So much talk about evil these days. Google is evil for promoting results from its Google+ social network on search results pages, and even for changing its privacy policy to make clear its services share data. Apple is evil for not coming down hard enough on harsh working conditions at its Chinese suppliers’ factories.

Well, maybe. But if they’re going to be honest, the many pundits piling on to today’s titans of tech need to look up from the screen and into the mirror. Google’s and even Apple’s businesses, warts and all, don’t exist without our explicit participation. As Pogo famously said, albeit in a different context: “We have met the enemy and he is us.”

Now, I’m still not so sure Google’s actions on either score rise to the level of evil by any reasonable meaning of the term. (In fact, the furor over Search plus Your World makes me think of Pogo creator Walt Kelly’s second most famous line: “Don’t take life so serious, son. It ain’t nohow permanent.”) But it sure looks like Google’s at least edging closer to the evil line than its hifalutin ideals ever seemed to suggest.

For its part, Apple has taken considerable effort improve the factories that produce the gleaming iPhones and iPads we love. But if today’s New York Times story is correct, it’s clearly culpable in its seeming ambivalence about coming down hard on its suppliers exploiting workers.

Fact is, though, these companies get away with things we don’t like only because we let them. As powerful as Apple and Google seem, they both answer to customers and users. That would be us. And unlike politicians, they must answer to us every day–if we insist they do.

But we can’t do that just by bitching about them on blogs. You want Google to back off on personalized search and data-sharing? Opt for the plain results (click the Hide Personal Search button up there on the right), sign out of your Google account, or even delete it entirely. Or try Bing, or DuckDuckGo. Easier than blogging about it! And if enough of you do it, rest assured that Google’s data crunchers will notice, and if they’re as smart as they like to think, they’ll figure out how to change things.

You want Apple to fix its factory conditions? Don’t buy that next iPhone or iPad, and tell Apple why. If enough of you just say no, Apple will notice, and maybe start to use some of those unbelievable profits to change things.

Everything else is just talk. And there’s been quite enough of that already.

Five Small Stories About Steve Jobs

October 5, 2011 by robhof

Lots of people who were closer to Apple cofounder Steve Jobs than I have written moving memorials to a man who, in an industry and a region where people love to say they want to change the world, actually did it. The Apple II, the Macintosh, the iPod, the iPhone, the iPad–and Pixar!–none of these would have happened, certainly not in the same culture-jolting way, were it not for Jobs’ imagination and determination.

Because I was busy enough watching Intel create the electronics revolution, chronicling Scott McNealy and Sun kicking Hewlett-Packard’s butt for awhile, and witnessing Jim Clark and Marc Andreessen birth the commercial Internet, I can’t share tales of watching the genesis of the particular revolutions Jobs sparked from a front-row seat. All I’ve got are a few small, even inconsequential tales of Steve Jobs from my brushes with him over the years. But I wanted to share them anyway in the hope that they add a little more color to the life of a man who brought so much to ours.

I met Jobs face-to-face for the first time just before he was to introduce, if I’m not mistaken, the NeXTcube computer in 1990. BusinessWeek writer Kathy Rebello and I visited Jobs to see the machine at NeXT’s offices in Redwood City, Calif. He was his usual charming self–and make no mistake, despite his well-deserved (and self-described) reputation as an asshole, he was very charming. And his enthusiasm was infectious even though I had doubts about whether he could widen NeXT’s wedge between Apple and Sun into a sustainable business.

I remember two things distinctly. One was his focus on the shape and design of the jet-black machine, which I recall him touching fondly. That love of good industrial design is something he clearly never lost.

The other thing I remember is that he nervously fingered the wedding ring on his finger. When I jokingly asked him if it perhaps it wasn’t fitting so well, he launched into a story about his grandfather, who was a machinist (if I remember correctly–though seeing that his adopted father Paul was a machinist, I wonder if I heard wrong). Anyway, he said his grandfather was operating a machine with his wedding ring on, and it got caught in the machinery, removing his finger along with it. So every time he felt the ring on his finger, it gave him a twinge.

Now, this was Jobs before his canonization as the savior of Apple, so perhaps it’s just an example of a CEO trying to make nice with reporters with a personal tale. Still, the story stuck with me precisely because it was such a human, uncorporate story to bother telling.

I also saw Jobs just a couple of times doing his famous product introductions. One was the introduction of the first NeXT machine at a huge gala event in San Francisco in October 1988, if I recall correctly, because BusinessWeek writer Katie Hafner needed help reporting on a NeXT story she was working on and I was the new guy getting sent to whatever needed doing. (She thought she was getting an exclusive, though Jobs apparently promised an “exclusive” to two other publications–vintage Steve Jobs.)

In demonstrating a built-in dictionary that could call up definitions with amazing speed, he said, “Hmm, what shall we look up? How about ‘mercurial’?” That was the most common descriptor of Jobs at the time, and his joke brought down the house. Like I said, he could be the most charming guy in the room when he wanted to conjur up his famous reality distortion field.

The next time I saw Jobs onstage was just three years ago in San Francisco at his introduction of the iPhone 3G at Apple’s Worldwide Developer Conference, helping out my BusinessWeek colleagues and Apple aces Peter Burrows and Arik Hesseldahl. I hadn’t seen Jobs in person in many years, onstage or anywhere else. Of course I knew about his health issues, but as I liveblogged the event, it still struck me how frail he seemed:

Maybe it has been far too long since I’ve seen Jobs speak in person. But he seems a little laid-back, even tired?

As it turned out, this appearance kicked off another round of speculation on his health. Even without the benefit of hindsight today, it felt to me that, at the least, Jobs’ ability to carry Apple entirely on his shoulders was fading.

Update: Oh, how could I forget that photo shoot? For a special issue on Silicon Valley in 1997, BusinessWeek had somehow gathered many of the leading lights of the Valley at that time. I later wondered how on Earth we made that happen, but there’s Jobs on the left, dressed characteristically with more style than the rest put together.

I don’t remember much about Jobs’ behavior during the shoot beyond his huddling with his friend and Oracle CEO Larry Ellison at one point. And maybe that was the point: While there was no doubt he had to be in that photo, he wasn’t yet Steve Jobs, the icon, he was the guy who had just returned to Apple after it bought NeXT and faced a huge uphill battle to save it. Still, he was Steve Jobs; I remember his letting the magazine know that he was annoyed about the photo because his white shirt stuck out from under his vest.

One last story: My wife and I used to frequent a small restaurant in downtown Palo Alto called Caffe Verona. One evening around 1999, more or less, we were getting coffee, and suddenly I noticed that ahead of me was Ellison. That was interesting enough, but then I saw him take his drink out to the small patio entrance–where sat Steve Jobs and his wife.

Being a reporter, and because I think neither recognized me in the dark, I took a seat outside a few feet away, hoping to overhear any juicy details about coming products, Silicon Valley gossip–whatever. Long after my wife went back inside to get warm, I kept nursing my cappuccino and pretending to read magazines. So what did I overhear?

A half-hour of talk about the details of macrobiotic diets.

It was a mildly funny story to tell for years afterward. After Jobs’ health issues, it became less funny. But I always thought it was significant for another reason anyway. Here was one (actually, two) of technology’s leading lights, and they somehow found time to pal around talking about everything but their businesses.

Ultimately, what I remember about Steve Jobs was not the showman, the icon, the visionary. I remember a real human being who just happened to change the world.

Beyond the Wow Factor: Why LinkedIn’s IPO Matters

May 19, 2011 by robhof

It would be easy to take today’s blockbuster initial public offering by business networking service LinkedIn as a sign that the IPO, the fuel for the tech industry’s wealth-creation engine, is back. But one IPO on the first day won’t tell us that. It’s just as easy to dismiss the rocket-ride to well over double its already-raised offering price as a sign of another bubble. Again, one great IPO’s first day doesn’t mean everybody will party like it’s 1999 (though if it’s “brain-dead” to suspect there’s more than a little froth in Internet investing, take me off life support now).

Still, there are many other lessons we should take away from LinkedIn’s IPO. Here are a few:

* Social networking has arrived as more than a cute phenomenon. LinkedIn may not be Facebook or even Twitter, but it’s serious networking, using people’s social connections to create real value. A lot of people already know this, but for the rest, it’s well past time to stop listening to the Luddites who think Facebook and Twitter are nothing but places to tell people what you ate for lunch.

* At the same time, it’s also apparent that social networking won’t be a winner-take-all business. Yes, a lot of businesses and even professionals use Facebook for business purposes, and will continue to do so. But many more people recognize the value in having separate circles of friends, colleagues, business contacts, and the like. Now, I’d bet that Facebook could be the biggest winner–winner-take-most, if you will. But Mark Zuckerberg clearly won’t own everything social.

* This is the first real sign of whether individual-investor interest in IPOs has returned. It was already apparent that the (literally) marquee names like Facebook, or even Zynga or Groupon, would rock the world when they go public. They’ve got fame, huge and fast-growing revenues, and soaring private valuations already, so using them as a proxy for whether smaller fry would go public was always erroneous. LinkedIn, by contrast, is a much smaller business that’s closer to those of dozens of private Internet companies that to date have been unable to provide their venture investors and entrepreneurial teams exits besides getting acquired. You can be sure that those private Internet companies are using LinkedIn to research potential chief financial officers and arranging meetings with Wall Street investment bankers, if they weren’t already.

* Those shady private-market valuations, which have given Facebook, for one, $65 billion-and-up valuations, suddenly don’t look so crazy after all following the first IPO of an actively traded private company on private exchanges such as Second Market and SharesPost. LinkedIn’s $2.4 billion valuation on those marketplaces, in fact, indicates to some that the supposedly savvy investors trading shares privately vastly underestimated the value of these companies. No doubt LinkedIn’s market cap will be volatile, so it’s unwise to think that Facebook suddenly will be worth multiples of its already breathtaking valuation. But it’s clear that the limited number of shares being traded on these exchanges, as well as the limited amount of information these investors had, didn’t necessarily cause them to overpay. At the same time, it’s unlikely the SEC will back off from scrutinizing whether to regulate them–in fact, it may move even more quickly if this IPO sparks renewed interest in the exchanges.

* LinkedIn’s success proves that Web companies aren’t entirely dependent on advertising for revenues, providing hope that other business models such as subscriptions and paid services are credible alternatives. LinkedIn makes most of its revenues not from advertising but from paid services for recruiters and premium subscriptions.

* Nice guys don’t always finish last. Talk to almost any entrepreneur about LinkedIn cofounder and executive chairman Reid Hoffman, and you’ll get nothing but admiration, and not just because he’s an angel investor in many dozens of their startups as well as a partner in the venture capital firm Greylock Partners. Hoffman seems generous with his time–not least, full disclosure, with me as a reporter since LinkedIn’s earliest days. I remember asking him once, years ago, about the libertarian, government-bashing leanings of some of his more famous colleagues from PayPal, and he sighed and recalled how, as the liberal in the bunch, he kept pushing them to give back to people less fortunate than they. Regardless of your politics, though, isn’t it nice to see that you can become a billionaire without being a jerk?

* For individual investors, the rule for Internet company stocks still should be caveat emptor. That ~~$8 billion~~ $9 billion valuation likely won’t stay that high in coming weeks or months, not consistently anyway, as the pent-up enthusiasm for Internet IPOs gets spent (at least until Groupon or Zynga or Facebook cranks it up again). For all the success of LinkedIn as a company and as a bellwether for Internet stock issues, it’s still a speculative play, and its share movement may well drive home yet another lesson: Individual investors should never put money they can’t afford to lose into anything their dentist is investing in, their cabbie mentions, or the press is hyperventilating about.

Facebook Ad Chief David Fischer: Making Ads ‘the Best Thing on the Page’

April 21, 2011 by robhof

In March of last year, just as market watchers Hitwise and comScore reported that Facebook overtook Google as the most visited website for the first time, Facebook also stole one of Google’s top ad executives: David Fischer. The former deputy of Facebook COO Sheryl Sandberg at Google and a onetime editor at U.S. News & World Report, the 37-year-old Fischer left a job spearheading the search giant’s local ad effort to become Facebook’s vice president of advertising and global operations.

Despite his sales background, insiders say Fischer was a good fit with Facebook’s geek culture. At Google, “he made (sales) people in an engineering culture feel that they were valued,” says David Scacco, Google’s first ad salesman and now chief revenue officer at MyLikes, which pays celebrities and other online influencers to promote ads on social sites. And despite a modest demeanor in public, he was known for sometimes cutting loose, dressing up as Ozzy Osbourne and singing ‘80s songs at sales conferences. That said, he’s clearly a sales guy: In a 50-minute interview, he used the word “opportunity” or its plural 58 times.

In this edited interview for my story on Facebook’s advertising strategy in the latest issue of MIT’s Technology Review magazine, Fischer talks about how Facebook hopes to transform marketing into “the most useful thing on the page.”

Q: What’s your vision of advertising, and how can Facebook make that happen?

A: The Web is being rewritten around people. There’s this transformation that’s happening from an information Web to a social Web. Once the Internet was great for answering questions like “What is the weather going to be like in Cambridge tomorrow?” and “What flights can I get from Boston to San Francisco?” It wasn’t so good at aggregating information about the way we actually live our lives, which is people.

Continue reading →

You Are the Ad: Digging Into Facebook’s Advertising Strategy

April 19, 2011 by robhof

When I first started looking closely at Facebook’s booming advertising business for an article that just appeared in MIT’s Technology Review, I was soon struck by an apparent disconnect. The social networking juggernaut clearly is gunning for big brand advertisers, hoping they will view its 600 million-plus audience as the next big ad opportunity beyond television.

Yet it appears that most of the ads on Facebook are actually from either small businesses or no-longer-small businesses (but not traditional brands) such as social games maker Zynga and daily deal service Groupon. What’s more, those ads seem more aimed at eliciting a direct response such as an email registration or a purchase on another Web site than they are aimed at branding, which is intended to implant a brand into consumers’ minds that might get triggered later when they’re ready to buy something. And between Google’s search ads and a gazillion display ad networks, online direct-response advertising is already a wee bit crowded–even if Facebook’s massive database of personal info holds a lot of appeal for targeting likely prospects.

In other words, it looks like most advertisers on Facebook aren’t yet using its ad platform for the very purpose it’s designed for: branding. Of course, it’s tough to complain about a company whose ad revenues are doubling, to an estimated $4 billion this year. But if Facebook is to fulfill the huge expectations of its investors, who are valuing Facebook at around $65 billion (give or take $10 billion or $15 billion depending on who’s counting), it needs to do more than provide just another way to drive a direct sale. It needs to capture–or create–a market out of the vast majority of ad spending overall that’s aimed at branding.

One way to do that is providing what Facebook has been doggedly pitching to Madison Avenue for years: ads with a social component, such as its recently introduced Sponsored Stories, in which people’s stated “likes” for a product or brand are turned into ads. These essentially are word-of-mouth marketing on steroids. David Fischer, Facebook’s vice president of advertising and global operations, lays out this possibility in detail in an interview I’ll post here shortly. Suffice to say, there’s certainly potential for brands to divert a significant portion of their television and print ad budgets–and a few are starting–but for a lot of brands and their agencies, that’s still on the come. For now, they seem more enamored of Facebook marketing tools such as Likes and Pages–which are free.

Another strategy is to create a new advertising market, as Google did with its search advertising. Search ads enabled very small businesses, as well as those with just an online presence, to place effective direct-response ads for a global audience for the first time. Likewise, Facebook could open up brand advertising to the business masses in a way no medium has yet done. That’s something Facebook COO Sheryl Sandberg makes a good case for in my interview with her. Depending on how you define branding vs. direct-response, this may already constitute a good bit of Facebook’s advertising.

Either way, I came away understanding why investors seem so enamored of the company’s potential–but also why many people in the advertising business aren’t yet ready to place all their chips on Facebook.

A Glimpse Into the Future of Television

December 20, 2010 by robhof

If there’s one thing that struck me while I was researching an article on the future of television for Technology Review, it was all the fake living rooms. Google has one. So does Roku. So do Logitech, Sezmi, and Intel (which I believe has several in different states). I’m sure I missed a dozen more. It’s a sign of how important television, the star of living rooms real and faux, is to tech companies as they look to tap into the technology and media riches of the last great mass medium.

They’re all trying to figure out how to meld the medium they know–the Internet–with the one they hope to revolutionize: television. Yet with little native knowledge of television, Silicon Valley firms must troop consumer after consumer into these cozy little corners of their corporations and observe how people watch television and how they respond to their many efforts to bring the Web to the screen watched on average five hours a day. Even now, these companies are still struggling. Google, for instance, just told several consumer electronics manufacturers to hold off on planned launches of Google TV products at the Consumer Electronics Show in early January.

At the same time, the television industry has a lot to learn, too. Like the music industry, they’re in many cases fighting to keep too many people from watching television entertainment online, because that could damage their lucrative business models. But while they may have more leverage against the Internet hordes than the music industry had, thanks to both those business models and the durability of the TV experience for viewers, they don’t know any more about the Internet than the tech companies know about TV. Ultimately they will need to give viewers more flexible ways to view their content, or someone else will.

At this point, honestly, it’s tough to know how this volatile mix of TV and Net will shake out. I know, because I asked a whole lot of experts in both, and it was kind of amazing how uncertain nearly all of them are about what will happen even a couple of years from now. I hope to have provided some insight into how things could play out, but the uncertainty about what’s coming next in television is what I find most interesting: Whatever comes of this clash of two great mediums is going to surprise us all.

How Long Will Social Games Keep Us Hooked?

September 23, 2010 by robhof

Not long after I started my farm (pictured above) on FarmVille, the leading social game on Facebook, I got a message from a friend. He was relaying a question from his wife, who had seen countless semiautomated posts to my Facebook Wall chronicling my progress in the game. Her query: “What’s the matter with him?”

It wasn’t the only such reaction I got from playing Farmville. I started the game as research to write a story on their rise for Graduate School of Business alumni magazine at Stanford University, where a surprisingly large number of social games founders or managers got degrees. It seems that people either love social games (one friend either is doing a very deep research project on them or needs an intervention) or hate them. But it’s hard to deny that they’re a game apart from most previous online games, because millions of regular people who don’t even know the term “gamer,” let alone touched an Xbox console or joined a World of Warcraft guild, are playing them.

I hope my story explains some of the reasons why, but what I’m uncertain about is how far social games can go. Clearly, Zynga and other social games leaders have found a way to provide entertainment people enjoy–and, let’s not mince words, appeal to people’s addictive nature by adroitly manipulating game mechanics to keep players coming back again and again. As a result, Zynga is raking in big bucks and seems headed for a blockbuster IPO. And games may well support a second big business in virtual currency for Facebook.

Given their undeniable appeal, it seems that social games are here to stay for a good long time. But I also wonder if the slowdown and churn we’ve seen in social games this year indicates a certain weariness on the part of players. I’m afraid I don’t have the addictive gene, so much of the appeal of social games is lost on me (although I would like to reach level 12 in FarmVille so I can plant chile peppers…).

But even people who respond to the rewards of these games can feel like they’re on a treadmill. As a result, social games companies are trying to add more wrinkles to their games to keep users from getting bored. But then, like so many tech companies that have fallen victim to the Innovator’s Dilemma, they may start losing the mass market, for whom the simplicity of social games is key. Only a few companies, I’ll wager, will be able to walk that thin line.

When Will People Understand Virtual Goods Are Real?

September 6, 2010 by robhof

Look, I know virtual goods sounded kind of exotic–four or five years ago. But when it’s a multibillion global business today, it’s past time to dispense with the notion that crops on Farmville and flowers on Facebook aren’t really real. While I’ve been guilty of describing virtual goods as imaginary at times, what set me off most recently was a story in the New York Times that couldn’t seem to hammer enough on the idea that they don’t actually exist in any meaningful way.

Consider the language in just the headline and first two paragraphs: “Fanciful items.” “Things that do not exist.” “Pretend merchandise,” in contrast to “actual goods.” “Make-believe items.” Later, the article asserts that “virtual merchandise is in its infancy.” Perhaps that’s true compared to what it can become, and it is relatively new as a sizable business in the U.S. But estimates of the value of virtual goods sold worldwide range from $2 billion to as much as $6 billion a year. That seems well beyond infancy.

The thing is, what we call virtual goods are really no different in the pleasure or utility they offer people from other virtual things we consider “real”: Digitized photos. MP3 files. Videos uploaded to YouTube. And of course, online newspaper articles. So why the continual amazement that people will pay for virtual goods?

Partly it’s because the very term “virtual goods” connotes an air of unreality. But I think it’s also partly because, even 15 years after the World Wide Web took off, many people still haven’t quite realized how much of our lives have moved online. You can argue we’ve gone too far, of course. Hey, I’ll choose a walk in the woods with my family over leveling up in Farmville every single time. But it’s time to get over the idea that virtual things aren’t real.

Questions About the Google-AdMob Deal–and How the FTC Answered Them

May 21, 2010 by robhof

Today the Federal Trade Commission decided not to oppose Google’s proposed purchase of leading mobile ad firm AdMob, clearing the way for the $750 million deal to be closed. Given recent hints that the FTC’s staff might recommend the commission block the deal, the decision was something of a surprise. But as the FTC itself explained, “although the combination of the two leading mobile advertising networks raised serious antitrust issues,” there is in fact ample competition in what is after all still a nascent market.

The investigation raised several questions about not only the mobile ad market but the FTC’s stance on such deals in the Obama era. Here are some of those questions, and the apparent answers:

* Would the deal allow Google to dominate the mobile ad market?

Not at this time, the FTC said, but noted that that was a danger:

Google’s proposed $750 million acquisition of AdMob necessitated close scrutiny because the transaction appeared likely to lead to a substantial lessening of competition in violation of Section 7 of the Clayton Act. Those companies generate the most revenue among mobile advertising networks, and both companies are particularly strong in one segment of the market, namely performance ad networks. The Commission’s six-month investigation yielded evidence that each of the merging parties viewed the other as its primary competitor, and that each firm made business decisions in direct response to this perceived competitive threat.

* Are mobile ads a separate market from other online ads?

I’m not sure why mobile ads, which after all are simply ads that happen to appear on mobile device screens, are really a market separate from other online ads. Marketers, after all, usually view them as potential additions or substitutes to display ads or even search ads, and they can in fact be either of those. And if they view them as separate markets now, it’s likely they won’t stay that way as ad technology firms increasingly offer them as a package to marketers. But it’s clear from the FTC press release that FTC considers the mobile ad market distinct–and furthermore that it doesn’t matter how new it is:

The Commission stressed that mergers in fast-growing new markets like mobile advertising should get the same level of antitrust scrutiny as those in other markets. The statement goes on to note that, “Though we have determined not to take action today, the Commission will continue to monitor the mobile marketplace to ensure a competitive environment and to protect the interests of consumers.”

Mobile ad networks, such as those provided by Google and AdMob, sell advertising space for mobile publishers, who create applications and content for websites configured for mobile devices, primarily Apple’s iPhone and devices that run Google’s Android operating system. By “monetizing” mobile publishers’ content through the sale of advertising space, mobile ad networks play a vital role in fueling the rapid expansion of mobile applications and Internet content.

* Did Apple help Google clear the deal?

Um, clearly. According to the commission’s statement:

The agency’s concerns [about the Google-AdMob deal] ultimately were overshadowed by recent developments in the market, most notably a move by Apple Computer Inc. – the maker of the iPhone – to launch its own, competing mobile ad network. … As a result of Apple’s entry (into the market), AdMob’s success to date on the iPhone platform is unlikely to be an accurate predictor of AdMob’s competitive significance going forward, whether AdMob is owned by Google or not.

* Should Apple be afraid of the FTC?

Very afraid. Or at least it should expect intense scrutiny, if the rather detailed description of Apple’s role in this market is any indication:

These concerns, however, were outweighed by recent evidence that Apple is poised to become a strong competitor in the mobile advertising market, the FTC’s statement says. Apple recently acquired Quattro Wireless and used it to launch its own iAd service. In addition, Apple can leverage its close relationships with application developers and users, its access to a large amount of proprietary user data, and its ownership of iPhone software development tools and control over the iPhone developers’ license agreement.

* Is Google off the regulatory hook now?

Not by a long shot. As the commission said:

Though we have determined not to take action today, the Commission will continue to monitor the mobile marketplace to ensure a competitive environment and to protect the interests of consumers.

Indeed, few experts believe that this decision will have much if any impact on other regulatory concerns about Google’s strength in search ads, its moves into other areas such as display ads, or the privacy implications of its vast data collection.

Robert Hof

Writer and editor

Author Archives: robhof

We Have Met the Evil and It Is Not Google or Apple: It Is Us

Five Small Stories About Steve Jobs

A Glimpse Into the Future of Television

Questions About the Google-AdMob Deal–and How the FTC Answered Them