Apple/Why 30% Is A Lot Of Money

Image via WikipediaI won't lie, finance was not my best subject area when I went back to school and earned my MBA. It looks like simple addition and subtraction but appearances are in fact VERY deceiving. Yesterday I threw the word margin around a lot. I know what the word margin means, but I'm a little unsure if it was the right word to use in that context. It probably would have been safer to insert the word "profit" in front of margin whenever I used it. having said that, on with the show...

I'm going to take a bit of time today to illustrate why 30% is a lot amount of money for Apple to be extracting from transactions that involve products with relatively high per unit costs to the companies who are selling them.

My examples will be based on what I know (or think I know) about the Martin guitar company and how their instruments are typically bought and sold.

The Martin Guitar company is rumored to sell guitars to their dealers at 50% of their published retail price. Since the 1960's knowledgeable buyers have expected and been able to get 40% off of the MSRP  if they shopped around a bit or knew of a dealer who was willing to honor that mark down.

Lets assume Martin has a guitar with an MSRP of $1000. They sell it to their dealers for

$500

Knowledgeable purchasers know that they can find a dealer who is willing to sell for 60% of the MSRP which would be

$600

In this case the dealer pockets $100 from this transaction. Note there are additional costs such as labor and warehousing but we're going to ignore them. $100 is 20% of the shop owners $500 investment. That's not a bad return, particularly if you can turn your inventory over quickly.

Now lets pretend that the guitar was sold via an iPad running a custom App that the dealer created. In that case the numbers would be as follows.

Dealer pays

$500

Buyer pays

$600

Apple gets 30%*$600 which would be

$180

Dealer gets

$600-$180

which equals

$420

of revenue on their $500 purchase. This is a net loss of 16% for the dealer. Clearly you couldn't stay in business based on that transaction.

Lets assume though that you can find a few customers who are willing to pay 75% of the MSRP. This is possible since 25% will seem like a decent discount to shoppers who are not familiar with how this market works.

In this case the guitar sells for

$750

Apple gets 30%*$750 which would be

$225

If we subtract Apple's $225 from the sale price...

$750-$225

would equal

$525

OK, the dealer made a profit, albeit a very small one at 5% ($25/$500). Meanwhile Apple pockets six times as much money and had zero skin in the game money wise. Not a bad racket at all. In the case where buyers are paying 60% Apple would get half the profits by taking just 5% of the transaction. As an aside, this is also why even a 1.5% transaction fee by credit cards can cause some companies distress. If you're profit margin is 3% a 1.5% charge is going to eat half your profits.

Lets put these two scenarios into a handy little table.

Profit @  |W/Apple |Direct
60% Retail|-16%    | 20%
75% Retail|  5%    | 50%

Inserting Apple into this equation is clearly not a win for the dealer under normal circumstances. If Apple has a big pool of potential customers who don't mind paying MSRP it might be though. In that case the picture looks pretty good for the dealer as they would make $350 on the sale of that $1000 MSRP guitar which would be a 70% profit margin. I'm not going to go through the math on that one but it should be fairly straight forward based on the examples above.

People who buy Apple products tend to be more affluent than average, but they also tend to be knowledgeable about how pricing works in the real world so if I were a dealer I wouldn't invest in an iOS app under the assumption I'd find a bunch of customers willing to pay retail or anything close to it.

As I said in my previous entry none of this is a surprise to Apple. The 30% isn't about collecting revenue in the case of this type of transaction. It's about eliminating their competition and creating an opportunity for Apple when they need to add some additional dollars to their bottom line. By creating this opportunity for themselves they are eliminating choice for their customers and creating a coercive relationship with both their customers and their potential competition/partners.

Related Articles:

• Guitar Heaven ... Confessions of a Martin Worshiper (judson2history.wordpress.com)
• Apple/Vendor Lock In/Not For Me (emkey1.blogspot.com)

Apple/Vendor Lock In/Not For Me

Image via WikipediaYesterday I explained why I don't own an iPhone. In the process of doing that I touched on something I want to explore a little bit more.

One of the reasons I cited was Apple's 30% tax on any purchases made by way of an application. If you're selling a magazine or other purely electronic piece of media and you own all the rights to your content that isn't necessarily a bad deal. This is because there are high fixed costs to producing the first copy of an electronic magazine but after that the incremental cost of selling another copy is nearly zero. Note, I'm not an expert on magazine publishing but the two times I sold an article I got a check up front and there was no additional per copy payment. So, if Apple provides  a way to put your product in front of millions of prospective new customers that 30% just might be a very attractive proposition. In cases like this I think Apple is being fair and reasonable as they are providing a potentially lucrative channel and want to be compensated for that.

The case for book publishers isn't quite as clear cut. They still have high fixed costs up front but in most cases they also have to pay royalties to the people who produced the work they are selling. I have no clue what a typical royalty on a book is but it's probably enough money that paying 30% of the gross sale price for a book to Apple is a bit of an unpleasant experience  having a viable alternative to Amazon probably makes that pill easier to swallow. Again, if Apple is charging 30% it's a reasonable deal.

Where we run into problems is when Apple tries to apply that % to companies like Amazon who are selling a wide variety of products including items that are not electronic in nature. Amazon's margin on products of that kind are small and are being squeezed as Amazon attempts to expand in a tough economy. This is easily proven by the fact that they had a 50+% revenue increase year over year in their most recent quarter but saw a drop in profits.

Amazon sells a lot of different things, including Apple products like the iPad. I very much doubt Apple is allowing Amazon a 30% margin on those items.

There was a time when 50% margins were common for retailers. Even before the advent of the world wide web and the consumer friendly increase in competition that it created average margins were in decline. Sam Walton built an empire with Wal-Mart and Sam's Club by squeezing margins down to 5% or less while still making a tidy profit.

So, clearly it's not feasible for companies like Amazon to pay 30% to Apple for most of the stuff they sell.

Obviously Apple isn't stupid. They know this. The fact that they are insisting on imposing this kind of fee tells me that they aren't actually expecting to collect much if any money in this case which means they have a different outcome in mind and it's not one I'm interested in being a part of.

One of the less clever things that most companies do at some point is to try to subtly or not so subtly lock us into using their products or services. Logically enough this is called "Vendor lock in". The reason I describe it as less than clever is that it's basically a coercive approach that works against the interests of a businesses customers. When you work against the interests of your customers those customers eventually get angry and frustrated. When that happens you're in trouble no matter how high you've built the walls around them. The only sustainable method to lock your customers in is to constantly please them. When you depend on any form of coercion you're building a dysfunctional and one sided relationship that will fail eventually.

Apple has established an impressive ecosystem with iTunes and the app store. They make boatloads of money off of their hardware but the hardware is just part of the picture. Apple also wants to sell us stuff. So far they've primarily sold us music and applications but you can be sure they'd like to sell more than just those items.

So, lets assume that Apple would like to sell us anything and everything like Amazon. They might brand such a venture the "iStore". Forcing Amazon and other similar companies out of the Apple ecosystem would reduce/eliminate competition for the iStore. In the short to mid term this would be great for Apple as they would benefit from not having to share their pool of customers for such purchases. They wouldn't even have to take advantage of their monopoly to charge higher prices. Just having 100% of the potential market increases their bottom line.

The long term problem with this approach is that consumers aren't stupid and when you start to depend on building walls around them they eventually become unhappy and look for ways to escape. I tend to be one of the first people out the door in this situation.

Apple used to be the plucky and smart underdog. This is changing. They are dominant in the Tablet space, control a substantial portion of the smart phone market and own the lions share of the revenues there and continue to see growth in their share of the PC market. This kind of success can be tricky for any company to maneuver. If you're publicly traded the problems only compound. Apple's financial performance over the past several years has been amazing and unprecedented. They are under an immense amount of pressure to continue to execute and grow. That kind of pressure can lead companies to do things that aren't always in their or their customers best long term interests. I think Apple's attempts to drive off competition and lock their customers in is an example of that scenario playing out.

All of which explains why I'm off the Apple bandwagon for now. I will not support a company that removes my ability to choose and uses their dominant position to strong arm their competition out of the picture. You win on innovation and quality or you don't win at all in my book.

Apple has consistently been a company that followed the high road in the past but it looks like they are starting to lose their way to me.

Related Articles:

• Apple's in-app-purchasing rules mean inconvenience for e-book buys (news.consumerreports.org)
• No iPhone For Me! (emkey1.blogspot.com)

No iPhone For Me!

Image by hobnogs via FlickrAnyone that has read more than a few of my previous posts will know that I'm a big fan of Apple and their products. My wife and I have owned several iPod's, an Apple TV, an iMac and a couple of iPad's over the years. There is one product I won't be buying and that's an iPhone. Actually, I won't be buying another iPad either. There are two factors that drove me to make this decision.

The first is the lack of a native Google Mail client. Yes, you can use Safari to look at your Gmail and it kind of works but it's not close to the full experience of a native client and that really bugs me. I don't care whether it's Apple or Google that is primarily responsible for this shortcoming.

It doesn't end with GMail either. Google has apparently taken a dim view on all things Apple since their Google voice App got rejected. I need my Google stuff and I'd be willing to consider an iPhone if it were all there. Since it isn't, the iPhone loses.

Actually it would still lose because of problem number two which is Apple's insistence that in app purchases must filter through them so they can take a sizable cut. I understand the business driver behind this but I don't like it at all. Charging anyone who wants to sell stuff through an Apple device 30% is theft in my book.

One of the reasons Apple is such an impressive company is that their margins are very high. This isn't true of companies like Amazon and Barnes & Noble who have very small margins on most products. When your margins are 10% you lose a lot of money selling something and paying Apple 30%. We're already seeing companies pull back from providing in app purchases because of this. This means choices are being eliminated and I'm a guy who likes to have choices.

There is an hope though. HTML5, while still not an official standard is gaining a lot of traction. The capabilities of HTML5 are making it possible to present users with a browser experience that is very similar to a dedicated application. "The Next Web" is an online magazine that shows what is already possible with HTML5 on the iPad. It offers a clean and simple interface that doesn't look like a traditional web site at all. What this means is that companies that can't or won't pay Apples exorbitant tax have an option. So in theory we users of Apple products won't lose in the longer term because of the Apple tax. I have to wonder though if Apple is going to take some sort of action against companies that bypass them in this fashion. I can see that happening based on some of Apples recent moves and I want no part of it.

Apple is a great company with great products but they are starting to lose their way a bit in terms of how they approach their customers and their partners. If this doesn't change I won't be buying any Apple products in the future.

Related Articles:

• Kobo preps HTML5 e-book app to get around Apple rules (electronista.com)
• Facebook using HTML5 to get around Apple, Google for mobile apps? (intomobile.com)

My Biggest Career Mistake

Image via WikipediaIf you've been around for any length of time chances are good you've had a few significant bifurcation points in your career where you had to make a choice. Sometimes those choices work out well, sometimes they don't. Skill and hard work play a part in the outcome but luck does as well.

Around 1997 I discovered a then obscure and very new open source database known as MySQL. MySQL has grown up a lot since then. It's currently used by Facebook for instance and provides at least part of the back end database services for many other well known sites. At that point though it was just a promising new comer that had three key advantages over it's competition.

1. It was free
2. It was fast
3. It was multithreaded

Point number three was actually the clinching differentiator, at least for me. What "multithreaded" means is that it was capable of handling more than one request at a time. This made MySQL ideal for small to medium sized web sites that wanted some sort of active content. MySQL was optimized for read speed at that point in time and given the demands of the day it was a great solution. It lacked things like sub selects and other more advanced SQL features but it had enough functionality to get a lot of jobs done and the price was right.

When I got involved the documentation was a very thin. Monty Widenius and David Axmark were the two driving forces behind MySQL and at the time a lot more attention was (rightly) being focused on fixing bugs and adding features. This made perfect sense and it gave me an opportunity to step in and help. I wrote or rewrote the majority of the documentation for MySQL over the first couple of years of it's existence. I also wrote a couple of articles that appeared in the now defunct Web Techniques magazine that helped champion both MySQL and PHP. Eventually though I was faced with a choice.

I had an opportunity at work to step into a management role. This was a long term goal of mine so I took it. I was managing people who were older than me and I was in a bit over my head at the time so I had to disengage from the MySQL community and the work I'd done there. Several years later MySQL was sold to Sun Microsystems for a billion dollars.

I was never an employee of the company that owned MySQL though I did receive MySQL license number seven for free in thanks for the work I'd done.

I can't help but wonder what might have developed for me professionally if I'd passed on that management position and continued my involvement with MySQL. I learned a lot in the management job and had an opportunity to work with some great people so it wasn't a bad experience from that perspective. Weighing that against what might have been if I either hadn't been given the management opportunity or chosen differently does occasionally keep me up at night though.

Klout Vs. Peer Index (Again)

Image by Intersection Consulting via FlickrI've written about both Klout and Peer Network before. Both are social network influence rating sites that purport to give individuals and companies an understanding of who the key movers and shakers are in the social network world. The way they do this is by using arcane and possibly questionable math formulas to evaluate people and companies on line interactions and networks and assign a score. My main concern continues to be the fact that I don't believe it is valid to measure multiple sites and somehow generate a single value that is comparable across more than one person. In other words, I feel good about tracking my personal progress but I don't feel good about comparing my Klout score to somebody else's since I may have a total different model of engagement than that other person. By this I mean for example that somebody else might use Facebook and Twitter as public facing means off social networking while I use Facebook only to communicate with friends and family and instead use this BLOG and Twitter as my public facing persona. I'm not going to be sending out thirty or forty updates a day on Facebook because of my use model while a person who is using Facebook as a means of communicating with a wider audience probably will.

Setting all that aside for the moment I'm ready to declare a victor, and the race hasn't even been close. Peer Index has always been extremely slow to update. In fact there are portions of my profile that have never updated. I even opened a ticket with them a couple of weeks back and while I did eventually get an acknowledgement nothing has changed as of today.

In the meantime Klout has made regular updates. Like clockwork I can login  every day and see what if any progress I've made in raising my Klout score. I might question the science behind Klout's scoring but I don't question the apparent influence they already wield or their ability to execute on their vision.

If my experience is any indicator Peer Index is in a lot of trouble. They are slow to update, slow to respond and are steadily being out innovated and out performed by Klout. This isn't a good situation to be in.

I'm going to keep tracking both for awhile more but at some point I'm going to stop bothering with Peer Index if they don't start to turn things around quickly. They just aren't generating any value for me right now.

Related Articles:

• I Can't Deny That Klout Likes Me Right Now (emkey1.blogspot.com)
• Klout & Peer Index Followup/Empire Avenue (emkey1.blogspot.com)
• Klout & Peer Index (Social Network Influence) (emkey1.blogspot.com)
• Facebook + Twitter = Klout (blogs.forbes.com)

Cisco/Marketing/Borderless Networks

Image via WikipediaThe first time I heard the marketing term "Borderless Networks" the obvious semantic interpretation made no sense to me. To be clear, I'm talking about computer networking, not human networking though the former enables the later on the Internet.

Many years ago when the world was a much more innocent place nearly borderless networks existed as computer security was essentially non existent. There's a lot of history that I could explain here but suffice it to say that the ideals of the early Internet pioneers proved to be naive and over time we've seen  layer upon layer of security added to networks in an effort to keep unauthorized people from doing not so nice things with data such as credit card numbers and other sensitive stuff.

Marketing types in the tech field have a tough job. Ideally they need to craft messages, products and strategies that appeal to both the technical and the more business oriented people who make purchasing decisions. This is particularly true of big picture marketing concepts like "Borderless Networks" which encompass a number of different products and are meant to describe something revolutionary in a way that excites the imagination and frees up big wads of cash.

We technical types tend to be very literal minded. When we hear "Borderless Networks" We think of... well, networks without security trust boundaries; at which point we get some combination of nervous/dismissive. From a logical perspective a network without trust boundaries is a completely absurd concept in this day and age. It sounds like Cisco is suggesting we move into a very bad neighborhood and leave all our doors and windows open with signs that say "Rob me please!" posted everywhere. The thing about the Internet is that from a logical perspective everyone lives right next door to every other neighborhood including the worst one which is why we need and have trust boundaries AKA borders.

Suffice it to say that on the technical side I don't think "Borderless Networks" is a very successful marketing term.

Of course from a logical perspective Cisco isn't really trying to sell us networks without borders. Instead they are pushing the concept that network trust boundaries should not be dictated by physical locality or unique but easily faked attributes of the hardware you are using to access a particular network resource such as your IP address.

Right through today most network security has been focused on restricting access via some combination of the IP address of the computer a particular person is using and some form of password authentication. This is a very course way of handling access control and one that doesn't provide a lot of flexibility in terms of where people can work and what data they can access. Where we're going is towards more of a role based approach which takes into account who a person is and their role rather than where they are located..

So, if you're role in a company changes your access to resources will change just as soon as IT flips a few bits. In the case of Cisco this change would likely happen through some combination of changes in Active Directory and Cisco's ACS product.

In the current model such role changes require a lot more work and tend to be very haphazard. This means there is an inevitable transition period when people in new roles still have access to information that may no longer be relevant to their job and lack access to information that is very important to their new role. The old model creates both operational and security issues.

So, while technical types are apt to hear "No logical boundaries" what Cisco's marketing wants us to hear is "No physical boundaries" when the phrase "Borderless Networks" is used.

To make this role based magic happen requires big changes in the way computers, applications and network infrastructure interact. The technologies that enable this to happen are what Cisco is referring to when they say "Borderless Networks". 802.1X, VLAN, NAC, ACS and dynamic VLAN assignment are all part of this.

The ultimate goal here is to enable an increasingly mobile workforce to access corporate resources in a reliable and secure manner, and sell lots of hardware and software of course.

I'm not convinced that Cisco's marketing department chose the best possible labeling to express the concepts encompassed by "Borderless Networks" given their bifurcated audience but I understand the complexities they were facing. Trying to come up with a pithy and descriptive phrase that will appeal to both the technical and business crowd is a non trivial task. If you're going to have to settle for hitting a home run with just one or the other than the people in the suits are where you're going to focus your efforts.

Related Articles:

• Network Defenses - Security Through Network Design (codingexplorer.wordpress.com)

The Twitter Bots Have Found Me

I've been gaining some additional followers on Twitter recently which is always nice. Some of them are clearly not real people though. I realized this when I got three new followers in a very short period of time. All had odd names and exactly the same tweets sent. Not surprisingly the tweets were advertising stuff. I suppose this a right of passage of a sorts but I'd just as soon not have to go though it.

There has to be an economic incentive for spam or there wouldn't be anywhere near as much of it as we see. I used to wonder who was falling for these obviously shady deals. Then a relative developed Alzheimer's and it became clear to me where at least one source of sales originate. When you're mental faculties start to decline the offers in spam look a lot more appealing. Realizing where at least some of the "customers" are coming from made me dislike spam a whole lot more than I already did. 

In addition to spambots that send tweets I've also encountered @emkey1tweets tweets that are links to spam. None of this is really news if you've been a heavy Twitter user for any length of time though. 

One secondary effect of all this spamming is that it makes social network influence harder to measure since those scores depend in part on @ activity and followers. The scoring includes determining the quality of an individual or companies network so as long as the algorithms in use take this problem into consideration it's hopefully not a significant issue. I can imagine some people "courting" spam bots to up their scores.

The stability on Twitter recently has been poor. Maybe the spam bots are to blame but there seem to be a lot of rumors going on about internal strife and general discontent. Likely a big part of the problem is that Twitter has been much better at generating revenue for others than itself. At some point investors start to want to see some sort of return on their money and employees start to wonder if they are ever going to get to cash in on their hard work. Like it or not a big part of the economic and intellectual engine that drives the valley is based on the assumption that hard work and success will be rewarded with large wads of cash. Twitter's endgame is far from obvious at this point and they may be starting to suffer because of that.

In spite of all the recent hiccups and other issues with Twitter there are an amazing number of very interesting and cool people available to follow if you spend a little time looking around. For instance, enter "Entrepreneur" in the search box and start working your way down the list of names. You might even be able to start a conversation with somebody who is highly knowledgeable in a field of endeavor you care about. 

Image by GE Healthcare via Flickr

Related Articles:

• Things You Should Know About 'Twitter Jail' (techpluto.com)
• Twitter Spam (talkaboutlocal.org.uk)

Borders/Apple/Google+ & Facebook

Image via WikipediaYou shouldn't notice any differences on the reading side of things but I've switched over to the new Google blogger beta composing tool. So far so good, though there have been a few bumps in the road. I had to do some manual editing in raw HTML mode to correct a couple of formatting anomolies.

The new composition tools don't seem to offer much additional functionality but it's early going yet. I decided to be proactive in making the change but I don't recommend that to everyone. The interface is a fair amount different and there certainly is a learning curve. It's probably a good idea to wait until it's a bit more polished before making the jump.

Borders
The final dissolution of Borders wasn't a complete surprise. When they closed a bunch of stores earlier this year the writing was on the wall. My wife and I were frequent visitors to our local Borders over the years and it was kind of  a surprise when it was one of the first ones to close down. The store  seemed to be busy and the staff were friendly and attentive. It was hard for me to understand how they couldn't be profitable given what I'd observed.

One thing that did bug me was the way they did their coupons for the Borders reward program. On the plus side they emailed the coupons regularly and the offers were often attractive. On the downside initially you had to print out the coupon and bring it in. They would then take the coupon. If both my wife and I wanted to use a particular coupon we had to print out two. At first I thought there might be different codes for tracking but when I compared two of the coupons we printer out they looked identical.

The Borders rewards program included a card. All the coupons were clearly in their point of sale system. All the coupons for a particular offer were so far as I could tell identical. Why then did they insist on a printed copy?

Later they did change the rule so you could show them a copy of the coupon via your smartphone but the whole thing was annoying and inconvenient which was kind of counter productive.

Maybe there was some obscure reason for this bizarre rule but it's certainly a head scratcher and it made me start to think that the problems Borders was having were rooted very deeply in the corporate side of things.

Barnes & Noble has done OK using essentially the same business model as Border's so you can't explain this bankruptcy by simply blaming Amazon, EBooks and other technological shifts in the book industry.

Borders has now joined Circuit City, CompUSA and many other large chains in the march down liquidation road.

Apple
I don't actually have anything to say about Apple other than WOW. Seriously, what they are doing in this economy is just amazing. Mostly I mentioned them because putting Apple in the title of my posts is always good for a few more page views.

Imagine a smiley here if you like them, pretend I never brought up the topic if you don't.

Google+/Facebook
I'm expecting to start hearing about G+'s growth slowing over the next month or so. It may just be me, but I'm seeing pretty much zero uptake by my less technical friends and contacts. G+ has become the geek choice hands down but that isn't going to carry them beyond a niche player and being a niche player in this space isn't very exciting as I've noted before.

In some cases people are apparently worried about the potential privacy issues of getting a Google account. That kind of confuses me. Both Facebook and Google know an amazing amount of stuff about me. They are both large companies with many fallible human being working for them.

Personally I prefer Google's approach to privacy right now but I may not ten years down the road if their management changes or undergoes a change of heart. Anyone that truly cares about their privacy should probably think very hard about the folly of putting a tremendous amount of personal information in the hands of any big online company. Before doing that though you have to ask yourself what kind of life you want to lead because like it or not the 21st century as we currently know it here in the US and much of the world is driven in large part by the ready flow of advertiser friendly personal information.

We collectively chose this path when we decided we wanted our Internet to be "Free". Employees and share holders need to be paid and so advertising became the economic engine of the Internet. When a business model is built on advertising you've given the companies in question a heavy motivation to optimize their means of bringing money in. In the case of advertising optimization means developing very sophisticated methods of tracking and categorizing people and this in turn leads to a significant reduction in privacy.

At some point in the not too distant future G+ needs to start making inroads to the mainstream. I'm personally hopeful that they will, but I'm starting to have serious doubts.

Related Articles:

• Privacy watchdog sets sights on Google (canada.com)
• Google's Biggest Problem: It's Too Rational (pcworld.com)

Volume/Text/Audio/Video

Image via Wikipedia

When I wrote yesterday about the efficiency of text in communicating ideas and concepts my primary motivation was to point out that no matter what medium is used, everything boils down to ideas that can be most efficiently represented by a finite number of words that take up much less space than video, images or audio. I think this is one of the reasons that audio blogging never took off the way many people expected it to. Audio BLOG's are difficult to search through and the information density just isn't as high as good old text.

Video arguably has taken seen more success but I'm not convinced the level is as impressive as some would claim. It's true that Videos very low information to byte density makes it an increasingly large percentage of total network utilization but one factoid I heard at Cisco Live 2011 put the amount of video uploaded to YouTube per minute at forty eight hours. That really underwhelms me. How many BLOG postings do we see in an average minute? I don't have any stats but I'm betting it would take a lot more than forty eight hours to read one minute of BLOG posting output.

I'm not trying to convince anyone that audio or video are bad. I've found a lot of value in both when they are done well. What I am pointing out is that in spite of all the hype, particularly for video; text is still the most efficient means of expressing ideas and concepts.

Video draws us in though as we are programmed by many years of our ancestors living out in the wild to constantly be looking for and assessing motion. When we go to a web site and a video starts playing somewhere on our screen we can't help but look at it; and that is what advertisers count on and a big part of the reason for videos popularity. That small video ad is going to be 99.99% of the total bandwidth of just about any web page in spite of the fact that it will in most cases be a tiny fraction of the total information delivered. From a revenue perspective though that ratio is totally flipped. Video advertising is a big chunk of the revenue pie for any site that employs it.

Moving pictures have entranced us since their invention more than a century ago and that isn't going to change. Stories told with words, whether written or spoken have entranced us for a lot longer though and I think it would be a mistake to forget that fact.

I'm not really a Luddite, but I do occasionally play one on the Internet.

Related Articles:

• The Voynich Manuscript: will we ever be able to read this book? (telegraph.co.uk)

Plain Text/Information Density

I've been hearing a lot of talk recently about how Video will take up the vast majority of the network bandwidth soon. This is great if you are a network technology vendor but I wonder how much value is being gained in relation to the increased cost?

Prose text is an incredibly information dense way of sharing ideas and concepts. Tolstoy's "War and Peace" had 560,000 words. Although it was originally written in Russian and French lets multiply that by the average number of letters in an English word which is 4.5. We end up with 2.5 million characters, or approximately 2.5 megabytes. That's not enough to store a single twelve megapixel JPG image of good quality. The dichotomy becomes more pronounced as we move to less verbose classics such as "To Kill A Mockingbird" or "The Great Gatsby".

I'm assuming 8 bit ASCII encoding here but even uni code only doubles the size so for the sake of simplicity I went with ASCII.

Audio is better than video or images from an information density perspective but you'll still only get a minute or so of good quality MP3 stereo audio for that 2.5 megabytes.

I'm not arguing against the use of audio or Video on the Internet. When done well either medium can be a great means of communication. The costs associated with poorly done video in particular though are gargantuan when compared with text. Plain old text allows us to render ideas and concepts in a form that is phenomenally efficient space wise. As an added bonus text can be compressed without loss quickly and easily to 20% or less of its size.

From a business perspective there is no greater bang for the buck than prose text when we're talking about the network.

The incredible increases in data being generated each year are often cited by industry leaders as some sort of wonderful magical thing with the implication that the amount of information being created has some sort of huge positive impact on the pace of innovation. The truth of the matter is that while we're creating vastly larger volumes of information each year the actual information density is dropping nearly as quickly so the net result isn't as impressive it appears at first glance.

All that hype does help sell a lot of hardware though.

Image via Wikipedia

Related Articles:

• How Bits and Bytes Work (mgitecetech.wordpress.com)
• Five Awesome ASCII Art Generators (theotakuologist.com)

Cisco's Single Vendor Vision Failure?

One of the clear themes at last week's Cisco Live conference was that Cisco really wants us all to buy a single vendor solution and it won't be any surprise that the vendor they are recommending is themselves. The basic premise is that by buying Cisco you get an integrated solution that saves you time and money both up front when you're implementing and along the way as you maintain and upgrade your infrastructure. It's not a bad story, but to be true Cisco would need to have a more coherent and well integrated set of product offerings than they currently do.

Anyone who has worked with Cisco devices knows that there are variations between product lines when it comes to management and configuration. As an example ASA firewalls don't support "show users" which is a common command to see who else is logged on to a device. There are many other examples that are unrelated to the functionality differences that exist between different types of devices.

Dealing with Cisco is like dealing with a ten thousand headed monster where most of the heads would prefer not to talk to each other and communicate instead through product announcements.

Another example is setting up different product lines to work with Cisco's ACS. ACS is a proprietary Cisco offering that provides authentication and authorization services. You would think that the configuration syntax and behavior would be more or less identical across all of Cisco's products. You would be wrong. There are subtle and sometimes not so subtle differences that can cause deployment delays, confusion and frustration.

I've been on the receiving end of HP's pitch to buy into their access layer switches and it's fairly compelling. HP's switches are less expensive, more capable and from a command line perspective look more like IOS than the command line of some of Cisco's products. I've also been on the receiving end of some horrific and expensive HP support so as compelling as HP's pitch was I personally wasn't ready to jump ship.

If Cisco wants to sell their integrated vision  they need to get their act together internally and start offering products that look like they are close relatives rather than distant cousins. They did this right a decade or so back when they came out with IOS for switches but have frequently failed since.

To be clear, I'm not claiming that IOS should be the language spoken by all Cisco devices. IOS offers an antiquated high cost interface to device management. Ideally though if you are going to make an effort to make an IOS like interface available you should do a better job on the implementation side by duplicating what has come before.

Really though Cisco needs to implement a management API that simplifies the task of configuration and make that API consistent across their entire line. Writing and debugging scripts that enumerate interfaces and do "for each" loops with logic to standardize interface configs should as much as possible be a thing of the past. Command line interfaces are nice, particularly for those of us who have been in the business for awhile but they should not be the primary means of management. Just to be sure I'm being clear here, Web browser GUI's that talk to a single logical device aren't the answer either.

Cisco also needs to streamline their product catalog and make sure that what remains is a line up that looks like it was designed from the get go to integrate quickly and easily if they want to argue with a straight face that they can lower companies Total Cost of Ownership.

Image by stars6 / Leonardo Rizzi via Flickr

Related Articles:Publish Post

• Cisco Cius (emkey1.blogspot.com)
• Why Is Cisco In Trouble? (emkey1.blogspot.com)
• Practical Analysis: IT Pros Don't See Cisco's Claimed TCO Advantage (informationweek.com)

Empire Avenue (Social Influence Scoring)

This is the third of what will likely be a four part series discussing Empire Avenue. Empire Avenue is one part game, one part social network and one part social network influence ranking. I'm still going back and forth as to whether this is a brilliant or misguided approach. This time out I'm going to talk a bit about the social network influence ranking portion.

My big issue with the other two sites that I'm familiar with that measure social network influence is that they combine the activity from multiple different sites into one composite score. This seems wrong to me and I made a post on Quora that elicited a response from Eva Schiffer that agreed with my basic premise so apparently I'm not totally off base in this belief.

Empire Avenue does not take this approach. The score each social network individually. You can see this at my public Empire Avenue page. Here's what you'll see as of today for the four sites Empire Avenue tracks.

• 
  3 Out of 100
• 
  15 Out of 100
• 
  1 Out of 100
• 
  1 Out of 100

Clearly I have a lot of room for growth, particularly on Flikr and YouTube. Actually I'm not sure I agree with the Flikr score. I've been posting images fairly regularly for a month now and have had a few views and contacts along the way. Based on that I'd expect to see at least a three or a four.

I don't have any issues with the other scores. I'm modestly active on Facebook and use it as a means to keep in touch with what is going on with my near to mid tier social network. It have zero interest in opening it up to a wider audience. I use Twitter and./or one of my BLOG's if I want to share with a wider audience.

Empire Avenue does provide some more detailed stats tools that give a slightly better idea of how you're doing. For instance on Twitter I have a quality score of two out of five and an audience score of 1.5 out of five. It's not entirely clear to me how I raise my quality score but the audience score is reasonably self explanatory.

By breaking things down Empire Avenue provides much better visibility into what is and isn't working when you're trying to assess how you're doing while trying to build your social network influence. Based on anecdotal and personal experience though don't expect this feedback to be instant. It takes a week or so for an initial number to be established and after that changes come slowly. If you're trying something new be patient and don't just count on your Empire Avenue scoring. Each of these sites offers mechanisms that will give you much quicker feedback on how things are going like "Follows" and "Contact" adds. Empire Avenue does provide some external confirmation though as well as a place you can point people to in order to validate how you're doing.

Having said all that, there are some problems with the way Empire Avenue does their scoring. Broadly speaking there are two ways you can use a social network. The one I'm most interested in is to aid in engagement; high quality interactions that teach me something and give me an opportunity to get to know people. The second and much more common way that social networks are used is to create low engagement and high volume conduits to an audience that may or may not be listening. Sharon Hayes recently completed a ten week experimental engagement on Empire Avenue and made some very good points in an article she posted yesterday after disengaging. I highly recommend it.

So far as I can tell this rewarding of high volume/low touch engagement is pretty much par for the course. Hopefully we'll see continued refinement in the methodologies being used by Empire Avenue and other social network influence measuring sites.

Image via Wikipedia

Related Articles:

• Empire Avenue (Social Networking) (emkey1.blogspot.com)
• Empire Avenue (The Game) (emkey1.blogspot.com)
• Empire Avenue Enables "Vacation Mode" (thetechscoop.net)

Cisco Cius

The Cisco Cius (See Us) is Cisco's first foray into the world of Tablets. It's an Android based device with a seven inch screen that features 1024x600 resolution and the capability to play back and encode 720p high definition video though strictly speaking 720p display would require the capability to display 720 horizontal lines and the Cius only does 600. Given the size of the screen though this isn't really an issue.

Cisco has been careful to position the Cius as a business specific tablet. This is reflected in both the suite of software that comes preinstalled on the and the price tag which is in the $750 range for a unit that is WiFi only with 32 gig of storage. That's very steep when compared to the current generation iPad but if Cisco is successful in their efforts to position the Cius they'll be able to charge a premium over Apple. Apple has had some success in the enterprise but that is much more a measure of how popular Apple products are than it is a reflection of any desire on Apples part to sell to the Enterprise.

I'm of two minds on the Cius. On tthe one hand it's a clever enough idea and the software integration is attractive even if much of it is available for free. The Cius is optimized to be the center piece of a portable office. You can be authenticated to your work network, sending and receiving texts, initiating and answering both voice and video calls and using custom applications all from anywhere in the world that supports a decent level of connectivity. This use case very much fits in with Cisco's "Borderless Networks" campaign which I plan on talking about in more detail at some point in the future.

But will businesses buy into this vision? Cisco certainly hopes so as they've staked a lot of their future prospects on the larger vision that the Cius fits into.

I'll go on records as saying that I think their vision is credible, but I'm not convinced they have what it takes to carry it out. I've run into a lot of Q/A related problems in Cisco products over the past couple of years and that doesn't give me a good feeling. Too often they seem to use their customers and TAC engineers to discover very obvious bugs in their products and find work arounds. This does not inspire confidence in their ability to execute on the highly complex and integrated vision they are trying to sell right now. They did announce at Cisco Live 2011 that they are in the process of reorganization their software efforts under one umbrella which is a very good move that should help move things in a positive direction if executed well.

One minor nit on the Cius. The ones I've seen only say Cisco. They  need to include the "Cius" name prominently. It's a clever name that does a good job of establishing a new kind of device and brand. Cisco isn't doing a bad job of marketing it otherwise but it's a fairly unremarkable looking and without the Cius name it's hard to be sure what you're looking at when you first see it.

I found my interest/excitement over the product tempered by the fact that I wasn't sure I'd found one when I stopped by the Cisco collaboration booth at Cisco Live 2011. Cius isn't just a product, it's a brand. Cisco needs to do a better job of getting the name out there and putting it on the front of the actual units would be an excellent way of doing that.

Image via Wikipedia

Related Articles:

• Cisco Live 2011 Day One (Collaboration, Mega Trends) (emkey1.blogspot.com)
• The Cisco Cius Enterprise Tablet Hitting Verizon Later This Summer (techcrunch.com)
• AT&T To Sell The Cisco Cius (techcrunch.com)

Twitter/Things I've Learned/Rant

Image by Getty Images via @daylife

I've been using Twitter for just over a year now. twitter is generally referred to as a micro blogging site. For a long time I didn't understand the appeal. then I finally figured out that it's kind of like a RSS feed. Don't worry if you don't know what an RSS feed is. Suffice it to say twitter bears an uncanny resemblance if you squint your eyes and turn your head sideways. Once that light bulb came on I was ready to sign up and did so in June of 2010. I have some followers but I mostly use it as a place to keep track of what companies and people I'm interested in are up to.

I've learned the following things over the past year plus.

1. You can respond to somebody else's tweets by putting an @ in front of their twitter handle. Do this at the beginning of the line. For instance, 
• @emkey1tweets Your pointless ramblings burn my eyes.
2. You can reference somebody else by putting a # in front of their twitter handle. For instance, 
• I think #emkey1tweets is an ignorant slug
3. Some people "follow" others with the expectation that they will be followed back and unfollow soon after when that doesn't happen. In fact, sometimes they unfollow even if you do follow them.

Item number three really annoys me. I at least skim every single tweet that comes across my feeds. For this reason I'm VERY selective about who I follow. I have zero interest in following somebody who followed me just to get a follow back.

I do at least take a look at the profile of anyone who follows me and read a few of their tweets. If those tweets sound interesting and the volume is reasonable and I'm not feeling too over subscribed I might follow them. Quality over quantity is key for me. If the quality drops I'll unfollow and I'd expect others to do the same to me if the tables were turned.

Another thing I've learned is that the odds that anyone who would resort to mass follows to try to get follow backs will be worth following are almost nil.

On the flip side of the coin, two people I've been following for awhile who have very respectable numbers of followers and a high sound to noise ratio are

Semil Shah and
John Refford

Both provide interesting and provocative commentary along with timely links to interesting articles. That is the right way to build a following.

If you happen to follow me on Twitter and I don't follow back please don't feel insulted. I say with complete honesty that it isn't you, it's me. If I follow you I want to be sure I can follow you, not just skip over everything you write because I don't have the time to actually read any of it.

Related Articles

• Why micro-blog? Why Twitter? (danielbeylerian.wordpress.com)

I Can't Deny That Klout Like's Me Right Now

Image via Wikipedia

I've been following a lot of different threads in the social networking space. One of those is social network influence ranking sites such as Peer Index and Klout. I've generally been less than enthusiastic about them and to be honest that hasn't changed. I still don't think that a composite score can be valid when comparing two or more people. Those scores are all fruit, but no two people represent the same fruit for reasons I've discussed before.

Having said that, I do think they are useful as a measure of personal progress if you're trying to increase your social networking presence. Since this is something I've been working on for the past few months I'm finding Klout increasingly useful. It updates in a reasonably timely manner which puts them well ahead of PeerIndex, at least in my experience. Most of my PeerIndex profile never updates and a week after opening a trouble ticket with them I still haven't gotten any response. This is not good.

My current Klout score is 25 out of a possible 100. Klout has something called "Klout Styles". I wasn't very happy/impressed with how I was classified a month or so back when I last wrote on this topic. At that point Klout had me pegged as an "Observer". The description of this style implied that I spent most of my time watching and very little participating.  As an active participant in online forums for more years than I'm willing to admit that didn't make a lot of sense to me though the likely root cause was the limited view Klout took of social media. For instance, this BLOG wasn't and isn't included in their tracking. They focus very heavily on Twitter and Facebook with LinkedIn and foursquare being a more recent additions.

I'm now classified as an "Explorer" which is a lot better for my ego and closer to the truth as well. The description text for "Explorer" is as follows:

You actively engage in the social web, constantly trying out new ways to interact and network. You're exploring the ecosystem and making it work for you. Your level of activity and engagement shows that you "get it", we predict you'll be moving up.

I have been working hard recently to up my profile in a positive way on the outlets that Klout cares about the most so some of my improvement may be due to my own proactive actions. They've also made at least a  couple of tweaks to their algorithms over the past month or so based on the recalculations I've seen in my score history.

One of the things I continue to wonder about is how Klout plans on monetizing their service. One possibility would be to make component scores for the individual social networks they track available on a subscription basis. That information would be potentially interesting to companies that want to get a better grasp on how to utilize their limited resources in reaching out to customers. It may sound cynical/wrong, but knowing who has the most influence is an important consideration when making these decisions.

What we're really seeing emerge here is an influence economy. That frightens me a little, but it doesn't have to be all bad and in reality we've always had one. The only real difference is that in the future it will be clearer who has the influence and if you want to look closely how they got it.

Related Articles:

• Klout & PeerIndex (Social Network Influence) (emkey1.blogspot.com)
• Klout Now Factors in Foursquare Checkins (mashable.com)
• LinkedIn Users: You've Got Klout (mashable.com)

Why Google+ Circles Encourage More Sharing (Short Take)

It's been interesting to hear some Facebook supporters defend Facebook by slamming Circles, insisting that they discourage sharing and are thus a bad thing. As I mentioned in an earlier entry, Facebook has their own implementation of this concept even if they have buried it increasingly deep in their UI over time. More apropos though is the concept that Teresa Zazenski came up with as part of an online conversation in the comments section of the post linked to her name. She pointed out that people may in fact be MORE likely to share if they have Circles. The reasoning is that most of us self censor if we have something to share that isn't apropos to our entire group of "friends". Circles give us the ability to target our message appropriately and thus increases the chance we will do so. She made some other excellent points that I won't share here so check out the link.

Facebook supporters need to find a better approach to criticizing G+ than Circles. The Circles concept is easy enough to defend and so far all of the criticisms I've heard have been weak while the arguments in favor have gotten increasingly strong.

These kinds of online dialogs are one of the reasons the Internet is very cool. Similar types of conversations have been happening for centuries but two hundred years ago they would have happened by way of journals and private letters and taken months or even years to run their course.

This sort of rapid sharing and dialog is one example of why the pace of change continues to accelerate.

Image via Wikipedia

Related Articles:

• G+/Facebook/Circles/Lists (emkey1.blogspot.com)
• Can Facebook and G+ Coexist? (emkey1.blogspot.com)
• Why Google Plus Might Be Better Than Facebook (ken_ashford.typepad.com)
• Why Google+ Is Not a Minus for Facebook (fool.com)

Pete Rose/Cisco Live 2011

Image via Wikipedia

It's starting to look like Pete Rose's day job is hanging around outside one of the shops in the mall that is part of the Mandalay Bay Casino in Vegas from noon until five PM. He's been there two of the three days I've been in town. This is not the way you would expect a seventy year old sports legend to be spending his twilight years. On the plus side I did see a queue of about five people waiting for him at one point today so he still has some fans. It seems kind of dangerous for a guy with an apparent gambling addition to be hanging out in Las Vegas though. It's kind of like a pyromaniac choosing to live next door to a fireworks factory.

The Cisco Live conference has been fun and in case my boss is reading this, educational as well. Cisco Live isn't "all Cisco, all the time" but it's close. Partners also make an appearance and based on my experience it's not a bad place to come if you're looking for some insight into what is coming in the world of technology in general and networking in particular.

I'll no doubt be using this conference as BLOG fodder for the next several weeks but here are some random observations I wanted to share today.

Cisco has been accused of losing sight of their core focus in recent years. Their stock price has been in the doldrums for a decade and significant growth has been elusive. I've written before about their acquisition culture and how it didn't seem to be working anymore. I'm seeing signs that both the lack of focus and the failure to leverage acquisitions effectively may be a thing of the past. It's too early to tell if their new focus is a winning one, but they clearly have one. What is it you may ask?  Video, collaboration, the social revolution and delivering the technologies needed to make those things reliable, affordable and cool.

Where Cisco went wrong in the past was going down market. Their acquisitions of Flip and Linksys took them directly into the consumer space where competition is fierce, margins are low and entire product categories can be born, live out their lives and die in a handful of years. That isn't the world Cisco came from and it shouldn't have been their focus. I think they've figured that out.

The Cius, Cisco's debut tablet is either the ultimate proof of their revival or another wrong step. It's priced much higher than the iPad and from a hardware perspective it isn't especially impressive. At first I thought it was a total misfire but based on the story Cisco's telling I'm not so sure now. It is firmly aimed at the enterprise and Cisco has included an impressive suite of collaboration tools. It's a phone, it's a video conferencing solution, it's a note pad, it's just about anything you want it to be if you're a business since it purports to be highly secure and amiable to custom application development.  I'm sure I'll write more about this in the future. With a bit of luck I might be able to get my hands on one for a few minutes in the next couple of days.

Related Articles:

• Cisco Live 2011 Day One (Collaboration, Mega Trends) (emkey1.blogspot.com)
• John Chambers at Cisco Live 2011: Cisco Will Drive the Future of Networking (blogs.cisco.com)