Media Dojo

Archive for May, 2009

Ask people in the abstract whether they want more choices,the answer is typically a resounding yes. However, look at how most choices are presented in real time and most people end up deciding between black or white, good or bad, open or closed, Democrat or Republican, whether they’ll have the chicken or the fish.

Digital privacy policy is often set up in a similar vein. You either have it (privacy) or not.

Binary choices can be useful for setting up the infrastructure for competing views to join in battle. The contestants line up in their respective colors. They go to various media outlets as either the home team or the visitors. There are lusty cheers or jeers greeting their positions, and we’re told that through this kabuki the winning view of truth will emerge.

But a funny thing happened on the way to Capitol Hill with digital privacy. Try as we might, it’s been almost impossible to set it up as a simple choice.

When I first applied to the Knight Foundation fellowship, I naively thought finally, I’ll understand digital privacy once and for all. That was laziness on my part. But, hey, imagine if it actually panned out. I’d have been a pretty smart duck.

The closer truth is that after hearing some very talented and passionate speakers along with sharp questions from 23 journalists, I’m believing there won’t be a definitive ceremony marking either the end of privacy or the complete securing of our privacy rights as they apply to the digital space.

More likely, we’re in for years of ebb and flow of digital privacy issues on the policy radar screen. Digital privacy can’t be solved as a specific problem. More likely, it’ll be managed as an ongoing issue with flare ups and periods of quiescence. I believe this isn’t simply because we haven’t sorted through the batting order of privacy contestants. More close in my opinion is the reality that you can’t separate the practical debate (how we do it) from the philosophical debate (what are we protecting) from the political debate (who decides it).  It’s three level chess.

We’re building an economy in which demographic and activity data is becoming the dominant form of capital. By dominant, I mean that it leads the dance for other forms of capital. In the 18th century the valuable thing to own was land. I could use my title to land to take out a loan to purchase something else. In the 19th century it was about owning machinery. In the 20th century, I’d say it was about owning formal intellectual property although I freely admit I’m agnostic whether that was the definitive form.

2009 is a bit more clear to me. With real or de facto ownership of personally identifiable information combined with analysis of a stream of activities, I’ve got a pretty good idea of a person’s economic impact and potential future value. If I can encapsulate that knowledge into some digital artifact I can transfer to someone else (e.g. a customer record, search history, ticked preference boxes) then that’s property. I can use such property to organize other forms of capital such as financial, technical, human and so forth.

Twelve years ago, I gave a talk at Harvard’s JFK school about the political economy of the Internet. It was 1997 and everyone had policy theories.  At the time, I tried to fit Internet policy debate in the context of property rights as I understood them from grad school.

“…the new reality is that the creation of wealth and power is shifting toward applying intellect, technology, and economies of scope to the problem of production and exchange as opposed to energy, labor, and economies of scale. No longer is the individual firm the fundamental economic unit but networks of firms where the integration of knowledge is superceding the division of labor to define an economic system.

Is this the new economy as trumpeted by the media? Perhaps it is, though the data is very incomplete at this point. But one thing is clear. We are witnessing the early days of a struggle between intellectual property and classic financial markets to define capitalism’s center of gravity. We can expect a wild ride for the next few years as Wall Street tries to value intangible digital assets with intangible digital securities. They’ll eventually get the trick right but history suggests that more fortunes will be lost than made before the dust settles and we have a new set of values.

Moreover, it is apparent that the Internet is playing a critical role in this struggle because it is becoming the main institution for circulating and adding value to intellectual assets or claims on those assets in the same fashion that the banking system circulates financial asset and claims upon them. This is changing the way that credit is created, bought and sold and therefore, the way in which the use of capital is determined, and how people are organized for work.

And those individuals who internalize this distinction and improve upon the process will control significant wealth and power in the 21st century.”

Well, it’s the 21st century and I was wrong about a major part of that analysis. I thought that intellectual assets meant intellectual property (e.g. patents, copyright, trade secrets, trademarks, brands and logos). What’s happened instead is that mindshare, usage, registrations, searches, in other words information about people has emerged as the most important asset for a new economy.

Digital privacy policy can’t be restricted to economics, politics, law, culture or technology. It’s all of that because we the people, you and I the individuals, are the primary assets in play for a new form of capitalism. In that sense, I wouldn’t be surprised in my lifetime if we end up amending the US Constitution to accomodate the new realities.

Growing up in Tennessee, I often heard my mother use the phrase “livin’ in high cotton” to describe a situation in which you’re the beneficiary of exquisite hospitality. Today, I received the final program schedule for my week in D.C. working on online privacy issues as a Knight Foundation fellow. From trips to the FBI, to a briefing from the Obama Adminstration Office of Science and Technology Policy, to meetings with Google’s Washington handlers as well as the ACLU, I’ll be livin’ in high cotton from Memorial Day.

Jokes aside, I’m honored to be given the chance to take a deep dive into online privacy concepts and policy at such a top level. If we take as given that demographics and activity data form the capital of the interactive world, then privacy becomes one of the core concepts to master. I’m also jazzed at the make-up of the other fellows and their organizations.

Mark my words, children. There’s many a time when you fill out an application with only a sliver of a chance to being accepted. However, the only sure outcome is that you have a 100% probability of nothing happening if you don’t fill out that application. So take a chance. You might end up pleasantly surprised.

Jokes are among the oldest and most effective forms of human communication. From etchings made by a bored Centurion on Hadrian’s Wall (“A Roman and a Greek were debating in the Forum one day….”) to the latest YouTube postings, the ability to take in communication, make it your own, and pass it along strums a deep cord within people—if it’s done well.

That’s one of key benchmarks for a newer breed of service providers using cloud computing to change how outbound communications via email and text are done by organizations to reach their customers and partners. I spoke with Dale McCrory, a top product manager at Exact Target out of Indianapolis. Earlier this month, Exact Target raised a whopping $70m VC round in the midst of economic turmoil. More about the company here: Media Dojo Tear Sheet: Exacttarget

I found that many of the social rules we’ve learned over time about context, consent and content of a good joke go a long way toward making the social value of it work. What cloud computing does, it allow the infrastructure to respond in tune with what a savvy marketer would like to do.

Media Dojo: Tell me about Exact Target and its DNA

Dale McCrory: We’re a SaaS-based one-to-one communications provider for companies wanting to reach their customers. We started as SaaS marketing to send out messages, primarily via email. We’ve now expanded our footprint to other one to one communications mediums like SMS.

MD: Where does cloud computing fit into that?

DM: There’s a portion of the cloud that allows a marketer to upload files that contain the email addresses that constitute their opt-in customer base. Our service connects to a back-end database on the customer premise. The data goes into the cloud at that point in time.

MD: So what problem are you solving?

DM: We enable marketers of all sizes to deliver direct communication (email, SMS, voicemail) to their customers and have all the tracking and analysis tied back to their goals and projections. We also have a content management landing page so people can build websites in our system. The main problem we’re attacking is that if you can’t find a way to quickly organize, personalize, send and track your marketing communications, it quickly defaults to spam in the customer’s mind. Aside from working the logistics of ensuring the right message to the right person in the right context, we also help our customers maintain their legal compliance with legislation such as the Canned Spam Act.

MD: So where is email marketing going as a business process? As an “art” form?

DM: It used to be only about the message: its content, its delivery, its tracking back to goals and outcomes. That’s still important but we’re also seeing email as a vehicle for allowing the consumer to repurpose good content across social channels. So it’s a customer being able to say, “the content of this email is important or funny enough for me to want to forward and display it on my Facebook wall”. Being able to facilitate that interaction while maintaining the essence of the message is crucial because now you’re introducing your content to people who weren’t experienced it before.

Secondly, it’s the ability within an email to actually change images on the fly. An example would be that you have a coupon that goes out via email that after three days you want that coupon offer to change into something else if it hasn’t yet been opened. We can do that with technology called Live Content.

MD: What cost areas are you attacking with cloud computing?

DM: If you look at a traditional web hosting today, if a SME marketer chooses to build a web presence that relies on regular email communication, most web hosts throttle back emails to about 100 per hour. The reason that most hosting companies limit you to about 100 is that there is a something called an IP address reputation. All spam collectors look at an IP address and ask whether the volume is too great. If the email volume exceeds a certain threshold, the host will start blocking everything coming from that IP address. The hosting providers have to do that because they have their own IP reputation to maintain with other hosting providers and peers. The individual host might have 500 customers sending email through that one IP address and if any one of those exceeds that threshold they can end up punishing the rest of them. So there’s a huge cost to doing that.

Take it up to the enterprise level and imagine that you need to send out 200K emails for a legitimate reason on a particular business morning. if your business is going to make money by getting those 200K emails out that particular morning and you’re on a system that can’t send out those messages fast enough, so it takes you 8 hrs to get those 200K emails out, you’ve lost money. By using the cloud, you’re able to get out your message and not worry about whether you put enough hardware to solve the problem. You’ll also need someone monitoring your IP address to ensure that not only do the sends go through, you’re also complying with your opt-in/opt-out lists. According to the Canned Spam act, you have to process someone within 36 hours who wants to unsubscribe. If you don’t meet that request, then you’re in violation of the law.

MD: Last question, what new things does cloud computing enable you to do from a communications point-of-view?

DM: One thing the cloud enables is for us to become a hub for data. It enables us to interact with other cloud providers, for example Salesforce.com. You can mix data from SF such as support data or it might be sales prospecting data, combine it with the rest of your email marketing data, and do advanced segmentations by bringing together all these disparate sources in to a single system. A key cloud advantage is that you need to bring multiple systems together in a standard way and you need to have the scale to do that.

Another aspect is that having the same communications platform on the cloud allows the customer to explore different messaging types such as SMS without leaving the basic system. So the marketer might want to know the customer’s communication preference, which might change depending on the type of message or even the time of day. It might be better to send a SMS instead of an email to let a customer know that their pre-ordered item is now in stock. That would be a huge undertaking if you needed separate systems.

This week will be a little light on postings because I’m going to NYC to participate in a workshop hosted by PricewaterhouseCoopers’ Entertainment, Media and Communications (EMC) practice. You probably know of them through the big Global Media and Entertainment Forecast published each year or every other year. Most research shops benchmark their online ad forecast numbers against that pub to a greater or lesser degree. I’m one of about 7-8 outside people brought in to bring new eyes/opinions to issues that occupy the EMC partners and directors. Should be an action packed day. FULL DISCLOSURE: I worked at PwC’s Technology Center during the late 90s in Silicon Valley.

Publishers have an inventory and supply chain management problem similar to airlines and their seat pricing. The value of the asset changes rapidly, changes according to who wants it, changes according to how it’s bundled with other offers. It’s a whirl of activity right up to the point when the plane takes off or the ad impression is served whereupon the value of the asset plunges to zero. It’s an everyday challenge to practice effective yield management for both online ad spaces and airline seats.

Savvy operators in both industries have long known what they wanted to do to crack this problem: take raw data in the form of server logs or ticket price searches, refine it into information that can be combined with other information in an analytics package, process that information into insight about opportunities to maximize revenue at the margin, and then take action based on that insight. It’s a relatively straight forward process that, technically speaking, requires a shitload of data, storage, processing, and reporting infrastructure. Thus, the “cost-effective” constraint raises its ugly head again.

However, cloud computing is starting to change that dynamic. I spoke with Tom Shields, CEO of YieldEx which is a cloud-based provider of tools for publishers to manage and optimize their online ad inventory, including forecasting of overlapping inventory and best possible campaign allocations. YieldEx became the second company to win Amazon’s Web Services Start-up Challenge, receiving $50,000 in cash, $50,000 in AWS credits and eventual direct investment into the company. For a quick overview, access the MD Tear Sheet. MD-TearSheet-YieldEx

Media Dojo: Why the focus on cloud computing?

Tom Shields: We ran into a number of problems during the 90s and into 2000 that were essentially unsolvable with the compute resources and capabilities we had at the time. The volumes of data we needed to process, the types of analytics that people wanted to do, the kinds of information that people were trying to get out of that data was pretty hard obtain cost-effectively. But we knew what we wanted to do. It’s a combination of yield management and plain old supply chain management for publishing. So what YieldEx is trying to do is apply computer science to and new capabilities offered by cloud computing to advance the state of the art.

MD: How are ad spaces different from airline seats when it comes to yield management?

TS: There’s a couple of things that make advertising impressions unique. Like airline tickets they disappear and the value goes to zero. If you have a physical object on a shelf, it may decline in value over time but it doesn’t disappear. The second interesting thing that so far seems unique to advertising impressions is that impressions can be characterized in many different ways. Those different ways have different values to different people.

So an impression coming in may be a male 25-34 on west coast looking at sports content. You might have some marketer wanting to buy sports content opportunities, others want to buy males; still others want to buy west coast. And these marketers may have different values attached to each one of those things. Part of the challenge here is that what one person considers premium inventory, another considers junk, what works for one marketer might not work for another. So there’s an optimization challenge to figure out how do I as a publisher maximize my revenue given this set of X impressions that expire at a given Y rate and given Z demand from all these different marketer audiences. It ends up being very complex and challenging, especially when you have 10 million ad impressions being served every month and you’ve got 10 thousand potential ad placements. The cloud allows us to economically crunch that kind of data unlike before.

MD: How does this work in practice?

TS: We take in a day’s worth of our publishing clients’ server log files. We process those log files overnight, turning them into clean information sets that you can run queries against in order to surface an opportunity to optimize your ad inventory. We need to be able to start up a hundred instances of significant sized virtual machines, and run them all in parallel for a relatively short period of time like an hour, 30min even. Then we need to shut them all down again and stop paying for them. That’s why our application is particularly well suited to the cloud.

In terms of the amount of server log data we need to process, it ranges from a couple of GB to a couple of hundred GB per customer per night. For some of the larger publishers, their current reporting infrastructure takes them 22 hours to process one day’s worth of server log data into information they can sell against. If you take that same data and put it in a cloud based parallel infrastructure, you can process it sometimes in less than an hour. It’s a huge difference.

MD: Is the nature of impression data changing online? How do you optimize that?

TS: Along with the Facebooks and other social platforms generating mountains of impression data, publishers are going to create a lot of that stuff anyway. How they obtain that data and use it for their own benefit and potentially sell data as well as impressions is probably where we’re going over the next 3-5 years. Publishers will probably also be combining their impression data with 3rd party impression data to get better demographics so that they can generate profile information that they can turn around and sell more effectively than an ad network might be able to.

Then there’s going to be this whole concept of measuring performance. What’s interesting is that for a number of marketing objectives that brand guys typically talk about, clicks are really a terrible measure for those things. For the publishers, the trick going to be about attribution tracking. It’s knowing, “sure that guy went on Google and did a search on the product but he saw five banner ads for that same thing before he searched and wouldn’t have known what to search for without getting the awareness from those display ads”. How does a publisher get credit for that? He won’t unless he can prove his content had an impact. And that requires data.

MD: Why do clicks rule? Should they rule for branding?

TS: It’s easy to optimize stuff you can measure. If you look at optimizing around clicks, it’s actually pretty easy because you can measure the clicks right away. You can promote your site because you can see where people are clicking and where they’re not. Without minimizing the scaling challenges involved, it’s a pretty straight forward problem. If you have feedback, you can optimize rather quickly.

The problem is that it’s hard to get feedback from activities that move higher in the funnel. Take brand awareness. How do I get feedback on brand awareness I can quantitatively measure automatically in software? If I can’t measure it quantitatively, it will be much more difficult to modify the format or delivery of the ad to optimize it quickly. If you can start measuring those things, you can start optimizing them very quick. But part of the problem is that there is this time delay between measurement and feedback because you can’t measure the impact of brand awareness until much later.

MD: Last question, do you see cloud computing as a means to collapse this float between measurement, however defined, and the ability to take action?

TS: Cloud computing offers only the ability to ingest, process and report a lot of data under far better economics. It’s no replacement for common sense on the publisher side. Whether you use cloud systems or what ever the key to optimizing your inventory is to learn what works with the customer, then go after it and earn money. How fast can you run your learn cycle so that you can maximize your earn cycle.

For marketers, learning is the overhead in the overall media buy. You’re taking your hit via lower effectiveness during the learning period of the campaign cycle in order to maximize the effectiveness of the earning period. So the shorter and more effective you can make the learning period, the less overhead you have, the more efficient the overall media buy becomes.

Andrew Heyward speaks fluent television, having been President of CBS News from 1996-2005. He’s also highly conversant in cloud computing. A senior advisor to Marketspace LLC, Andrew co-wrote with Marketspace Chairman Jeffrey Rayport a public policy study on cloud computing, sponsored by Google, which argued that there are eight fundamental elements for “enabling” the cloud to realize its full potential. While policy-makers can play a supportive role, the cloud, like the roll-out of the Internet before it, is taking shape on its own, in ways largely mediated by market forces.

[Editor's note: http://www.marketspaceadvisory.com/cloud/]

The big issue, however, isn’t policy so much as cui bono? Deciding who benefits and who pays in a cloud-based environment won’t be announced in a press release announcing a policy initiative. It’ll require similar block-and-tackle work to build an ecosystem as we saw in Internet circa 1995-2005. The paper lays that out on page 4 of the executive summary:

“Despite such an exhaustive array of benefits and the already high rates of consumer adoption, the cloud remains in its early stage of development. To become the next computing paradigm – democratizing computing resources for the masses – the cloud will demand an ecosystem. That ecosystem will go far beyond the obvious examples of providers of cloud services (operators of data centers) and their customers (individuals and organizations). It will require sustained innovation from digital device manufacturers, bandwidth providers (cable cos. and telcos), and content companies (media, content and software makers, among others).”

I spoke with Andrew about the potential implications as they might apply to the cable television industry.

Media Dojo: Who was the intended audience for the paper?

Andrew Heyward: The paper was intended for an interested lay audience. That’s why it spent a lot of time looking at what was standing in the way of adoption of cloud computing, what could accelerate its adoption, and what are the policy implications. So, the final audience was policy makers on Capitol Hill.

MD: How does the money flow in today’s cable television industry?

AH: The simplest taxonomy is that a studio creates a show and sells it to a cable channel like TNT as part of the line-up. The channel is carried on cable systems owned by companies like Comcast, which pays fees back to the channel, who pays the studio. Of course, it’s a lot more complicated when you factor in revenue shares from advertising, but that’s essentially the historic structure.

MD: What is changing with professional video content?

AH: Professional video now comes in multiple flavors. You have video that was created from the start for online consumption, like the “programs” on Blip.tv. Then you have video that was created for traditional distribution that ends up online in a parallel life on a site like Hulu. An emerging consumption trend is that people have become used to an online experience and now want similar features with professional video such as the ability to share, the ability to tag, to comment or interact in numerous ways. This is common on the web but still primitive or non-existent in traditional video environments like cable or especially broadcast television.

MD: How does the maturation of online video affect the today’s television industry?

AH: The biggest change is that long form online video has become a legitimate competitor to traditional distribution. That means the TV business must successfully navigate two countervailing ideas. The business was built on aggregating audiences through scarce distribution channels based on compelling content that wasn’t available elsewhere. So television distributors could charge those viewers directly through subscription fees or indirectly through advertising in order to fund the ecosystem.

To the degree that online video becomes a separate major source of entertainment and information; it stands the chance of disintermediating the distributors which are the broadcast, cable and satellite networks. At that point, the cable provider will ask why it’s paying for something that people are going to download for free anyway. Here’s where the Internet is a great disruptor because it allows content creators to bypass these filters/barriers to production and then distribution.

While this is happening on the industry side, on the demand side you have people wanting to become their own media programmers. That trend is coupled with growing consumer expectations that content is going to be available online and they’re going to be able to do things with it. So professional content creators are wrestling with the dilemma that they need to make video available to customers how they want it and when they want it. But in the short term, they must try to do that without jeopardizing or cannibalizing the traditional business model that is based on exclusivity and scarcity.

MD: Where does cloud computing fit into this matrix?

AH: Cloud services can help companies that have dramatic demand cycles by allowing them to “rent” extra computing capacity only when they need it. But the real innovation is that the cost of distribution is coming down to virtually nothing.

[Editor's note: I've posted several times my belief that the game changer from cloud computing is far lower costs for HD-level video production/distribution combined with the ability to make video streams as interactive as any other form of Internet content. Speaking with Andrew I thought that cloud computing will unmistakably surface whether the true competitive advantage of today's big video players is based on their control over the creation of compelling content or their control (now slipping) over content distribution. I'm not looking for a press release to announce when we cross that line. I'm listening for an "A-List" video content creator like a Spielberg to publicly state that it's more important for their work to debut online than on screen or on TV. It hasn't happened. But it's a matter of time.]

The Knight Center for Specialized Journalism has invited me to be part of a week-long seminar on online privacy and policy. It will take place at the University of Maryland at College Park at the end of this month. It’ll be a deep dive into the Obama adminstration’s technology policy, social media privacy, electronic health records, global privacy policy among others. Journalists will attend from Associated Press, Newsweek, IEEE, Yahoo!, St. Louis Post-Dispatch as well as international publications from Turkey and Angola. Details can be found at this link:

http://specializedjournalism.org/index.php?q=seminars/2009/digital_life

Along with the honor of being accepted, I’m jazzed at the prospect of being able to drill into this stuff on a sustained basis with such top quality talent. I will update more during the seminar. I might even try for an interview or two on Capitol Hill once we get deeper into cloud-based media services like Google, Facebook and others. No worries about me becoming a political blogger. There’s plenty of them around—even after all the aerial spraying.