the team on Twitter: @aniphon, @ricketsm, @JohnABacon, & @spencerfrazier. The team will let you know as soon as the app is approved by Apple & available in the App Store.  Until then, I remain mum even as I struggle to regain control of my phone from my Aniphon-fanatic kids.

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NOTE: Faculty using my book – version 1.3 of “Information Systems: A Manager’s Guide to Harnessing Technology” will be available in December, ready to ship to bookstores for the start of the Spring 2012 semester. The new version will include a significantly updated Netflix chapter, covering the rise & fall of Qwikster and detailing the differences between the atoms & bits based businesses.  The Google chapter will also include coverage of the Motorola acquisition and Google+. Contact your FlatWorldKnowlege sales rep for details.  The text will continue to remain free online, and I’ll be sure to share links as soon as updates are online. Feel free to check out v. 1.2 in the meantime, and please share information about the project with your colleagues.  Thanks!

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These four horsemen of twenty first century consumer tech go toe to toe, or at least have begun to rub elbows, in all sorts of overlapping terrain. Consider that:

• All four firms now offer apps marketplaces where third parties enhance their ecosystems.
• All sell advertising and aggressively collect and leverage data to tailor offerings, services, and keep you tied to their clouds.
• All integrate with the post PC devices. All but Facebook sell them.
• All will recommend and sell you movies and TV programming.
• Music? They’re all there.
• Games? Ditto.
• Delivery and recommendation of news and magazines? Yup.
• All but Amazon have a videophone service. Put a lens on the Kindle Fire and Bezos’ll get there, too.

And they all want to tap into your wallet and perhaps someday be your bank. Earlier this year Apple announced iTunes has over 200 million accounts – making it the biggest credit card hub on the web. Amazon has 121 million customers. Facebook has turned its credits payment system into a nearly half-billion dollar a year business. And Google Wallet is the first of the big four with an NFC mobile payment platform. Purveyors of plastic cash, be worried. While the big four use credit cards today, it’s a simple tech trick to link directly to a customer’s bank account, cutting out fees consumers have learned to hate.

A quick look at the lineup offers eye-popping numbers:

• Apple currently jostles with Exxon-Mobile to be the most valuable firm in the world, but growth favors Cupertino. Exclude desktops and in every major category it competes in, Apple enjoys double-digit growth and margins, and it’s creating new categories. In less than a year the iPad sold enough product that if it were a stand-alone firm it’d land at about the mid-point of the Fortune 500. Some in the press yawned when the iPhone 4S was introduced, but Apple sold a record breaking four million units in the first three days, double the rate of any prior phone launch. It’ll earn an estimated $368 on each iPhone (they’re carrier-subsidized). Apple is by far the most profitable retailer in the US on sales/square foot basis, performing nearly 2x greater than #2, Tiffany. Apple defies the law of large numbers – the biggest is getting bigger faster than less profitable, smaller rivals. And the firm’s cash horde is an insanely-huge $81 billion. No dividends- this coin’s ready for battle.
• If user attention and data are arms in the new race, Facebook sits on an arsenal no-one can touch. More than one in ten world citizens has a Facebook account – astonishing when you think the world population includes China (that doesn’t have Facebook), babies, and others who aren’t realistically online. More than half these users visit each day. While Google has been built on indexing the public Internet, Facebook’s data cache is out of the reach of Larry & Sergey’s spiders. Facebook’s $4 billion+ in estimated revenue this year is tiny, but the firm hasn’t even begun to turn data value valve yet. It has no external advertising network (no “Ads by Facebook” to rival the “Ads by Google” you’ll find everywhere from the NY Times to smalltime blog sites). Facebook collects two billion “likes” a day – that taste making is ready to become a commerce engine. Reed Hastings of Netflix is now on Facebook’s board. Why not bake a Facebook platform into consumer electronics like Netflix did – a “like” button on the remote control? Of course, when that happens, who needs the networks, Netflix, Nielsen, or any other media middleman? Facebook can send you the stuff your friends, and its algorithms, say you’ll love.
• Google gushes cash. Its ad business has grown about 30 percent this year despite the global recession. And despite Microsoft’s constant attempts to chip at its edges, Google still holds down about a 65 percent share of search. Larry Page has shown great ambition since becoming CEO earlier this year. He’s launched Google+ (far behind Facebook, but with bragging rights as the fastest growing social network in history), he’s killed 28 laggard products, and this year Google has made 57 acquisitions so far this year. The biggest was buying Motorola Mobility. That makes Google a handset manufacturer (a risky bet), but it also puts Google on the set top of millions (look at your cable box – if it says Motorola, that’ll mean Google if the deal clears). The $12.5 billion for Motorola also brings in 17,000 patents – a potentially vital resource. Apple has shut down Samsung in Germany and Australia this year, and Cupertino may come knocking, claiming Android is a knock-off of the heavily patented iPhone. Patents give Google a counterpunch. And while the free Android only delivers about $10/user to Google (all in the form of increased mobile ad sales from increased usage), that’s adding up to a billion-dollar business – a vital opportunity should PC search advertising mature.
  
• Amazon threw down in September, offering up a quartet of Kindles from the $79 base model to the $199 color, video playing, web browsing 7” Kindle Fire. At half the price of the iPad it’s smaller and does less, but Amazon competes with a different playbook – it’s willing to take a loss on Kindle (estimated at between $10 and $50 per unit) to get it in the hands of millions. The reason is simple. For Amazon the Kindle isn’t just an eReader or media playing ‘post PC’ device. It’s the store. And Amazon cannot afford to give up the store since the store is the business. Amazon Prime, the firm’s $79 program offering unlimited two-day shipping, shows the impact of lubricating commerce. The year before a customer joins Prime they spend $400. This number jumps to $900 the first year in Prime. And Prime subscribers are growing at a 50% annual clip (students, remember you can get in on Prime for free). Prime subscribers also get to stream thousands of free television and movie titles (the firm paid CBS $100 million for 18 months streaming rights that include Star Trek). In another four years analysts think Amazon will hit $100 billion in revenue, passing the mark faster than any firm in history, and a full thirteen years faster than Wal-Mart’s pace. Amazon has bought up competitors that get to the edge of threatening it (Zappos, Diapers.com), and has done so thus far without justice department scrutiny. And it’s influence is way beyond retail and media. The Amazon cloud is the IS infrastructure for firms ranging from startups to Netflix (FastCompany claims that “even Apple relies in part on Amazon’s cloud infrastructure”).

As tech gets cheaper look for trends to continue. A couple of stats for our Moore’s Law fueled world – Amazon introduced the Kindle in 2007 at $399. Today it offers a base model at $79. Apple recently celebrated the 10^th birthday of the original iPod, a $399 device with 5GB of storage. Today Apple’ll give you 5GB for free in iCloud. As we say in class, Moore’s Law means the impossible becomes possible and it leads to a new kind of price elasticity where whole new markets open up.

Why Software is Eating the World
This article appeared in August and was recommended by many colleagues and former students but I’ve just gotten around to putting it in the WiG. It’s well worth the read! Marc Andreesen (the baldest guy at the right – click for interview video), current venture capitalist and the co-founder of two multi-billion dollar firms (Netscape and OpsWare/LoudCloud), writes in the Wall Street Journal that “every company I work with is absolutely starved for talent. Qualified software engineers, managers, marketers and salespeople in Silicon Valley can rack up dozens of high-paying, high-upside job offers any time they want, while national unemployment and underemployment is sky high. This problem is even worse than it looks because many workers in existing industries will be stranded on the wrong side of software-based disruption and may never be able to work in their fields again. There’s no way through this problem other than education, and we have a long way to go.” [note to those firms looking for a role-model program – at Boston College we’ve quadrupled the number of students studying technology & business in just four years].

Geek up – the trends are clear. In a decade broadband access has grown from 50 million to roughly 2 billion people worldwide. In the next decade five billion people will own always-on pocket computers – smartphones. In a decade, we’ve seen the cost of hosting Internet applications fall by a factor of 100 thanks to the power of the cloud. Firms that failed to see how software-driven businesses enable fundamentally different cost structures and competitive assets have failed miserably – witness Borders and Blockbuster, among many others.

Music is now software with record labels existing only to provide “software companies with content… Music industry revenue from digital channels totaled $4.6 billion in 2010, growing to 29% of total revenue from 2% in 2004.” Pixar was a software company – Disney was forced to buy it to stay relevant in the world of animated movies.

The highly controversial Groupon, which uses software to power and distribute local coupons, generated over $700 million in revenue in 2010, after being in business for only two years.

The trends can swamp even technology firms. While video game revenues are have doubled to $60 billion in five years, traditional firms such as EA and Nintendo suffer, while new revolutionaries Zynga ($235 million in Q1 revenues this year), Angry Birds parent Rovio ($100 million in revenue this year), and Apple (maker of the largest game platform in the world despite not offering a conventinoal ‘gaming device’) have redefined game content, delivery, and consumption.

And as our students study, Wal-Mart, FedEx, the airline industry, biotech, and financial services are all built on a bed of modern software. Oil and gas exploration happens because of data visualization and supercomputer analysis. Satellite imagery and math power modern agriculture. And as we’ve seen with drones and other defense initiatives, the modern soldier is increasingly a robot.

Not only does the manager need to think strategically about technology, they also need to think deeply about broader implications – privacy, security, and the downside if this technology guesses wrong or funnels behavior and activities in narrowly defined ways. But that doesn’t mean we should use less of this or even stop it. It does mean that if we’re to use it properly, all of us need to learn more about the role technology plays in our current world. Ignore it and you ignore our future.

The Science Behind Viral Marketing
We often talk about the value of viral marketing, but David Skok, a successful venture capitalist at Matrix Partners, gives the concept depth with this great slide deck (above), and accompanying post on “Understanding the Key Variables in Viral Marketing”. It’s a fantastic resource for anyone seeking to understand how to leverage virality to grow a business and potentially jumpstart network effects. We’ve been fortunate to have had David speak at a past Boston College Technology Council event, and he’s also scheduled to speak as part of a Boston College Venture Competition program. All are invited out to hear David talk on “Business Models 2.0: How the web is changing sales and marketing, and creating new business models”, at 6:30pm on Nov. 30^th. Location TBA, but stay tuned at bcvc.org and follow @BostonCollegeVC on Twitter for details. Also – those in the Eagle Startup Tribe also likely want to hear BC alum John Prendergast, leader of Boston’s Lean Startup Circle, talk about Lean Startups on November 9. 7 p.m. (location TBA).

Ready, Set, Pitch: A Recap of the BCVC Elevator Pitch Competition
Speaking of BCVC – 36 teams entered this year’s Boston College Venture Competition Elevator Pitch Competition. Judges included Bijan Sabet (BC alum and Spark Capital investor in Twitter, Tumblr, Foursquare, and many others), Katie Rae (Managing Director of TechStars Boston), and Greg Dracon (Partner at .406 Ventures). This year saw the first-ever awarding of a BC SEED track prize for social entrepreneurship. The track record of prior BCVC EPC participants is pretty strong – last year’s teams went on to win the Mobile Track in the Exec Summary Competition of the MIT$100K, place as a finalist in Mass Challenge, and win a slot in Highland Capital Partner’s elite and highly competitive Summer@Highland program. Lauren Landry of BostInnovation covered the event. Want to participate or attend future BCVC events? See http://bcvc.org.

Africa: Turning the World Upside Down
Many of you have written to say you’ve enjoyed the examples of “Tech for Good” that I’ve been including in recent “Week in Geek” postings. You may also enjoy this recap and overview of mobile technology in sub-Saharan Africa. Several locally-grown technologies are having wide and impactful use, including:

• M-Pesa, the text message payment service by Kenya’s Safaricom which supports about $1 billion a month in funds transfers.
• Ushahidi, a crowdsourcing visualization and mapping effort used for everything from exposing corruption to tracking issues in the aftermath of natural disaster. The platform now has over 20,000 deployments in 132 countries.
• Mxit, a South African mobile chat platform that has 3x the number of Facebook users in that country, and over 25 million users worldwide.

Also be sure to check out the great slide deck “Mobile Trends 2020 Africa” – chock full of stats, graphs, and lovely images.

Some Press
It’s always nice when our work gets attention. A few noteworthy items this past month include:

• Being named (along with my colleague Jerry Kane) to the BostInnovation list of “Top Boston-area Professors, Deans, and Presidents to Follow on Twitter”
• Quoted in the NY Time story “Apple’s Lower Prices Are All Part of the Plan”
• Quoted in the Boston Globe story “Investors in Startups Score Big Despite Slump”

Finally, like many of you, I was moved by the passing of Steve Jobs. I’d shared a personal reflection the next day and was honored to learn that a member of Apple’s AcademiX effort had shared it with the rest of their Education Team. It was simply a small way to honor not only the legacy of Steve Jobs, but also the hard working people at Apple who have created products that empower and inspire so many. We remain grateful for your work.

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Facebook As Tastemaker
The chart below shows that Facebook is a juggernaut. There is no other social network. Across all websites (not just social), users spend more time on Facebook than the four next most popular websites combined! 800 million users are on Facebook. Half a billion check in every day. The site is, in just seven years, a species-level eco-system sprung from the dorm room of a college sophomore.

Despite the many challenges of social advertising, Facebook should see revenue double this year to more than $4.25 billion. This week saw massive changes announced that promise to plant the firm at the center of a whole new digital nervous system. Facebook will become more powerful by making sharing easier and also by filtering this information more finely – to bring the most valuable stuff to the surface, help you find the old stuff, and allow you to dive deeper when you’re in the mood to explore what your friends are up to. And with each activity, you embed more of your life into Zuck’s machine. With these changes Facebook is fast becoming the fabric of the Internet, the nervous system of future commerce.

Facebook has split the old ‘News Feed’ into groups, now categorized as “Top Stories” and “Recent News”. Facebook will try its best to guess what you’ll find important, but you can click on an item and promote, demote, or hide it. Mashable offers a nice slideshow tour of the changes. Friend lists allow you to create groups so you can quickly see groups of posts (e.g. ‘Family’, ‘Co-Workers’, ‘Close Friends’), and you can easily post status updates just for groups. You can also ‘mute’ updates from friends that overshare. (Facebook explains this in a blog post w/pics & video). And a subscribe option makes Facebook more “Twitter-like”, allowing you to easily follow users who don’t friend you back, and to post updates for everyone to see.

“Lightweight” information (music, games, location updates, shared links) now goes into a new right-side bar called the “Ticker” that appears on each page. And a brilliant new extension of Facebook’s Open Graph API allows firms to create “Lifestyle Apps” that plug into the Ticker feed, making sharing instant if you agree (no “like” button required). Spotify’s CEO showed how you can click to instantly listen to songs your friends are streaming. Netflix and Hulu titles can also be automatically shared (in every country but the US, where the 80s-era “Bork Law” needs to be lifted before video’s viewed can be made public). Yahoo, The Washington Post, and Newscorp’s The Daily are among the news firms plugging in to the Ticker. Cooking apps, workout apps, games, and more can all integrate into Ticker sharing. Check out Facebook’s video demo of the “new class of social apps” below and you’ll get a sense of how, as Zuckerberg puts it, social apps will allow firms to “rethink some industries”. For cases where automatic sharing doesn’t fit, the Facebook Gestures effort rolls out a whole new set of verb buttons (“watched”, “listened”, “read”) to go along with “like”. Oh, and that embarrassing “poke” feature has been buried – no room for that undergrad cheekiness in the new landscape of social screen real estate.

Facebook’s beautiful new “Timeline” lets users curate photos, posts and video, creating a sort of digital scrapbook of their lives. It looks like something Apple could have designed (see the video below). Timeline will roll out slowly, but it is possible to get the feature today with a few extra steps. Technology Review has a nice piece on Nicholas Feltron of Feltron Reports who’s now at Facebook & is responsible for much of the implementation and design of this new hyper-sharing. Lifehackers and quantified life geeks, the new Facebook is your catnip.

COMMENTARY: One of the biggest challenges Facebook faces is balancing the goals of 1) encouraging users to share more, 2) surfacing the good stuff (signal) without frustrating users who receive too many valueless posts (noise), and 3) allowing users to be instantly social without jumping to another web location (the “hunt vs. hike” problem). The new multi-tier newsfeed looks like it hits the trifecta sweet spot balancing these goals with well thought out design.

For years we’ve seen advertisers build detailed guesses based on tracking cookies and other techniques of monitoring online behavior. These targeting techniques have been extraordinarily lucrative, but imperfect at best – tough to aggregate across devices (mobile, web), machines (work, home), and more. But on Facebook *you* tell the site *exactly* who you are, what you’re interested in, and who else might be interested in the same thing. This is a far more powerful game.

We shouldn’t be naive – there is a downside. As the “Are You Paying Attention” blog poses: “When will the first horror stories start coming out about engagement ring purchases, personal health issues and sexual orientations being inappropriately revealed due to auto-sharing?”. Is this just a new version of an opt-in Facebook Beacon? One that reaches deeper and wider? Is it just that we’ve become more accepting of this level of sharing? Has Facebook gotten better at framing benefits and putting users in charge?

For many, Facebook is a Borg-like hybrid – an electronic plug into their lifestream. And now the bioimplants run even deeper. It’s scary to some and several will say they’ll leave Facebook. The firm is likely to screw up again as it pushes the privacy envelope and fails to see pitfalls in the cascade of sharing (early reports suggested new features could reveal who “unfriended” you, an act previously thought private). But to me “Facebook Boycott” sounds an awful lot like “iPod killer” did in the prior decade. There was no iPod killer – the only firm killing the iPod is Apple – no one ever left and there was never an acceptable replacement. Zuckerberg has you locked into a network of your friends that most will never ever leave. The keys are network effects & data-driven switching costs – perhaps the two strongest barriers to entry that technology can create. And with the changes above, Facebook is well on its way to strapping a massive cash register onto those assets, too. As the New York Times puts it “everywhere on the site, users will be able to more precisely signal what they are reading, watching, hearing or eating. This will let Facebook reap even more valuable data than it does now about its users’ habits and desires, which in turn can be used to sell more fine-tuned advertising.”

Just look at how many services Facebook has been able to envelop simply by turning on features – photo sharing (sorry Flickr), link sharing (goodbye Digg). The new Facebook incorporates features of Google+, Twitter, Tumblr, and About.me. And does Netflix have to worry, too? Granted, Reed Hastings is on the Facebook board, but studios are offering product directly through Facebook. At f8, Hastings himself has detailed how he found Facebook’s social features to be more persuasive than Netflix Cinematch. If Zuckerberg can aggregate audience and make effective recommendations with Facebook data, then what value does Netflix offer studios? It wasn’t announced today and it’s likely still quite a bit away, but it doesn’t take much imagination to see where this is going – Facebook integration into the television – deep advertiser links, television apps, content recommendations, commerce. There’s a cut in there for cable providers, television stations, a promise of pay-per-performance advertising, targeted advertising, commerce-from-the-couch, and more. If Facebook can crack the privacy nut and put the user firmly in control, they could become a trusted partner for all in the a new commercial value chain, brokering efficiency and taking a cut along the way. Time to “rethink industries”, indeed.

Netflix to Split DVD & Streaming Businesses
Reed Hastings isn’t some lucky guy who stumbled into an opportunity and rode it to success, he’s a seasoned entrepreneur and admired visionary. Before founding Netflix, Reed Hastings built and sold one of the 50 largest public software companies in the U.S. After repeatedly being doubted by Wall Street analysts, Hastings had proven his chops again and again. So much so that Fortune named him 2010’s Businessperson of the Year, and both Microsoft (the nation’s fourth most profitable firm in any industry), and Facebook named him to their respective boards of directors. Under Hastings, Netflix drove Blockbuster into bankruptcy, repelled Wal-Mart’s DVD-by-mail entry, built a firm that had regularly topped customer satisfaction ratings by Nielsen, Foresee, and the American Customer Satisfaction Index, and enjoyed subscriber, revenue, and profit numbers that consistently and repeatedly tracked up and to the right… until about two months ago.

This summer Netflix announced it was effectively turning the company into two firms under the Netflix brand, and that its two services – subscription DVD-by-mail and subscription streaming – would be two distinct plans, each billed starting at $8 a pop. That represented a 60% price increase for customers who were previously paying $10 for unlimited streaming + one DVD-at-a-time. Customers complained and Netflix predicted it’d lose 1 million total subscribers in the next quarter. Then Netflix did something unexpected – it made customers even more angry. In an oddly timed Sunday morning blog post and video, Hastings announced the two separate services would now run on two separate websites – Netflix for streaming and a newly named Qwikster for DVD-by-mail (Qwikster will also offer video games for an added fee). Ratings entered on one site wouldn’t carry over to the other. Two bills would appear on a customer’s credit card statement. Although the announcement came with an apology for how the firm handled the transition, the announcement didn’t fix anger over prices or separate plans. In fact, it made the aggregate firms that trade under the ticker symbol NFLX more difficult for consumers to use together – shocking for a firm that had so successfully built its brand through customer experience. Adding to the pain is the embarrassment of the re-branding launch. While Netflix secured the domain Qwikster.com, the Twitter handle @Qwikster was owned by a guy whose avatar was cartoon of a pot smoking Elmo from Sesame Street. It’s hard to fathom that no one checked this in advance or that the rebranding was so urgent it couldn’t wait for the fix. Netflix has lost more than half its value since breaking $300 a share earlier this July.

Despite the trauma, many have argued that Hastings is doing what has to be done at some time – he’s separating out a business that’s inevitably going to wither, and public markets are unforgiving to firms that shrink over a long and protracted period. As TechCrunch put it, “Netflix is effectively hastening the death of its DVD business by making it inconvenient to manage both services”. We’ve seen firms kill popular features in their product line before – Apple killed the 3.5” drive and is hastening the demise of computer DVDs and Flash – but I can’t ever recall such a bold and dramatic move from a company that had been so successful.

Hastings has always known this day would come – he just didn’t know when. He knew the market for the DVD-by-mail business would shrink, and the asset he’d built through a 58 site coast-to-coast fulfillment network would begin to lose value. On several occasions he’s said “We named the company Netflix, not Mailflix or DVD-by-mail-flix.”

The problem is that streaming is different from the DVD business in just about every way: costs, content availability, infrastructure & distribution, competitors, innovation possibilities, opportunities for expansion & global reach (here’s a table I put together to outline the issues). DVD content is a fixed cost and any disc Netflix can buy it can then rent thanks to the 1908 “First Sale Doctrine” Supreme Court ruling. This ruling doesn’t apply to streaming and broadcast. Instead, streaming rights have to be acquired from content owners or firms that have a right to re-license work, and those costs are 1) skyrocketing while 2) much of the content isn’t available. As an example, consider that three years ago Netflix paid $30 million to license content from Starz, the nation’s #4 pay TV channel, giving the firm temporary access to premium titles from Disney and other major studios. This contract is up next year and Starz turned down $300 million for renewal – a 10 fold increase in license fees in less time than it takes my students to complete an undergrad degree! HBO is also one of many content owners that won’t license its content for streaming. The cable channel worries a Netflix that offers a larger selection and lower price than HBO will kill pay channel subscriptions. Instead, HBO offers it’s own HBO GO service for subscribers that want to stream. Streaming competitors are also more formidable than the DVD-rivals – many are well capitalized and motivated to win (Amazon, Apple, Google… even Wal-Mart is back). And consider streaming infrastructure. The $300 million it cost to build a DVD distribution network was a barrier that kept many new entrants out. But in streaming Netflix uses Amazon’s cloud – meaning other firms can ‘rent’ their way into the same infrastructure, too.

There is a potential upside – streaming allows the firm to go international without a physical infrastructure. And Technology Review suggests it’s shortsighted to assume streaming is just about the content you could get on DVD. A streaming future could be far more social. Premium events could include chats with writers/directors/actors. We haven’t begun to grok what premium content in a streaming world might look like.

And nothing says Hastings is limited to a single monthly subscription for all of its offerings. A streaming-only firm could create a targeted-ad business, streaming free or discount content to users who endure ads, respond to surveys, etc. Video-on-demand or other tiers are all a possibility – none of which are available in the single-subscription DVD-by-mail world.

Hastings clearly sees the big transition he faces. Moving from one industry to another, radically different one, is path that has killed once-dominant firms in the past. Writing in a blog post, Hastings states “Most companies that are great at something—like AOL dialup or Borders bookstores—do not become great at new things people want (streaming for us).“

As for the timing of the transition, also consider this: Netflix was and remains a very richly valued stock. Could it be that Hastings knew the share price of NFLX was destined to fall in the short-to-mid term, and he figured timing this with the pain of separating the firms would be better than a two-step pullback – a price correction followed by a subsequent decline from separating the business? Yes, the stock price is falling, but look at the firm’s P/E ratio. When Netflix hit $300/share it was in nosebleed territory. Even at the value as of this writing, the NFLX P/E ratio is 32. Apple (a firm that grew revenues over 70 percent last year and shows no signs this is going to let up) has a P/E of 16. Google’s is 18. Microsoft’s is just above 9.

NFLX management realizes the inevitable – the killer assets they’ve built in DVD-by-mail don’t all translate into streaming. Margins for DVD-by-mail may drop as subscribers find more of this content conveniently offered online, and US postal service troubles means the quality of the DVD-by-mail service will decline (slower delivery, no Sat. delivery) while postal rates inevitably will go up. So if 1) the stock is overvalued and due for a decline and 2) the existing asset value has peaked, let’s rip off the Band-Aid quickly – endure rapid pain, but then start the process of strengthening the only business for the future – streaming. There may have also been pressure to make Netflix fit nicely into the click-to-stream future that Hastings presented on stage at f8 just a few days after the Qwikster split was announced.

There are a lot of unanswered questions. One of Netflix key assets is customer data (remember the Netflix Prize?). But with two separate websites, reviews are collected separately. Will this data be integrated? Will Cinematch be developed jointly? Will NFLX split into two stocks, one for streaming, one for Qwikster. Is either part of NFLX acquisition bait? How are customer data and other technical assets divided up now and in the future? And if someone buys the firm, what do they really get? Subscribers, data, technology, management and staff, any durability to licensing deals or goodwill with studios and other partners?

It’s right to criticize Netflix for a botched customer outreach during the transition. Hastings has apologized even if the apology and follow-up could have been handled better. But it’s hard to see alternatives that don’t require NFLX to eventually become two firms – one that’s allowed to die and one that’s nurtured to try to grow quickly enough to snatch competitive assets ahead of rivals. The reality for managers is that oftentimes there isn’t simply a good and bad path to take. Sometimes the choices faced are: 1) a painful path and 2) a more painful path. Hastings was the hero-victor at the close of the firm’s first act, but whether the film ends a triumph or tragedy has yet to be seen.

Why the Dish/Blockbuster Streaming Service Won’t Wound Netflix
It looked bad when Dish Network, which purchased Blockbuster’s assets last April for $230 million, announced a rival streaming effort just days after the Qwikster debacle. The new effort would offer one DVD-at-a-time and streaming for the old Netflix price of $10. But Peter Kafka at the WSJ’s AllThingsD picks apart the hype. The service is only available to a subset of existing Dish customers who have the right tech connected to their sets. The Blockbuster effort would offer 3,000 movies available for streaming to TVs, and 4,000 for streaming to PCs, vs. 20,000 on Netflix. Blockbuster does include video games and $10 is better than $16, but it’s worse than $8 Netflix for more choices in streaming only. Also note that earlier this summer PC World compared the $16 Netflix plan to rivals and came to the conclusion that Netflix still offered the best value.

TechTrek in Entrepreneur Magazine
It was wonderful to see TechTrek get a full page of coverage in Entrepreneur Magazine, but even better seeing that so many of our students and alumni were profiled. Greg Nemeth of Y-Combinator’s WakeMate, Shahbano Imran of LocalOn, Patrick Allen (who, as a sophomore won the MIT$100K ESC Mobile track & made the finals of the MassChallenge), Bill Clerico of WePay (one of BusinessWeek’s Young Tech Entrepreneurs of the Year), and Eagle mentor extraordinaire – Peter Bell of Highland Capital Partners – all got mention. A gratuitous (c’mon, I’m a dumpy bald man) two-page photo spread showed me along side two extraordinary faculty from other schools – a distinguished group with both being chaired full professors running established centers. Nice to see our hard work is getting noticed.

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During a recent trip to Nairobi I was able to see the service in mainstream use throughout the beautiful and modern downtown area.  Citizens use mobile phones to pay for just about everything including cab rides, groceries, utility bills, and school fees.  Some employers even distribute salaries via M-Pesa. But while middle-class Kenyans have a technology many of us in the States would love to have, too – it’s the impact on the poor that’s most astonishing.  Not only does M-Pesa help secure cash that would otherwise be vulnerably stashed under the proverbial mattress, it’s also a conduit for city-dwelling migrants to instantly send cash back to their villages – no more “bus trip money transfers” or risky mailed envelopes filled with cash. More than ¾ of the service’s customers use M-Pesa to save. Safaricom execs say they’ll make the service ‘bigger than cash’. $20 (and falling) mobile phones are an economic lubricant empowering millions. And by 2012, 1.7 billion of the unbanked poor worldwide will have a mobile phone.

Here’s how M-Pesa works – just go to one of nearly 30,000 M-Pesa agents to perform an initial cash deposit.  To spend money – text a published account # along with the payment amount.  You’ll get a text message receipt back and your account will be deducted.  Want to receive money? It works the same way – you’ve got an account number you can share with others. Here’s a year old, but still very good video documentary of M-Pesa that faculty may want to share with class.  And another longer video produced by Safaricom.

Personal note: It was my huge honor to speak at the recent AIBUMA conference in Nairobi, where Safaricom CEO Bob Collymore also gave an address.  It’s important for those in the US and other mature economies to know that while we often see images of poverty in Kenya – slums and the rural poor – there is a vibrant, emerging economy taking root and a solid and growing middle class (African images that sadly, are still rarely seen in the west). In fact, downtown Nairobi, with its palm trees and modern buildings, looks at first glance like it might be part of downtown Los Angeles, and many of Nairobi’s modern shopping malls wouldn’t be out of place in any major US city.  I also had an opportunity to talk with students at the University of Nairobi Business School campus in the bucolic Kabete area.  There’s tremendous interest in entrepreneurship and I hastily put together a resource list of a small sampling of tech activity happening in the city. Investors  note – a July/August visit would allow you not only to check out the exciting, emerging tech scene, but also take in a Safari during “The Great Migration” – about a five hour drive away.  Combine the justifiable business expense with a family vacation!  For the curious, I’ve posted my own pics as a Google Plus photo album (I was in the Mara two nights & three days – despite the refugee crisis on the north border, there is thankfully no drought anywhere near the Mara or Kenya’s capital).  Nothing’s certain yet, but I do hope to work to create a Boston College “Tech in Emerging Markets” field study to bring our students to Nairobi, perhaps in the summer of 2013.

HomePlus Subway Virtual Store
Speaking of global tech innovation, now let’s visit S. Korea. Tesco’s S. Korean brand, HomePlus, looked to compete with much larger E-Mart without increasing the number of stores.  The solution is ruthlessly cool, as this video shows.  The firm posted virtual displays in Korean subway stations – billboards that show actual merchandise. Users shop on their way through the station, scanning QR codes with their mobile phones.  Online purchases are then scheduled for delivery when shoppers arrive home.  Mobile phones and m-commerce mean the billboard can be the store. HomePlus online sales are up 130% in three months, registered users are up 76%, and the firm snagging the top spot in online sales and narrowing the overall gap with E-Mart.

How Social Media Affects Content Relevance in Search
Google’s PageRank search results ranking algorithm is largely based on inbound links – the more websites that link to a web page, the higher that page will appear in Google rankings.  But now social media is fueling ranking, as well.  While marketers have had to scramble to master SEO this past decade, they’d best beef up social skills, too, otherwise their brands may fall off the search engine radar.  Web users now share 30 billion pieces of content on Facebook and tweet 5 billion times a month.  And about a quarter of that includes links to other content.  Although the major search engines remain secretive about the inner workings of their search rankings, the two largest search engines – Google and Bing, now fess up that search results are positively affected by social signals such as tweets, Facebook Likes, and Google +1’s. One recent study of Google results showed that “tweets and Google+ shares dramatically affected the rank of new, previously unindexed content. The results in most cases were nearly instant.”

The developments don’t just mean that marketers need a new skill – they also underscore the strategic importance of social media to Google.  Earlier this year Google was skewered in the press for having less relevant search results that were increasingly polluted by so-called “content farms” like about.com – firms that create ad-filled pages with weak content but that are optimized to rank highly in Google searches.  But social can potentially counteract those that try to game the system – likes from verifiable social media accounts and especially from your friends or those with a similar surfing profile – could help surface the links you’re likely to want most – all while bypassing the “content farm spammers”.  That’s why Google needs G+ to be successful, and why Facebook and Twitter may hold valuable trump cards in the evolution of search. Oh yes, and kindly “like” Gallaugher.com at the top of the home page, and do consider +1-ing it in Google search.

Social Power and the Coming Corporate Revolution
On a somewhat related note, David Kirkpatrick makes many points in Forbes that I share with my students (and uses many of the same examples) – Social (combined with mobile) will charge the current generation of managers to be more honest, show more humility, behave with a higher ethical bar, show greater attention to customer service, and focus more on employee satisfaction than their predecessors. And on top of that they do so with a vastly more complex business environment – one with far flung global partners, markets, and rivals. The senior manager that doesn’t understand the freight train that is mobile and social will almost certainly be steamrolled.

In A Tough Labor Market, Software Developers Wanted
“Everyone in the room wanted to talk to me”. So says a recent tech grad at a university career fair in this Curt Nickisch WBUR broadcast.  Despite the down economy, the Boston-area, and many other US cities, don’t have enough technologists to go around.  And just about every other major discipline demands more tech skills.  Marketers need to know SEO, social media, CRM, and “big data” analytics, finance folks bound for Wall Street need to understand tech to value M&A deals & IPOs, accounting firms are beefing up their tech hiring, operations can’t be rewired without tech, LinkedIn and other social media skills are the new HR toolkit, and the geeks are clearly at the strategist table.  Geek up new college student.  Your future demands it!

United’s iPad Deployment Lets Pilots Shed Excess Baggage
United Airlines, will give iPads to some 11,000 pilots.  The move allows the firm to replace the roughly 38 pounds of manuals, charts and logbooks on each flight with a single 1.5 pound tablet. Trees rejoice – the move will save nearly 16 million sheets of paper.  Even more significantly the reduced rate will also shave some 326,000 gallons from United’s yearly jet fuel bill.

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March of the Tencent Penguins
Shenzhen-based Tencent may have a cute, winky penguin as a mascot, but the firm is a Goliath. Publicly traded Tencent is the largest Internet firm in China.  It has a user base about as big as Facebook’s (in the 700 million range) and a market cap approaching $50 billion (Forbes says the firm’s co-founder & CEO Pony Ma is China’s 9^th richest person).  Tencent did $3 billion+ in revenue in ’10, and earned $1.2 billion in profit. The stock is also up 5,000% since it’s IPO in 2004. Flush with cash, they’re on the hunt.  Acquisitions include a $400 million bounty paid for LA-based Riot Games (maker of the online game “League of Legends”), and they’re in greater-Boston, too (the Concord-based Tencent office even nabbed one of my former TechTrekkers as an intern). Last year Tencent invested $300 million in Russian investment firm Digital Sky Technologies, a company that has holdings in Zynga, Groupon, Facebook, and Twitter. Groupon is partnering with Tencent, Zynga is bringing its games to Tencent’s networks, and celebrities endorsing Tencent services include Chicago Bulls point guard Derrick Rose. Says Sequoia Capital’s Michael Moritz “If you are a Silicon Valley guy and you don’t have Tencent on your radar, you have to be deaf, dumb, and blind… They are extraordinarily thirsty and aggressive.”

The firm’s 11,400 employees oversee a stable of properties that include China’s popular QQ chat service, a host of games, the Q Coins virtual currency, a search engine, an e-commerce marketplace, a Twitter-like service (Tencent Weibo – pronounced “way-baw”) that has 200 million users (about Twitter’s numbers), and two social networks that combine for half a billion members – pengyou.com (Mandarin for friend) and youth-focused Qzone. Those are a lot of properties, but the bulk of earnings come from the sale of virtual goods.

Tencent rivals grumble that the firm doesn’t innovate, it just bullies its way into lucrative markets after others pioneer and show promise (“says one account, Tencent is never the first to “eat crab”—a localism meaning “try new things”). But Tencent’s success speaks for itself. Obvious success wasn’t always the case.  In 2001, South African media group Naspers bought out Tencent investments made by IDG and the son of a Hong Kong billionaire.  The $32 billion Naspers put in for a 47% share of Tencent is now worth over $16 billion,” making it one of the most profitable private equity investments of all time.” Another fun fact, many of the firm’s employees have adopted English nicknames.  BusinessWeek states the company’s internal message boards are filled with posts from the likes of “Thunder”, “Fruity”, and “Neo”.  If you find these handles online, be nice.  They might soon be your boss.

Nathan Eagle: Global Mobile Workforce
Check out this video of the PopTech talk by MIT Prof. Nathan Eagle.  Eagle is founder & CEO of txtEagle, a system that can compensate users for their input by offering them free mobile phone credits. The potential is big-impact powerful – one of Eagle’s test examples was soliciting real-time updates on blood supplies from field nurses in rural African hospitals.  Initially there wasn’t much of an incentive – nurses were effectively taxed for texting blood bank status because their personal phone accounts were charged for airtime (and this can represent a sizable chunk of a rural nurse’s income). But Eagle’s system offered modest cell phone usage credits in exchange for nurse input, and the result was a huge spike in the response rate – Tech for Good in action! txtEagle has since built a compensation platform that’s integrated into the billing systems of 220 mobile phone operators in 80 countries, providing access to roughly 2.1 billion mobile phone users. Among the ideas is pay-per-survey market research that can help brands understand their next 2 billion consumers.  Says Eagle, “This is a massive hammer & I’m still looking for nails.”  Seems the venture community thinks those nails are out there – Eagle raised $8.5 million for the effort earlier this year.

Eagle’s talk also offers examples of how mobile phone data can inform development. For example, geotargeting usage patterns reveals how a previously silent population lives, and can inform things like the placement of sanitation infrastructure, schools, clinics, the organization of labor markets, and more. And as phones get smarter and cheaper, look for richer opportunities. There are 2x more people online in the so-called developing world than in industrialized nations, and cheap Android phones grease the wheels of commerce & opportunity.  While it’s great that my students have Eagle in their own backyard, some of the most exciting innovation happening in emerging markets is led by locals.  Forbes chronicles how mobile phones are transforming commerce in Africa (led by Kenya’s Safaricom and the M-Pesa effort), and Visa decided it needed some S. African innovation, plunking down $110 million for mobile financial services infrastructure provider, Fundamo.  In roughly the last half decade or so, I’ve seen my American-born students go to work for Asian giants like India’s Infosys or China’s Tencent.  It’s only a matter of time before firms from sub-Saharan Africa start recruiting on The Heights. I’ve got a lot to learn but am thrilled I’ll have a chance to learn more as I travel to Nairobi later this month.

When Patents Attack
This podcast from NPR’s This American Life exploring absurdities in the U.S. Patent system is fascinating, entertaining, and downright scary.  Some background: most folks understand why we have patents.  Inventors who come up with a “useful, novel, and non obvious” innovation should be able to protect their creation from being copied by a larger, better resourced giant that can steal an idea before the little guy can make a market. This kind of protection should be a catalyst for innovation.  But drawing the line between something that should be protected and something that shouldn’t is up for big-time debate.  I often share with my students some examples of the more ridiculous ideas that have previously received U.S. patents, including: a method for exercising a cat with a laser pointer, a method for swinging on a swing (awarded to a five year old), and a method for a comb-over (as a bald man myself I’d like to see them try to enforce that one). There’s even a patent on toast (U.S. Patent No. 6080436 – a thermal “Bread Refreshing Method”). But beyond cases of patent craziness, should business methods be patentable? For example, should Amazon.com have been awarded a patent for the one-click ordering method (portions of which have now been overturned)? Should software be patentable? Is it ‘just math’, or a resource-intense invention akin to biotech that needs legal protection to incentivize innovators?

This American Life’s broadcast takes us to the offices of Intellectual Ventures (IV), run by former Microsoft Chief Technical Officer Nathan Myhrvold (whose side projects include the high-tech $625 “Modern Cuisine” cookbook). Myhrvold’s firm has been accused of being a ‘patent troll’ – a firm that buys up patents, then exploits these rights not by innovating, but by demanding payment from others.  Intellectual Ventures claims it helps foster innovation by protecting and providing value to the small-time innovator.  But in tracking one of the ‘success stories’ IV pointed reporters to, This American Life uncovered some 1,300 shell companies owned by Intellectual Ventures, many of which were involved in aggressive patent litigation.  The TAL reporters take us to a corridor of empty offices in East Texas (an area favorable to defenders in patent cases) where many of these shells are “headquartered”.

One of the problems with the current patent system is that issued patents seem to cover just about anything.  As TAL says, if you’re a firm doing something online – you’re probably violating someone’s patents.  So today many “tech companies use software patents as offensive and defensive tools to battle one another, or to make money, or both.” Is this defense of the little guy?  A few months of patent litigation can sink a startup.

Moves involving some of the world’s largest tech firms underscore the amount of money brought to the patent war arms race.  A recent auction of Nortel patents fetched some $4.5 billion – double what many were expecting.  The winners were a consortium that included Apple, Microsoft, RIM, Sony, and Ericsson.  An opposing bidder – Google. That $4.5 billion is a sunk cost that doesn’t make your product any better.  Google may have missed out on Nortel’s patents, but it recently bought more than 1,000 patents from IBM, covering things such as systems and methods for Web-based querying, and ranking and retrieving documents. Google is also rumored to be in the hunt for InterDigital, a firm that holds many mobile patents (some $3-$10 of the cost of an iPhone goes to the firm), and which some speculate might fetch in excess of $5 billion.

And in an interesting back and forth (that shows the role social media is playing in legal battles), execs at Microsoft and Google have sparred over their patent bidding.  Google claims the consortium is ganging up against the Android-powered powerhouse.  But Microsoft execs have tweeted & blogged that the firm wasn’t excluded at all – it actually invited Google to be part of the consortium! Daring Fireball’s John Gruber asks: “How is Google’s argument here different than simply demanding that Apple, Microsoft, Oracle, et al should simply sit back and let Google do whatever it wants with Android, regardless of the patents they hold?” TechTrek friend Andy Kessler lists patent reform as one of the things the government can do to jump start job growth. Does congress have the will and ability to tackle reform? The health of our startup culture may depend on it.

Portrait of an Incubated Summer
It’s great to see the co-winner of the 2011 Boston College Venture Competition get some coverage from Inc. Magazine! As readers of the Week in Geek may already know, the venture formerly known as AddItUpp went on to gain admission to the fiercely competitive Highland Capital Partners program, Summer@Highland.  Now renamed Jebbit, the pay-for-attention ad effort is the youngest team in Highland’s coast-to-coast mentorship effort (some Jebbit members were admitted to the program while just sophomores – the technical lead was a freshman).  The teams in Summer@Highland get killer coaching, from rock-star partners (two are BC alums), execs in the firm’s A-list portfolio firms (we’ve got Eagles there, too), and others.  If you’re an entrepreneur, be sure that Summer@Highland 2012 is on your radar.

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Social Media History – The New Job Hurdle
A must read for students and employers! Students, beware what you post! A year-old start-up, Social Intelligence, scrapes the Internet for everything prospective employees may have said or done online in the past seven years.  It’ll scout out your upside – honors and good deeds, but also hunt for the bad stuff: racist remarks, drug references, sexually inappropriate posts, and identifiable violent activity including displays of weapons or bombs (yikes!). Social Intelligence reports have gotten past initial FTC concerns. Job candidates must consent to the background check, and are notified of any adverse information found. Reports also remove references to a person’s religion, race, marital status, disability and other information protected under federal employment laws. But those doing the hiring should be careful, too!  Warns one EEO Commission manager “Things that you can’t ask in an interview are the same things you can’t research,” such as information on a person’s age, gender, religion, disability, national origin and race.”

Commentary: This is a key issue – we warn students about employer searches all the time, but who’s warning the employers that social search done poorly could prompt a lawsuit? And screening is happening – 75% of recruiters are required by their firms to research candidates online, and 70% of U.S. recruiters report they’ve rejected candidates because of what was found online.

For job seekers, if you’re not responsible online, then fear your Facebook.  But there is an upside in a world where social media is the new resume – you can distinguish yourself as someone who’s smart, knowledgeable, curious, has something of value to say, and can attract a following. In fact, in some fields you can be screened out if you’re not active on social media. One VC recently told me that the firm wouldn’t seek out interns through college recruiters.  If someone didn’t catch the recruiting announcement on Twitter, then they weren’t working hard enough to become an industry player.  This isn’t all that new.  When I was in industry I’d regularly ask technical candidates ‘how do you learn?’ In those days alpha-geeks used Compuserve (yes, I’m old) or similar resources to vault a learning curve and avoid reinventing the wheel. Today technical recruiters should expect deft applicant use of Stack Overflow, Quora, and kin.   Also be smart and consider that your future coworkers will likely spend more time with you than their spouse & family. If a portion of what you share online is snarky gossip or grumbling, hyper-partisan political diatribe, or blowhard prognostication, then your social-self is recruiter repellant.  You may be really nice ‘in person’, but social media is the modern first impression.  Don’t blow the show.

Why Netflix Raised Its Prices
One of the cases in my book is on Netflix, and big changes are afoot!  Reed Hastings has essentially recast Netflix into two businesses – DVD-by-mail and streaming over the Internet, each operating with a distinct management team and subscription plan, but both under the Hastings-led Netflix umbrella.  DVD-by-mail is still wildly popular, but earlier this year the splash screen at Netflix.com dropped all mention of discs.  The flagship product is now unlimited streaming (priced at $7.95).  Want a disc-at-a-time subscription plan with that? It’ll cost you another $7.95.  A single subscription for the combined service used to cost customers just under $10, so the change prompted many to flame the firm. Overnight the Netflix Facebook page was bombarded with 44,000 angry posts, Twitter trended with the #DearNetflix hash tag, and the New York Times’ David Pogue called the move “a 60 percent overnight price increase — that gives you nothing new in return.” It’s a risky transition, but Hastings has framed it as a cost issue, claiming that if people are going to use both DVD-by-mail and video streaming services, then Netflix will need more money to support the very different costs associated with both businesses. Gripesters take note – PC World pointed out that even with the price hike, Netflix still represented a far greater value than any of the available alternatives. And Netflix is a firm that regularly models customer churn and has almost certainly run numbers on the risks and benefits of the pricing change.

There are pros & cons in this atoms-to-bits shift.  Mail charges drop (the firm represents 20% of U.S. first-class “flats” and 1.7% of all first-class mail revenue).  And eventually Netflix may be able to close some of its 50+ distribution centers. But the firm’s long-tail DVD inventory has a much shorter streaming tail that lacks many first-run titles (could be a boom for Redbox). DVD acquisition is also largely a fixed-cost proposition (the Supreme Court ruling known as the “First Sale Doctrine” allows any firm to rent out physical discs it purchases), but “First Sale” doesn’t allow for digital streaming. This leaves Netflix vulnerable as streaming licenses continue to rise.  Netflix gained access to Sony and Disney titles through a deal with the Starz cable network, but analysts think the renewal of the Starz deal may cost Netflix 10x the original price.  And licensing has all sorts of inconsistent provisions.  Sony titles were pulled when a viewing cap on streaming Starz content was exceeded, and some titles are pulled when cable networks bid for exclusive ‘viewing windows’. Others (notably HBO) refuse to share their content. And while in the atoms world a failure at one distribution center allows the others to pick up the slack, the bits-only side of Netflix has seen repeated failures in its bits streaming infrastructure, resulting in multiple service outages. The skeptic sees Netflix straddled between two businesses without getting the full efficiencies of a pure-play.  The Netflix-bull sees the firm’s size and ecosystem (you can now stream Netflix on over 200 consumer electronics devices) as insurmountable competitive advantages.  And look for Netflix to try to grow that scale even more.  The firm has announced plans to expand to an additional 43 countries (streaming only, of course).  And for those teaching the Netflix case, there’s one more tidbit you might want to mention to your students – Reed Hastings is now on the board of Facebook (a nice addition to the role he already enjoys on the Microsoft board).

Google+’s Circular Logic
There’s also big news relevant to Google (another case in my book), too.  Google’s success in social media has been mixed.  Its two biggest successes – YouTube and Blogger – were both acquisitions.  Internally-developed Orkut has for years ranked as the top social network in Brazil but has limited success in only a few other nations; and Google-hatched Buzz and Wave were both dismal failures.  But with Google+ the firm may have finally created a hit (says one manager of the launch ‘This could scarcely have gone better“).

The multifaceted service rolled out as an integrated collection of social products associated with a user’s Google profile (here’s my profile – feel free to follow). Stream is a newsfeed, Sparks is a recommendation engine, Hangouts is a video chat service that can support groups, Huddle offers group texting, Circles helps manage sharing contacts (so you can share a given item with just ‘friends’, ‘business contacts’, or any other sharing circles you want to create) and Photos is an image sharing service that leverages the firm’s Picasa offering.  Novel features are layered on top of elements similar to those found in Facebook, Twitter, Tumblr, Skype, and Group.me.  And initial Google+ features are just a start – the firm has promised to add Games, Questions, services that allow businesses to get in on the socializing, and more. Mashable offers a Complete Guide to Google+, with links to ‘how to’ videos.

Learning from earlier failure, Google+ got a lot of things right.  The interface design was praised (Andy Hertzfeld, a member of the original Macintosh design team, was behind design efforts), and the new features were tightly integrated with other Google products.  A toolbar that runs on top of most Google services means that Google+ is just a click away (but bad, if that creates a ‘bundling’ concern that Google favors its own products over rivals – think Windows/IE/Media Player anti-trust rulings).  Circles were easily built from Gmail contacts. The big upside is control that makes Google+ “as good for a whisper as it is for a shout”. Circles potentially gives you the best of Facebook & Twitter – sharing isn’t reciprocal (when you post you specify whether it’s viewable by the public, or only by select circles), you can follow whoever you want, and you’re not limited to the 140 Tweet limit. The downside? Fragmenting the market. I already post to Twitter, Facebook, and LinkedIn.  Unless a service like TweetDeck comes along that adds easy G+ posts side-by-side with these others, then there’s gonna be a shakeout.  Google+ will need to build its user base fast if it wants to last – a tough task but the rollout promised a contender.  Despite being launched only in invitation-only beta, Google+ attracted some 10 million members in just its first two weeks, making it the fastest growing social network of all time. Michael Dell has hosted over 22 Hangout video chats, Mark Cuban is a Google+ posting fiend, and even Mark Zuckerberg has a G+ account!  That’s a great start, although still far behind Facebook and Twitter.

Look for Google to recruit friends to build the platform.  It’ll offer social game firms more favorable rates than Facebook, which takes 30% of sales and has a cushy relationship with Zynga (Google’s in-app payments ask for only a 5% cut, although it isn’t clear if this’ll be the G+ rate). Google will also host games, allowing game makers to save on infrastructure costs. Oh yeah, and while Facebook & Zynga are close? Google is also a major Zynga investor. If Google+ is a hit, the firm could gain an opportunity to serve more ads, grow additional premium services (a game currency, fees for increased photo storage), and gain additional data and insight that can be used to help in search, content recommendations, and ad targeting. Competing in winner-take-most markets where network effects dominate will be tough, but Google brings a number of assets to the table (think size, scale, brand – hundreds of millions of people with Google user names and passwords, an army of Android smartphone users) and seems committed to growing the effort. Earlier this year CEO Larry Page stated that Google will tie employee bonuses to the success of the firm’s social efforts. For an insider’s look at the making of Google+, see this piece from Wired by “In the Plex” author Steve Levy, who researched his book but remained mum during the service’s development.

Apple Blows Past Estimates
In the days before the iPhone launch, Boston College alumnus Phil Schiller gave my students a master class in Apple marketing, then days later invited the group to VIP seating for Steve Jobs’ keynote.  That day we watched tech-industry history unfold.  The iPhone business is now half the revenue of the second most valuable company in America (see chart). The iOS-based iPad, not yet two years old, is a $6 billion business, that’s not just bigger than the Mac at $5 billion, it’s at a run rate that last year would have put just the iPad business at the edge of the Fortune 100. Mac sales (already growing far faster than the industry) were up 14% over a year ago. Revenue is up 82%, and profits up 125%. The firm’s cash balance of $76 billion is greater than the market cap of more than 40 of 2010′s Fortune 100 companies. The once left-for-dead firm is not only huge, it’s growing faster than most rivals – something the law of large numbers says shouldn’t happen.

The innovation continues.  Apple launched new products this week (a refreshed MacMini and Macbook Air), and OS X Lion.  The operating system was disc-less – it could ONLY be purchased online.  Apple sold a million copies in the first 24 hours. Between Apple and Netflix it’s clear that plastic discs are dead.  Accounting students may be interested to note that Apple has deferred some revenue related to software/feature upgrades so that it can legally roll these out without having to charge users (that’s accounting to fuel tech feature adoption).  And one bit of wacky news.  While Chinese firms are notorious for counterfeiting Apple products, it seems they’re now counterfeiting Apple stores, too!

Cyber Weapons: The New Arms Race
A slideshow in BusinessWeek’s cyber warfare cover story seems designed to make you lose sleep (sample: researchers hack into a moving car’s standard onboard systems to disable brakes, stop the engine, and control other functions). The perps in recent actual cyber attacks vary but its becoming increasingly clear that cyberwarfare is escalating worldwide. The feel good story of the year (mentioned in the last Week in Geek) involves Britain’s MI6 replaced an Al-Qaeda bomb-making recipe with one for granny’s cupcakes.  But the real watershed is Stuxnet (see this excellent Stuxnet video primer, and check out the Stuxnet crib-sheet).  Called ‘the most sophisticated cyber-weapon to date’, Stuxnet (allegedly launched via a U.S. and Israeli initiative, but never confirmed) infiltrated the Iranian nuclear program, instructing centrifuges to spin until they destroyed themselves.  Alarm systems were re-programmed and monitoring systems were sent messages that everything was OK, even as hundreds of pieces of physical equipment were breaking up.  To be clear, this wasn’t the familiar bits-only damage that most virus victims are familiar with – Stuxnet destroyed real, physical systems.  Expect more. The U.S. is building up the Fort Meade CyberCommand, and Obama has signed executive orders giving a military all-clear to use cyber weapons for a range of tasks from espionage to (with a further presidential directive) the crippling of an enemy’s electrical grid.

We might feel good that a nuclear threat was set back, especially when the alternative shut-down option would have been open-conflict, heavy bombing, and almost certainly human casualty.  But there’s now a fast-growing, venture-funded economy of cyber arms-merchants peddling offensive tech.  E-mails from the shadowy Atlanta-based firm, Endgame, were uncovered when the hacker group anonymous hacked a prospective client.  The e-mails detail a price list for offensive cyber tools and suggests that a menu of push-button hack attacks are now being peddled to customers other than Uncle Sam. “A government or other entity could launch sophisticated attacks against just about any adversary anywhere in the world for a grand total of $6 million. Ease of use is a premium. It’s cyber warfare in a box.”

The cyber arms merchant business is a wild west with unclear rules and frightening dynamics.  The ‘weapons’ are digital goods with no marginal cost – meaning an infiltrated ‘armory’ can be duplicated (perhaps without detection), and ‘deployment’ happens online. Got a PC, skills, and a broken moral compass? You could be an arms merchant and munitions factory all in one. Of course, the weapons themselves are considered to be ‘brittle’, since countermeasures can often be developed quickly once exploits are discovered (Stuxnet used at least four “zero-day” exploits that had been previously unknown and indefensible).

The past few months have shown worldwide vulnerability of even some of the most sophisticated organizations. The Pentagon was hacked this summer.  The attacks perpetrated against Google (dubbed “Operation Aurora” by McAfee) are ‘conservatively’ estimated to have infiltrated an additional 2,000 firms including Adobe, Juniper Networks, and Morgan Stanley.  The hacking raid on security firm RSA (also mentioned in the last WiG) nabbed code from SecureID tokens (a product used by U.S. government agencies, defense contractors, and major banks). BusinessWeek describes the hit as the equivalent of “breaking into a heavily guarded locksmith and stealing the master combination that opened every vault in every casino on the Las Vegas Strip.” There was also a 10-day attack on S. Korean computers in March took out thousands of machines (North Korea is suspected as the source).  Cyber security is clearly every employee’s priority.  See our security chapter for a primer on vulnerability and an overview of security measures (and look for an update, soon).

Millennials Make Millions
Faculty, here’s some inspiration to share with your students.  A few years ago Catherine Cook spoke to my undergraduate Computers in Management core class (Cook is also mentioned in the first chapter of my book).  I invited her to speak because she founded the successful social networking site, myYearbook.com, when she was just a sophomore… in high school! By 2008, myYearbook had grown to become the 15 most popular websites in the country, sporting more page-views than ESPN or Amazon. This summer myYearbook was sold to Quepasa, a social network targeted primarily to latinos  The price? $100 million.  That’s roughly three times what Newscorp got when liquidating MySpace.  Not bad for a woman who just graduated from college herself.  Congrats, Catherine!

WePay: BusinessWeek’s Best Young Tech Entrepreneurs
Pardon me for a prof’s point of pride, but it’s a real thrill to share the success of my former students.  I hope it inspires others! It’s been a pretty great summer for TechTrek alum Bill Clerico and his BC classmate Rich Aberman.  The duo were named to the prestigious BusinessWeek Best Young Tech Entrepreneurs list, TechCrunch crowed about their continued growth, and they’ve staffed up (they’re now 33 employees strong). The firm continues to offer a slick solution for groups to collect and spend money (nag deadbeats, collect funds in an FDIC ensured account, handle payouts, and expose a fraud-busting audit trail). But they’ve also moved into donation collection, ticket sales, and now store fronts.  Launch day included coverage from Forbes, Mashable, TechCrunch, Fast Company, VentureBeat, and they were the lead story on my favorite tech news digest site Good Morning Silicon Valley. The new service looks like a winner, charging a straightforward 3.5% fee , compared with: Yahoo Stores (cheapest plan: $40 per month + 1.5% fee + 2.9% paypal fee + .30), Shopify (cheapest plan: $29 per month + 2% fee + 2.9% paypal fee + .30) , and Etsy (3.5% fee + 2.9% paypal fee + .30)  (plus a 10 cent listing fee for every item). We remain hugely proud of Bill, who has gone from student to one of TechTrek’s hosting CEOs in less time than it takes most students to finish an undergrad degree. And co-founder Rich Aberman wowed BC TechCouncil West (and my undergrad students) during our May Palo Alto meeting.  Congrats to Bill and Rich on their continued success!

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Why Not All Earnings are Equal – Microsoft has Wal-Mart Disease
Here’s an insightful article highlighting the perils of stalled growth, a concept we introduce to our freshmen in their first course in management (see the strategy section at the end of the Google Case).  Citing a Conference Board study, Adam Hartung in Forbes writes: “When a company hits a growth stall, 93% of the time it will be unable to maintain even a 2% growth rate. 75% of the time we can expect it will fall into a no growth, or declining, revenue environment.  And 70% of the time it will lose at least half its market capitalization.” Ouch! And Hartung argues that Microsoft is struggling to find any reliable growth prospects to move the stock needle north.  To be sure, the firm is wildly profitable and mints cash.  It has $29 billion in just its offshore accounts. But all that cash with lackluster growth caused the firm to begin issuing dividends last decade (pretty much unheard of for growth-oriented tech firms).

Commentary: In its quest for new, multi-billion dollar markets Microsoft has found one in entertainment.  Fueled by the Kinect (the best selling consumer electronics product of all time), the entertainment division had a nearly $2 billion Q3.  But look at Bing and the results are grisly. BusinessInsider claims that Bing spends $3 for every $1 it brings in, and that losses are on a $3 billion a year run rate. Bing and Facebook have strengthened ties, with Facebook content and friends now influencing Bing results.  This could be a significant alliance (Google doesn’t have access to the ‘dark web’ of content hidden behind a Facebook login, but now Microsoft does).  However its unknown if adding Facebook’s punch to Bing will be enough to get users to kick the Google habit.

Microsoft’s recent purchase of Skype has lots of potential synergy. Merging Skype with Kinect would make home TV-based video calls a reality.  Skype is a nice branded feature to bake into the struggling Windows Phone platform (which will soon show up on all Nokia smartphones soon, a move that cost Microsoft $1 billion).  And keeping Skype’s 663 million accounts out of the hands of Google, or another rival, may also prove a savvy chess move (the prospect of a Google-owned Skype linked to Android, Gmail, and search ads may have been too much for Microsoft to stomach). Neat synergies, but profits are uncertain. Skype brought in about $860 million in revenue last year, but no profits.  And Ballmer’s shop plunked down serious coin in what is now Redmond’s largest acquisition ever -  $8.5 billion, about 3 times what Skype was valued at when it was spun out of eBay just 18 months earlier. With Skype inside Microsoft, the world’s largest software firm becomes the world’s largest international long distance phone company (by usage). Whether these moves are enough to help the King of the PC grow in a post-PC world remains to be seen.

Not All Revenue is Created Equal: Key to the 10x Revenue Club

Revenue analysis was a hot topic recently and this is also a really great read.  Benchmark’s Bill Gurley offers a great, example-filled listing of the key factors contributing to justifiably high valuations.  I’ve also got to admit a bit of pride that so many of these themes are covered in our intro course and textbook, including factors for sustained competitive advantage, network effects, switching costs / lock-in, churn, capex, viral customer acquisition, SaaS’s revenue model & business impact, scalabilty and margins and more. While b-school bashing is often in vogue, our students should feel really good about our focus, breadth, and the validation our programs regularly receive when positively compared against what thought-leaders find important.

The Internet Bubble
The Atlantic sums up an excellent infographic put out by G+, calling out a bunch of factors that suggest we’re in another bubble.  The 3x accrual in Skype’s valuation over 18 months was mentioned above, but also consider LinkedIn’s brief flirtation with a $10 billion valuation despite yearly profits of $12 million (PE as of this writing – above 1800 vs. the historical 15!).  The PE for Pandora (not on the infographic) is non-existent – no profits.  But it had a post-IPO value of $2.6 billion. Profitless two-year-old Groupon is planning an IPO that may value the firm at $25 billion. The deals site turned down Google’s $6 billion offer earlier this year.  And the site violates one of the growth tenants mentioned in the earlier article – it requires lots of human capital to scale.  Groupon will soon have an editorial staff bigger than the Chicago Tribune (or any Midwest newspaper), and it’s staff of 8,000 employees (half of them sales) is several times larger than profitable and revenue-rich Facebook. A recent NY Times profile of the photo-sharing app Color paints it as a sort of Webvan-esque failure, raising a shocking $41 million in Series A funding. Color’s 38 employees inhabit a space sized for 120 that includes a custom-built half-pipe skateboard ramp. Most see Color as a failure (should have read our Network Effects chapter before the launch).  By contrast, the far-more-successful Instagram raised just a bit more in total funding than Color spent on just the domain names Color.com and Colour.com, and runs with a staff of just four full timers.  Anyone who lived through the dot-com bust (one of the Computer.com guys, of 2000 SuperBowl fame, was one of my students) can recognize the signs. For a laugh be sure to check out Scott Kirsner’s “Bubble? What Bubble?” look back from Jan. 2013!

Commentary: But another side of this market shows valuations below historical averages, or that are not at all reflective of growth.  Microsoft (despite concerns mentioned above) has recently traded at a paltry 9 PE.  That’s about where Intel is, too.  Now, Intel has threats with rivals’ power-sipping ARM-based server chips threatening its high-margin big-iron business.  But both of these firms gush cash and are solidly and consistently profitable.  But the most shocking is Apple – a firm that grew revenues and earnings by over 70% last year, but which is still only slightly above the historical PE of 15.  Does the market really think (as one analyst puts it) that Apple won’t grow any more? So what we’ve got in the tech sector is a real anomaly.  It looks like a mottled market with big patches of both bubble and value.  Buckle up – tech can be wildly cyclical and it looks like we’re in the midst of the market equivalent of the Tacoma Narrows Bridge footage.

Why Content Isn’t King (and Netflix Rules)
Great piece in The Atlantic that complements why we teach Netflix as one of our first strategy cases.  Sure the stock is likely overvalued now, but the real point is that many predicted the firm would fail, yet Netflix has built real, durable assets for competitive advantage. “The dirty little secret of the media industry” is that content aggregators, not creators, create the most value.  Think cable channels: they simply aggregate old movies, cartoons, or television but put up margins several times greater than the studios that created the content.  How come? Distribution scales (fixed costs spread across multiple customers), customers have switching costs (with Netflix it’s queue, Cinematch, learning comfort, and habit-forming use).  Now think about studios.  Aside from sequels, do you really feel compelled to return to a Fox movie after watching one Fox hit? And what if the studio creates a superstar from their talent? A bidding war ensures that actually raises costs for the next risky, hoped-for blockbuster.  No – making movies is not a good business.

But the case for Netflix as distributor is even better.  While cable channels serve customers through cable providers, Netflix has a direct customer relationship, which it uses to gain feedback, tailor results, and serve with award-winning service.  While cable firms rank 18^th of 19 industries ranked by J.D. Power, Netflix is tops in customer service and recently even beat Apple in the 528 firms listed in Brand Keys’ survey of customer loyalty.

The author of the piece, Jonathan Knee, an iBanker and Media Program director at Columbia’s B-School, echoes key points we’ve taught our students for years: “Netflix’s ability to spread the fixed costs of content, marketing, and technology across a subscriber base vastly larger than any other competitor’s is continually reinforced by superior customer service, a powerful recommendation engine, and a great, habit-forming product.” Shockingly, so many don’t see the underlying strategic dynamic.  The investor Whitney Tilson wrote a “7,000 word” piece arguing for his huge bet against Netflix, and then scrambled to cover his short position after NFLX reached another new high. Wedbush analyst Michael Pachter once called the firm a “worthless piece of crap” and  put a price target of $3 on NFLX (at the time trading around $11).   A poster with Pachter’s photo and the “piece of crap” comment now hangs outside a kitchen at Netflix, and as of this writing NFLX trades above $250. Let’s repeat, the stock (with a PE above 70) is expensive and it’s likely that it will come down. And there are many hurdles to overcome.  Cable companies are trying to throttle streaming (Netflix is now the single largest source of Internet data traffic in North America and that telcos want to meter that traffic).  And negotiation for streaming content is a tough business, with some cable channels locking out Netflix during distribution windows, and others (HBO) refusing to play at all (look for even more coverage in our updated Netflix case due by August)  But here’s another scenario to consider: Fortune recently argued that Microsoft should buy Netflix and make Reed Hastings the firm’s CEO.  Hastings is already a Microsoft board member, Microsoft needs to strengthen its media strategy, and prior to Netflix, Hastings had already built and sold one of the 50 largest software firms. Netflix has a market cap of $13 billion and Microsoft would need to pay a premium, but Redmond is one of the few firms with the coin to pull that off.  Keep that scenario in your queue.

Hackers & Thieves, A Growing Web Menace
The Privacy Clearinghouse says that in 2011 we’ve had over 251 reported computer breaches involving the theft of personal information as of June, up from 234 in the same period last year. But given the headlines, you’d think the problem was much worse. Citigroup recently reported that the credit card numbers of some 200,000 customers had been compromised. A hack of Sony’s Playstation network exposed the personal records (and in some cases the credit card numbers) of about 100 million account holders. A subsequent Sony hack led to the posting of 54 megabytes of Sony’s developer source code and internal network maps of Sony BMG. Earlier this year a breach at database marketer Epsilon exposed the e-mail accounts of millions.  If you were a customer of Chase, Bank of America, Best Buy, TiVo, or a handful of other firms them you almost certainly got a warning message about this last spring.  Infected computers in the Massachusetts Executive Office of Labor and Workforce Development have put at risk the personal information of some 210,000 state residents.  Some hacks do get a laugh – like the bogus posting on the compromised PBS Newshour site that Tupac and Biggie Smalls were alive & living in New Zealand.  Others are far more serious. In March one of the most respected names in security technology, RSA (a division of EMC) was hacked.  Stolen data allowed the bad guys to spoof the firm’s SecureID login systems and infiltrate RSA clients that included defense contractors Lockheed Martin, Northrop Grumman, and telecom firm L-3. In an unrelated event, what was described as a “very major breach”, the International Monetary Fund was infiltrated, with private e-mails and documents compromised. Google also went public this spring with yet another accusation of major hacking initiative within China which was apparently targeted at opponents of the Chinese government.  Expect more.  Says a member of the House Committee on Intelligence, the current attacks will “look like amateur hour compared to what’s coming in the next decade… We’re not moving fast enough to close the vulnerability.”

So who’s doing this hacking?  A diverse group of actors.  The Sony breach allegedly came from members of a hacking group that is said to be motivated more out of protest and mischief than theft-for-profit (a 19 year old was among those arrested in the case). The Boston Globe suggests that gangsters are also moving on from credit card theft to markets for stolen corporate secrets, given that widespread hacks have flooded the market with credit card numbers, causing a hundredfold drop in the street value of a stolen card. In Google’s case, it may very well be that China that went after the firm’s account holders (China has confirmed it has a cyber warfare unit but says it’s for defense only). The West hacks, too – from Stuxnet’s takedown of the Iranian enrichment program to (my personal favorite) Britain’s MI6 replacing of an Al-Qaeda bomb-making recipe with one for granny’s cupcakes. And it doesn’t help that systems are becoming more connected, more complex, and increasing the opportunities for sloppiness to slip through.  For example, are you one of the 25 million Dropbox users?  Well, TechCrunch reports that your files were exposed to the world “passwords optional’ for about four hours on a recent Sunday.  Managers – learn the issues associated with security and make them a priority.  Here’s an accessible primer – the security chapter in our textbook.

The Startup Genome
An interesting, if controversial, attempt by the team behind the business accelerator BlackBox attempts to identify factors associated with successful startups.  The hope is that a “Startup Genome” can be mapped in ways similar to Pandora’s mapping of the music genome.  Key findings from the team’s first 67 page report are summarized in the TechCrunch post above, the full report is at http://startupgenome.cc/, complete with the requisite infographic.

Making Boston More Awesome for Young Entrepreneurs
The Boston Globe recently ran a collection of pieces anchored by The Road To Awesome, which examined the factors that make a region attractive to the young & talented.  Curiously, the often-cited costs and government efforts seem not to have much of an impact.  The piece includes a collection of essays by the young and tech-savvy with exposure to ‘tech hip’ locales in Silicon Valley & NYC, and it’s loaded with Boston College connections.  The Globe’s Scott Kirsner mentions WePay and thredUp (both Bay-area ventures started by BC alumni).  And the essays include contributions from BCVC ’10 winners Shahbano Imran & David Tolioupov (who also founded LocalOn in San Francisco), BC MBA ’11 Student Courtney Scrib (who attended BC’s TechTrek West & TechTrek NYC), and recent grad Andrew Boni, who helped lead BC’s IS Academy, was a participant in Valley-based TEC, and is headed to Google’s Mountain View HQ). All were former students of mine. Be sure to check out the slideshow featuring many of our alums!

I also offered my own thoughts on ‘Making Boston Awesome’ in a blog post.  I can’t take credit for it, but one of my recommendations was for Boston Magazine to celebrate one young entrepreneur, in particular, and it was nice to see a Boston Magazine story on SCVNGR’s Seth Priebatsch appear a few weeks later.  Now if we can just get those other requests I made come true…

Video: BC Minute – The Boston College Venture Competition
For those interested in the Boston College Venture Competition, here’s a brief & very slick “BC Minute” video. And here’s a Deeper Look at the 2011 Boston College Venture Competition Finalists from Bostinnovation. Particular congrats to AddItUpp, which won an additional $10k grant as part of the selection to participate in Highland Capital Partner’s ultra-competitive Summer@Highland program, to MogloApps, which has launched their location-based game in Apple’s App Store, and to LeaseDash, which is a finalist in the MassChallenge (as a testiment to their entrepreneurial chops, know that members of this team also took the MIT $100K Executive Summary Competition with a previous idea called CityPenguin – since discontinued due to changes in the Twitter API).

Apple’s AcademiX Conference 2011
I was hugely honored to have been asked to give one of the 8 presentations at Apple’s AcademiX 2011 conference.  Apple’s “TED for Ed.” was held in four locations and simulcast to an audience of 2,000.  Speakers a med school dean, a law school dean, and a former ambassador – all talking about how tech has impacted their work.  If you’re interested in the role of social & mobile in higher-ed, my talk was titled “Mobile & Social: Higher Ed Rocket Fuel”, and it can be streamed via the above link.  It was great to see BC’s efforts given exposure!

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Oh yeah – and I’m headed to Nairobi to give a keynote talk in late August.  I’d love to hear from anyone with experience / advice for a first-time Kenya traveler.  I’m also very interested in researching what we at BC call “Tech for Good”, the use of information technology to empower developing regions, and want to keep this in mind as I travel, too. Any thoughts / suggestions / comments are most welcome.  Thanks!

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Tech Jobs Boom like it’s 1999
Break out that Prince single, in the geek’s world it’s time to party like it’s 1999. High Tech is undergoing its biggest hiring binge in over a decade.  Microsoft has announced raises for everyone. Google also gave everyone a raise last year (including paying one uber-geek $3.5 million to keep him from fleeing to Facebook).  The search sovereign alone hired 1,900 new employees in just its most recent quarter. HubSpot and Meebo are among the startups that will now pay anyone $10,000 for referring an engineer that these firms eventually hire.  And eBay’s recent (rumored $135 million) acquisition of Boston-based Where is in part an enormous experienced-hire program designed to bolster the firm’s mobile efforts. One recruiter says we’re deep in a money war for engineers. “If you are highly talented and risk averse, a major brand (Facebook, Twitter, Zynga) is where you end up” Not only do these firms pay well, but each offers high prospects for the IPO or buyout gravy train. “If you’re talented and not risk averse, you start your own company.”

Facebook Open Sources Its Servers and Data Centers
As Facebook’s VP of Technical Operations puts it, data center plans were like Fight Club with the first rule being that you don’t talk about them.  Not any more.  Facebook has built the world’s most energy efficient datacenter in Prineville, OR (photo tour and video), and it’s telling the world how it did it.  The social network’s Open Compute Project (more video) shares plans and CAD files for things such as the server power supply, chassis, motherboard, and cabinet specifications, battery backup cabinets and data center electrical and mechanical systems.  Facebook claims its redesigned, stripped-down servers are 38% more efficient and 24% cheaper than those sold by major manufacturers. Zynga is among the firms considering using Facebook’s design.  Serves in the Facebook design are made with commodity x86 (Intel or AMD) chips, use one screw, and snap together in minutes (Container Store-style, as GigaOm put it). The server chassis is a bit taller to accommodate larger, more efficient heat-sinks – claw-like structures on top of chips that draw potentially damaging heat away from sensitive computing components.  Better heat-sinking lowers cooling needs. Facebook servers can also run in steamier environments, with Facebook’s Prineville facility operating at 85°F and 65% relative humidity.  This lets Facebook rely on evaporative cooling instead of air conditioning. When it’s toasty outside water is sprayed on incoming air to cool it down.  And when it’s cold, warm air from the servers is routed to heat up offices. By using a 277 volt electrical distribution system in place of the standard 208 volt system found in most data centers, Facebook has created a hyper efficient system that loses only about 7% of power vs. a 22-25% loss at typical data centers. Facebook has installed a set of solar arrays, too, but it only generates a fraction of heat needed.  Greenpeace would have liked the server farm to be placed in a low-carbon footprint area (most of Prineville’s power comes from coal). But sharing ultra-efficient data center plans is a step in the right direction.  It also underscores a key fact of Facebook’s strategy. Its competitive advantage isn’t in data center design – it’s in the network effects and switching costs the company’s social network has created.  The Register pointed out as much (been reading our case, blokes?).

Inside Amazon’s Cloud Disaster
Cloud computing can bring tremendous benefits.  Firms ‘rent’ someone else’s infrastructure instead of having to build out their own.  In many scenarios, costs drop and firms can rent more capacity to scale up when need arises. This can be great for startups – allowing many to launch with much smaller capital requirements than in the past.  But if your cloud goes down, it can be the equivalent of your ‘front door’ slamming shut – keeping customers and staff out. The April 21^st failure of Amazon’s cloud left many startups in the lurch.  Hootsuite & Quora were down completely, Reddit was in ‘emergency read-only mode’, and Foursquare, GroupMe, and SCVNGR experienced glitches.  For an unlucky few firms, the failure stretched into a second day, while most other Amazon customers, including Netflix & Zynga, appeared to be entirely unaffected.

The cloud crash provides a lesson in fault tolerance & redundancy.  And while as of this writing it’s unclear what happened, BusinessInsider points out that the Bezos cloud was supposed to separate parts of its data centers into different “availability zones,” where by an outage in one zone wouldn’t impact others. BI suggests that even though Amazon runs multiple large data centers scattered throughout the US, there wasn’t a complete backup of many cloud client systems that was able to be switched on at another location when needed.  The cloud has been pretty reliable, and big firms ranging from Pfizer to the Nasdaq are Amazon cloud customers, but all systems need to be tested as part of a disaster recovery plan – testing which apparently wasn’t thorough enough this time.

Intuit’s Big Refresh
Technology Review covers how Intuit has turbocharged innovations.  Among the ruthlessly cool new services is SnapTax, an iPhone and Android app that prepares and files a United States 1040EZ tax form when a user takes a smartphone photo of their W-2.  Teams are encouraged to brainstorm several ideas at the outset of a project, instead of getting attached to the first one. Teams also frequently touch base with target customers to get regular feedback to ensure they’re on the right track.  The SnapTax team, for example, would trawl Chipotle and Starbuck stores, soliciting feedback from SnapTax’s user demographic used to further refine ideas & designs. For this past tax season the SnapTax app was free to download, but charged $19.95 to file taxes electronically.  Intuit is also deep into one the most significant and successful packaged-to-cloud/SaaS shifts in the industry.  Fueled by new applications as well as savvy acquisitions (such as Mint.com), Intuit last year had already boasted $1 billion in cloud revenue.

FT Series on The Connected Business
Technology is radically changing the face of the Human Resources function.  Consider that firms used to horde their employee directories for fear they’d fall into the hands of a competitor.  Now rivals can use soon-to-be-public LinkedIn to offer a rifle-scope talent raid, complete with resume access, the ability to view endorsements, and discrete private messaging.  Put this way, the bar for employee satisfaction has never been higher.  The Financial Times exposes some other HR-focused developments in its ‘Connected Business’ special section, noting that the face of HR is increasingly a portal, not a person.  Software such as StepStone feeds website job postings to LinkedIn, Twitter, Monster, and other sites. Retailer Makor reports these systems have helped save the firm more than $1.2 million in recruiter agency fees, all while increasing the quality of the candidate pool. Another example cites that data mining through shift management software can save firms upwards of 3% of labor costs via more efficient scheduling. And talent management software can help firms track metrics that showcase stars and identify slackers.  The talent management software category grew 41% between ’09 & ’10, with two leaders (SuccessFactors and Taleo), both posting 2010 sales above $200 million.

Apple’s Quarter: A Blow Out…Again
The last quarterly report before our students head to Cupertino on TechTrek was once again freakishly strong – providing great fodder for class discussions on strategy, execution, profits, growth, and firm valuation.  Cupertino’s quarterly profits were up 95% year-over-year to nearly $6 billion – another record for the March quarter.  The firm sold 18.65 million iPhones in the quarter, up over 2x year-over-year.  The device is a corporate hit, with 88% of the Fortune 500 testing or deploying the iPhone. Laptop sales were up 53% vs. a year ago. Half of all Macs (both portable and desktop) sold were to new customers switching from Windows-only platforms. Mac sales have outperformed the overall PC market for 20 straight quarters. The firm sold 4.7 million iPads including every iPad 2 it could make. As for iTunes, sales are up 27% in the last year. Over 10 billion apps have been downloaded and Apple has paid over $2 billion to iOS app developers. Although cautioning the situation is unpredictable, Apple claims “we did not have any supply or cost impact from Japan quake in Q2 and we don’t anticipate any in Q3”.

Your iPhone is Tracking You. So What?
Apple’s quarterly numbers came out following reports that iPhones store a local minute-by-minute time-stamped location logs.  David Pogue’s blog offers a quick read correcting misinformation and showing examples of what’s really being kept, how it can be accessed, and frames it in the context of what’s really at stake. Wired points out that Apple actually disclosed the practice more than a year ago.  Data collection is tied to the firm’s iOS 3.2 move away from Google/Skyhook Wireless location data to its own services.  Regular updates (recorded when Location Services are “on” in iOS device settings menu) allow the accuracy of the geographic database to be continually refreshed.  The data are anonymized with a random identification number generated every 24 hours, and are transmitted over an encrypted link to Apple every 12 hours. Essentially this means you’re helping build location services by being enlisted as an anonymous mapping censor.  So despite headlines this isn’t about a big database in the sky with your name and movements on it.  The WSJ (image above left) points out that Google’s been doing this, too (and of course, mobile providers know where an account holder is when they provide voice & data services).  One likely gaffe was exposed and this is a very important lesson for tech students: the iOS file was stored unencrypted by default (backups can be set to encrypt in iTunes) and it seems this file will linger seemingly unnecessarily for up to 10 months (odd since anonymous updates are sent to Apple about every 12 hrs).  That means that if someone stole your phone or had access to your backup, then they could potentially download a file (consolidated.db) that exposes your movements.  This really isn’t a big deal for most users, but potentially quite important for those who count on secrecy. Apple does provide a method for corporate users to remotely ‘wipe’ their missing phones, and the firm clearly understands the importance of user privacy.  Analysts suspect that the locally stored file was likely mistakenly allowed to linger, and that the implications of the file weren’t considered when auditing security on the iOS release. In an age of constantly connected devices, constantly changing security threats, rising concerns over privacy, and a high-velocity media that’s always ready to hype a headline, it’s critical that engineering teams consider the broad implications of design, data storage, and deployment.

Eagle Eyes on Turning Point
The moving and powerful work of Carroll School of Management Egan Professor, and Information Systems Department Chair, James Gips is profiled in the PBS documentary Turning Point. Prof. Gips’ work allows severely handicapped individuals to communicate using ground-breaking assistive technology. It is an extraordinary example of research that underscores BC’s tenant of “Men and Women for Others” (the one-hour piece alternates between coverage of Eagle Eyes and another story, The Clark Family and their 21 adopted children, so be sure to watch until the end.  And have a hanky handy). Share the link with your loved ones, and take a moment to congratulate Prof. Gips on his inspirational and impactful work.  We are all so proud to have Jim as a colleague.  Also visit these links to learn more about Eagle Eyes, and the free Camera Mouse technology. You can also read a recent interview with Prof. Gips in the Boston Globe, and coverage in BostInnovation (which includes additional video & images).

Two Teams Tie for First in BC Venture Competition
The track record for the Boston College Venture Competition is extraordinary.  In less than three years BCVC-affiliated teams have won competitions at MIT and Yale, enrolled in the prestigious Y-Combinator accelerator, launched multiple products and services, and raised millions in venture capital.  Judges claimed the five finalist teams in this year’s competition represented BCVC’s strongest field yet – with pitches on par with the nations’ most elite graduate programs.  This year’s competition saw BCVC’s first ever first-place tie between AddItUpp – a novel advertising model that will pay users for answering questions about ads & websites, and MySavvyShoes – a ballet flat for girls that allows for snap-on decorative accessories.  Campus phenomenon, the location-based social game Moglo, came in third (their app has already soft-launched in the App Store). And keep an eye on LeaseDash (whose team members won the MIT $100K ESC Mobile Track), and Cura College Counseling (a BC/Harvard college counseling service that’s already serving customers).  Congrats to all of the winners – now get big fast so we can keep writing about you!  Wondering what last year’s winners PIQC.net are up to? They’ve raised six figures in angel funding and are now out in the Bay Area (along with two other BCVC-affiliated startups, WePay & WakeMate).  Check out PIQC’s recently launched SSEO.com and LocalOn.com!

Photos From TechTrek NYC
Finally, on Patriot’s Day (when the Boston Marathon is held) BC’s Information Systems Department held a geek marathon of our own.  25 students (9 grads, 16 undergrads) boarded a bus at 4am and headed to New York City for a full day of meetings with some of the Big Apple’s hottest tech firms. The day started out with Foursquare co-founder Naveen Selvadurai, who discussed the firm’s wildly successful March product update (here’s a video of CEO Dennis Crowley discussing the firm’s vision).  Then it was on to TechStars New York, where we met Managing Director Dave Tisch just days after the accelerator hosted over 500 VC and angel investors during its dozen firm showcase Demo Day at Webster Hall. Then it was on to Google New York, where we met  with four Eagle alums including Tristan Smith of CreativeLab, who co-wrote the Parisian Love spot that ran during Super Bowl 2010. Next up was Rent the Runway, where BC alum Dan Nova sits on the board, and where BC Alumna Brooke Hartmann (recently quoted in the Wall Street Journal), gave a master class on the red-hot startup.  Finally FreshDirect’s senior management team not only shared insight on the firm’s phenomenal success, we also got to sample some of their scrumptious products! The FreshDirect case (scroll down about 1/3 of the page) is a staple in our studies of strategic technology alignment, so this was a particular treat.  Thanks to all who so kindly helped make our first TechTrek NYC such as success. Yet another reason why technology studies at Boston College have grown four fold in four years.

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The Cloud: Battle of the Tech Titans
When geeks talk about the cloud they mean “the ethereal place somewhere on the network where work gets done”.  It’s drawn in diagrams as a cloud because it doesn’t really matter where it is or what hardware it’s on as long as the job gets done safely & reliably.  And cloud computing is smokin’!  Most think this is a race of the “Big Three” – Amazon, Google, and Microsoft –high profile firms with very different origins.  But a gaggle of startups and larger tech shops are also in the game. IBM raised its 2015 cloud revenue forecast from $3 billion to $7 billion. AT&T is building an Amazon-style cloud, and Verizon dropped $1.4 billion to pick up cloud firm Terramark Worldwide. And it is an arms race.  According to this BusinessWeek cover story, Amazon is adding enough computing muscle to power one whole “Amazon.com circa 2000” (when the firm was a $2.8 billion business). The biggest of Amazon’s cloud palaces can reach 700,0000 square feet, or about the size of 16 football fields. Cloud are ‘big’ because data use is exploding & firms can’t keep up. “This year, according to IDC, the world’s digital universe will reach 1.2 petabytes, or 1.2 quadrillion megabytes.  If you take every word ever written in every language it’s about 20,000 times that” (see ‘Cloud Math’ graphic).

Amazon’s cloud is called AWS and analysts think that business will bring in three quarters of a billion dollars this year.  Netflix uses it to stream movies (talk about coopetition – Amazon recently announced streaming bundled with Amazon Prime two-day shipping subscription). Zynga uses the Amazon cloud to handle usage spikes. The craft marketplace Etsy uses the Amazon cloud to analyze purchases & create personalization services, letting Etsy’s small artisan producers have access to code engines that only the big guys could previously afford.  Take that, Gap & Ikea!  The cash-strapped City of Miami has used the cloud to build a service that monitors nonemergency 311 requests. The cloud also allows firms small & large to throw “big iron” computing behind one-off problems.  Northrop Grumman dropped 1.3 million files into Amazon’s cloud and trained cybersecurity learning algorithms in less than a day.  Kraft leveraged Microsoft’s cloud service “Azure” to merge IT systems with Cadbury after the M&A. Microsoft’s cloud also allows the 8 person finance/tech firm MarginPro to help banks price commercial loans.  The math is great – for every $10 million in revenue the company makes off its work, it pays just $1,500 in cloud fees to Microsoft.  No scrambling to free up extra cycles in house – a “guy in a cube” can now pay by the drink as need arrives. And AWS and its competitors are now a catalyst for startups, with VCs now reportedly handing out Amazon gift cards.

The cloud also requires a new skillset, but it’s one you can learn at your desk. We’ve moved way beyond “LAMP”, with today’s engineer leveraging a whole new set of tools that might include Casandra, Hadoop, NoSQL, and Voldemort.  Want more detail on Cloud Computing?  There’s fun and comprehensive coverage in the chapter “Software in Flux”.

Retailers Struggle in Amazon’s Jungle
It was a great opportunity spending time with students at Amazon HQ in early March – the firm is a stellar study of tech-enabled competitive advantage.  Amazon is not “the Wal-Mart of the Web” – it’s better!  A recent Wells Fargo study showed that Wal-Mart was 19% more expensive than Amazon (assuming no taxes & shipping). The price gap is about half as wide if customers pay standard shipping (see image from WSJ at left). And of course Amazon’ll give you free shipping if you pony up $79 for an Amazon Prime subscription (and, as mentioned above, they’ll throw in free video streaming).  Amazon now gets most of its revenue from non media products (meaning products that aren’t books, video, or music).  And Bezos knows SEO – a study of 100 product category search terms showed that in a majority of the listings, Amazon snagged the top organic search spot on Google.

Amazon is so big the law of large numbers should mean growth will slow, right?  Well, Amazon’s sales rose 40% last year (to $34 billion) – and that was in a recession! Startups can try to compete, but Amazon’s got a 15 year experience jump on them.  Timing builds scale, brand, and expertise. Get a tasty sub-market like shoes or diapers? Amazon will say “get in my belly” (it bought Zappos for $928 million in 2009, and Diapers.com for $545 million in 2010). The Wells Fargo study above is also fascinating because it showed Amazon’s nimble responses: Two months after the initial survey Amazon had more items in stock than its rivals, and when rivals were out-of-stock, Amazon raised prices an average of 10% vs. the first period studied.  Yes, they’re big, but they’re also drenched in data, keenly observant, and stealthily nimble.

Can OnSwipe Steal Magazine Sales Back from Apple?
The reading experience on the iPad is great.  You hold it at the length of a magazine rather than hunching over a screen, it’s possible to highlight text and take notes right on the device, the content is limitless and served up in a magnificent digital buffet, its always with you, and (key for Prof. BadEyes) it’s usually a snap to increase font & image size.  But publishers are still unhappy.  As the consolidating storefront, Apple has the potential to gather a massive amount of users data that publishers covet. Few are excited about sharing 30% of iTunes sales with Apple. Now a startup hopes to move the tap & swipe user interface out of the app and onto the web, bringing an app-worthy UI experience to the browser.

OnSwipe’s interface works with tablets and smartphones, and is designed to be cross-platform -  iOS and beyond.  The firm plans a launch later this spring with 20,000 content providers (although much of that will come from integrating with WordPress and Tumblr).

Full-screen magazine-like ads will pop up at a point determined by publishers – say after a certain number of articles read, and publishers will eventually be able to choose to provide their own ads or work with an OnSwipe’s ad network.  The firm is started by Jason Baptiste (who studied at BC) and Andres Barreto, and has managed to recruit some serious advisory and backing cred.  Former execs from the two top mobile advertisers AdMob (bought by Google) and Quattro (bought by Apple), sit on OnSwipe’s board.  The firm has raised $1 million in funding from super angel Ron Conway (who was in Facebook, Google, PayPal, and WePay among others), Morado Ventures, and Spark Capital (VC to Twitter, Boxee and key content source Tumblr). I’m hugely excited to host Jason Baptiste, and Spark Capital’s Alex Finkelstein in class on Tues., April 14, 4:30-6pm, Fulton 117.  All are welcome to drop by (as long as there are enough seats for my students).

Zynga’s Farmville, Cityville Developer Tells What Makes Games Great
Zynga is a beast.  The firm dominates three of the top four spots on Facebook.  Some value the firm at $10 billion (that’s bigger than EA and just $3 billion shy of Activision Blizzard), and Zynga founder Markus Pincus is now a billionaire (at least on paper).  The firm recently made public that it expects to rake in $1.8 billion in revenue this year, and $630 million in profits.

AllThingsD offers some fun facts on the gaming giant. For the full impact on how virally Zynga games spread, consider that in the first 30 days Farmville brought on one million players, and CityVille took in 14 million. A recent talk by Mark Skaggs, Zynga’s VP of product, claimed moms are where the market is (the average Farmville user is a 43 year old woman).  Staff call Facebook the “matriarch network”.  Others have called Farmville the “new soap opera”.  Zynga investor & Kleiner partner Bing Gordon is credited with coming up with the idea for a ‘farm game’ (Gordon, who we bumped into on an earlier TechTrek, was previously Chief Creative Officer at EA).  Boston College has gotten an inside look at Zynga recently – we look forward to an alum meeting in May, we just got back from Zynga HQ in March, and in February we visited Zynga Boston in Central Square, Cambridge.  Oh yeah – and Zynga is hiring (the firm grew from under 400 to 1200 employees from Sept. ’09 to Sept. ’10)!

SXSW 2011: SCVNGR’s Seth Priebatsch on how gaming will change the world
A keynote at South by Southwest Interactive (SXSWi) means you’ve made it in the world of social geekdom. Previous keynotes have been given by founders of Facebook and Twitter.  This year SXSW tapped Seth Priebatsch, the 22 year old CEO of Cambridge-based SCVNGR. And SCVNGR is on a roll.  The firm raised another $15 million at a $100 million valuation this past January, passed 1 million users in Feburary, landed a deal as a native app on Sprint 4G Android handsets, and earlier this month launched a new daily-deal / loyalty generation app called LevelUp (initial roll-out in Boston & Philly). LevelUp rewards loyalty (vs. the “one and done” deals at Groupon which have generated criticism from some retailers). Priebatsch hopes SCVNGR can ‘crack the science of loyalty’ through a combination of location-based deals and good incentive mechanics.  Here are slides from SXSW, as well as Seth’s TEDxBoston video).

SCVNGR has also a number of notable game triumphs.  A recent campaign for the chain Buffalo Wild Wings brought in 33,000 new customers and saw 30% of them come back within seven days. Another campaign with Dunkin Donuts runs ‘til the end of March, and has users vying to win Bruins gear, and Celtics and Bruins tickets while completing Dunkin-centric challenges.  Last year the ‘location wars’ heated up when SCNGR answered Foursquare’s Pepsi deal by snagging Coke.  BC students recently enjoyed a visit to SCVNGR HQ at the Lechmere stop on the green line, and TechTrekkers also spent time with SCVNGR board member Peter Bell at his office on Sand Hill Rd. in Silicon Valley.

Check In Lately? Foursquare Revamps its App
While SCVNGR had the SXSWi Keynote, Foursquare continues to have a much larger market share.  The two year old service, launched at SXSW in 2009, now has some 7.5 million users worldwide.  A new update seeks to make app use more fun – moving way beyond “I am the mayor” bragging rights.  A new “explore” feature will make recommendations of near-by venues based on your check-in history or where your friends have been.  The new search will take broad searches like ‘date night’ and turn them into recommendations, too. And merchants get a variety of new specials including ‘swarm specials’ earned when a venue gets lots of check ins, ‘flash specials’ that are quick-hits at a specific time, and ‘friends specials’ for bringing a buddy, are added to existing promos like ‘mayor specials’ for the person with the most recent check-ins.  The ‘leader board’ is now more prominently featured, encouraging friends to compete with one another as Foursquare power users. Foursquare also got its share of buzz at SXSW, linking the app in a rewards deal with American Express.  Participants enrolled online, checked in using Foursquare & clicked a “Load to Card” button, then physically swiped their AMEX cards at a venue. Spend more than $5? AMEX gave you $5 back on your statement. Rewards weren’t the goal for Foursquare – rather it was about driving usage and awareness. Right now the world is big enough for two game-like LBS competitors.  And we’re delighted that Foursquare is kind to BC as well.  The firm will host us during our upcoming TechTrek NYC in April.

2011 Most Influential Women in Technology
Get inspired – FastCompany rolls out this year’s of leaders and pioneers in the world of geekdom.  Making this year’s list are Jennifer Hyman & Jennifer Fleiss (Jenn & Jenny) of RentTheRunway.  Our students will be visiting RTR as part of TechTrek NYC next month. Haven’t heard of RentTheRunway? Talk to a woman in grad school – the ‘Netflix of Fashion’ is the go-to destination for dresses.  It’s huge on campus & a great way to get a varied wardrobe when all of your friends are getting hitched (admission: having this dumpy bald man giving fashion advice is out of place, but the business model is extremely cool & the firm is growing like crazy).  Want more inspiration?  Check out FastCompany’s 25 Women-run Startups to Watch.

From a Boston College Dorm, New Thinking about How to Encourage Energy Efficiency
Speaking of startups – here’s an exciting story.  Three BC sophomores have gone from idea to hardware product in about 10 months.  That idea was to surface personal energy use and make awareness as easy as glancing at a clock.  Applied Power Innovations sells a monitor that anyone can install – clipping outside the power lines near your home’s main electrical box.  A separate monitor plugs into an outlet and shows real-time energy use and carbon emissions.  At around $200, API’s solution is far cheaper than many alternatives.  The speed and sophistication of the effort underscores how we’re living in the golden age of student entrepreneurship.  The team: C.J. Reim and Rich Rines of the Carroll School of Management, and Kevin Driscoll of the College of Arts & Sciences, outsourced engineering and manufacturing overseas and got the product off the ground in a little over a semester.  The team has also leveraged social media to spread the word. co-founder Rines has been rated one of the top clean tech folks to follow on Twitter!  You can read additional coverage of API in the BC Chronicle and Boston Globe.

Want to meet the entrepreneurs? Applied Power Innovations will be one of several student entrepreneurs showcased at the reception during Boston College Technology Council East Coast Spring Dinner on April 27. That dinner’s speaker will be Paul Sagan, CEO of Akamai.  Hope to see our alumni there!

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