TECH TALK: Internet Tea Leaves: Baidu’s August Action

It has been a fascinating August. A number of events have focussed attention on the Internet and the future. I had originally intended to write a column to look at ten years of the Internet and mobile phones in India. In fact, I wrote a column on the New Internet for Business Today. (It appears on pages 98-99 of the latest issue. I will reproduce it here later in this series.). The Week too had a recent cover on the Indian Internet’s first decade. But I’ll take up that discussion later. For now, we will take up the bigger discussion – opened up by six events which took place in August.

The first was Baidu’s IPO. Baidu is China’s leading search engine. The perception that it is “China’s Google” set the stock on fire on its opening day as it rose from $27 to over $150. (It has since settled at around $80 giving it a market cap of $2.5 billion.) Baidu raised over $100 million. For a brief period, it seemed like the dotcom heydays once again as discussions on revenues and profits were set aside. Investors who perhaps missed out on Google’s IPO last year don’t want to be left out! (For the record, Google’s IPO a year ago was priced at $85. Today, Google trades at about $280, giving it a market cap of $80 billion, making it the most valuable media company in the world.)

In an article shortly after Baidu’s IPO, the Wall Street Journal provided additional context about China’s Internet in which to view the IPO:

Internet companies in China are fighting over a small pie. The Chinese Internet-search market attracted total ad revenue of just $148 million in 2004, according to iResearch Inc. of Shanghai. While China's advertising industry is booming, many major advertisers focus big campaigns on banner ads posted on Internet portals such as those of Sina Corp. and Sohu.com Inc., which remain more popular than search sites such as Baidu.

"We treat the portals as a national medium, after TV and print," says Ralph Szeto, the China director of WPP Group's mOne unit, which buys media space for clients' ads. "But user habits are changing toward searching," he adds, giving sites such as Baidu a niche among an estimated 600,000 small and midsize Chinese companies that pay anywhere from three fen to five yuan per advertising link. The yuan trades at about 8.1 to the dollar.

Moreover, most Chinese can't afford computers and the country's electronic-commerce market remains immature. Many Chinese prefer to download entertainment and communicate with friends through mobile phones, which are less expensive than computers.

In the future, "Internet content will merge with mobile-phone technology," putting even more of a premium on media companies that can offer attractive content, says Peter Tan, director of consumer insights for Interpublic Group's McCann Worldgroup ad agency in China.

Baidu’s IPO was the first of two events related to the Chinese Internet. The second had to do with Yahoo and Alibaba.

Tomorrow: Alibaba and Yahoo

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TECH TALK: Internet Tea Leaves: Alibaba and Yahoo

Yahoo invested a billion dollars and handed over its Chinese operations to the local Alibaba management in return for a 40% stake in Alibaba. The deal valued Alibaba at $4 billion. Alibaba’s flagship site is a marketplace for SMEs – helping Chinese SMEs sell to others in China and globally. It had revenues of $46 million last year. (By contrast, Baidu’s 2005 revenues are expected to be about $30 million.) Alibaba also operates two other sites: Taobao is a consumer auctions sites (in direct competition with eBay in China), and AliPay, which is a payments and settlement service along the lines of PayPal.

The Wall Street Journal wrote about the deal: “The deal marks a supreme vote of confidence in [Alibaba CEO Mr. Jack] Ma, whose knack for bold statements and charismatic leadership has helped build his company but has rankled local and foreign competitors along the way. The Yahoo connection will cement the 40-year-old as one of the most prominent public faces of China's new entrepreneurial culture and give him a much larger platform from which to pursue his ample aspirations…The tie-up will create a company with a formidable presence across all major segments of the Internet industry in China, combining Alibaba's existing business-to-business and consumer-auction sites with Yahoo's stable of Chinese search engines and communications services.”

Bill Bishop added: "No question this creates a monster in the China Internet. It will have a powerful combination of search, communications, commerce and auctions. All they need is a game component and they could have a shot at becoming number one...This deal is potentially disastrous for Ebay in China."

An article a few months ago in Knowledge@Wharton outlined why Alibaba is so important:

Alibaba has been successful because it recognized it could fill a gaping market need: China has virtually no printed directories or electronic databases that allow companies to describe their products and help buyers and sellers find one another while providing a certain level of comfort that the firms are on the up and up. Moreover, Alibaba focuses on mom-and-pop businesses in China, of which there are untold numbers, rather than trying to facilitate transactions between multinationals, which often have their own web-based systems for dealing with suppliers, and other big companies.

Alibaba "offered a platform where China manufacturers can reach world exporters and vice versa," says Safa Rashtchy, an e-commerce analyst with the investment firm Piper Jaffray. "It's a pretty inefficient system [in China] right now. The company figured if it signed up all the manufacturers in China and carefully listed their products and made them available to the U.S., Europe or wherever, it could extract good revenue. That's what they're doing."

I have followed the fortunes of Alibaba since its early days. I liked the idea of an SME marketplace very much. At that time, Global Sources was the leader in the print media in helping connect SMEs. Alibaba raised a lot of money and went through many ups and downs in its journey. (There are two Harvard Business School case studies on Alibaba’s early days.) Alibaba has crossed one mountain – another lies just ahead.

Tomorrow: China Internet Potential

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TECH TALK: Internet Tea Leaves: China Internet Potential

A Bloomberg commentary in the International Herald Tribune lays out the challenges for the Alibaba-Yahoo combo:

The question is whether Yahoo can overtake eBay, China's leading online auctioneer, and win more search-engine customers in the second-biggest Internet market after the United States.

"The Alibaba purchase gives Yahoo a strong local entrepreneur, a heavyweight in the industry, who can drive the company to success," says Duncan Clark, managing director of BDA China, a technology consultant in Beijing. "China is a high-maintenance market. It is highly regulated, highly sensitive and difficult to manage from 15 hours' time difference away."

Yahoo controls just 3 percent of China's online auction market and ranks second among search engines. To turn the company into a leader, Ma must win the loyalty of Yahoo's 600 China-based employees and attract customers in a relatively undeveloped electronic-commerce market.

"Chinese Internet users tend to focus on online games and spend a lot less on e-commerce," says Frank Shi, an analyst at CLSA in Hong Kong. "The Chinese market is still immature."

The battle for the China Internet market has been joined in earnest. Google may have a small stake (2.5%) in Baidu but will no doubt be looking for a bigger slice. eBay, which was also rumoured to be in the race to acquire or partner with Alibaba, will be contemplating its next move – hoping to ensure that the history in Japan (where Yahoo is the leader in the auctions space) does not play out again in China.

For now, at least, the two events together put the spotlight firmly on the potential of the Chinese Internet. There are over 100 million Internet surfers and broadband penetration is increasingly rapidly. Baidu joins the likes of Sina, Sohu, Netease and Shanda in monetising the growing user base. The mobile users base in China is at over 350 million. [By contrast, the Indian numbers are about 25 million for the Internet and 60 million for mobiles.]

As a side-effect of the China interest, Indian portal Rediff saw its stock nearly double to $14 (giving it a market cap of over $350 million). On a related note, Indiatimes (of the Times of India group) raised $36 million selling a 15% stake to Sequoia and Westbridge. (It is probably looking forward to a Baidu-like IPO in the next year given its entrenched position across the Internet and mobile spaces in India.)

Soon, India will join China as one of the world’s largest Internet markets. How soon that happens depends very much on the speed with which we can get broadband rolled out at affordable price points for the mass-market. What is clear about the two August events related to China is that finally the East is starting to come of age and the global Internet leaders are paying attention.

Tomorrow: Google’s Googlies

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TECH TALK: Internet Tea Leaves: Google’s Googlies

August saw four announcements from Google, which set off a flurry of speculation and discussion. It announced the acquisition of Android, a start-up working in the mobile space. It then said that it is planning to raise $4 billion in a secondary offering to add to its $3 billion cash. It launched Google Desktop (version 2) and Google Talk last week. The Google Desktop comes with a sidebar takes up screen real estate on the desktop and provides a view of items of interest to users, automatically learning about the user. Google Talk is the company’s foray into instant messaging and broader person-to-person communications.

Business Week summarised it as follows: “Talk about ambition. Google appears to be contemplating forays into everything from Wi-Fi Internet access and mobile devices to operating systems and e-commerce.”

The New York Times led the chorus of dreamers:

A Google-branded smart phone has long been a personal pet project of Page, and this year Google invested $2 million in a project by Nicholas Negroponte, founder of the MIT Media Laboratory, to develop a $100 wireless laptop. The smart-phone idea would be a way to extend Google's reach and give it a more extensive connection with its users by offering Google on a multipurpose mobile device.

Google has also attracted wide attention in other communications fields, both with its purchase of fiber optic cable capacity and with several quiet moves it has made in experimenting in wireless technologies…The idea that Google might try to build an independent national Wi-Fi network has been discussed, but network industry specialists say such an idea is far-fetched.

Another article added: “Google has already added free e-mail, mapping, news aggregation, and digital-photo management to its offerings, bringing it into competition in each case with two or more rivals. On Wednesday, it announced the introduction of an instant-messaging system. And its plans for a new stock issue are fueling speculation that it is preparing to enter any number of other markets, from services for mobile phone users to an online payment service that would compete with PayPal…Add to that list an Internet-based phone system and several products that would be directly aimed at Microsoft, including a Google browser and a software offering that would compete with Microsoft Office.”

So, even as the China events were being digested, Google turned on the heat on its rivals with its offerings. What is Google up to? What is the company’s masterplan? In reading about what people have to say, we can get a good idea of the future of the Internet in its next decade. From the Indian Internet point of view, the two Chinese events will have greater importance. But from the overall evolution of the Internet, what Google can and will do will perhaps be more far-reaching.

So, as August gives way to September and the rains slowly ebb away in Mumbai, we’ll start a journey looking first at what the “talk of the [global] town” is around Google, and then put that thinking in context around what it means for us in India.

Tomorrow: The Metaphor

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TECH TALK: Internet Tea Leaves: The Metaphor

We’ll take up the discussion of the Internet in the series next week. For today’s column, we will take a slight detour and discuss about the art of reading tea leaves.

I was wondering what title to give this series. I had first thought of “Google and the Future.” While that was bound to capture attention, Google is just one of the companies shaping the Internet. In fact, from a vantage point in India, what is happening in China may be more important given the similarities of these two emerging markets. So, I thought that was too narrow a title.

The second title I thought was “August ‘Appenings.” It was a funny attempt at alliteration but the title did not even give a hint of the story. The more obvious “The Future of the Internet” was too broad a title and would also not be reflective of what I was discussing.

It was then that the phrase “reading tea leaves” occurred to me. I liked the Chinese connection also. The initial title “August Tea Leaves” quickly gave way to “Internet Tea Leaves” and I knew I had just the right title for this Tech Talk series.

But my curiosity had been piqued. How exactly did the phrase “reading tea leaves” originate? And so, I dug around a little. (Since all of this writing is online, there really are no constraints in times of “hyperlinks” that I can take!)

JoyOfBaking.com offered this explanation:

In order to read the tea leaves, you will need to use smooth shallow tea cups that have white interiors. The loose tea leaves need to be of a good quality, large leafed, and brewed directly in each tea cup.

To make the tea, place about a teaspoon of tea in each cup and then fill with boiling water. As the tea steeps the leaves will settle to the bottom of the cup. As you drink the tea, make a wish or think of a question. After drinking the tea, leave about a teaspoon of the tea on the bottom of the cup, and with your left hand, swirl the tea three times to spread the leaves around the sides of the cup. Gently turn the cup upside down onto the saucer to drain out the leftover tea. Turn the cup right side up again and look for a picture pattern. The first picture you see is the answer to your wish or question you thought of while drinking the tea.

They say the placement of the pictures in the cup is very significant. Leaves on the bottom of the cup foretell the distant future. On the sides foretell of events in the not too distant future, and leaves on the rim area tell the present. The pictures or symbols that you see very clearly have more weight than those that are unclear.

I found this on SoYouWanna.com: “It seems so random that people actually read tea leaves in order to predict future events. You might as well try to ‘read’ a toilet bowl or a piece of gum. Where in the world did the practice come from? Tasseography, as it is sometimes called, is an ancient Chinese practice that spread to Europe with nomadic gypsies in the mid-1800s. And while most people don't take the art of tea-leaf reading too seriously anymore, it is nonetheless a fascinating hobby.”

Hmm…Tasseography. I hadn’t heard of that before. EasternTea elaborated:

Tasseography, sometimes called tasseomancy, is technically a branch of divination where patterns of symbols made by tea leaves in a cup are interpreted. Not a science, and not new, it probably developed thousands of years ago in China, but it has also been associated with the Eastern European "gypsies," the Scots, and the Irish, among others. Although enjoying a resurgence in New Age philosophy, for most of us, and especially tea-drinkers, it just plain fun -- something to do as we contemplate the bottom of a great "cuppa."

Tasseography consists of three distinct phases. The first is creating the reading. [This involves knowing] how to set up the cup so that it is "readable." The second step is recognizing the individual symbols, associating them with the inquirer, and determining their significance. This takes a knowledge of the symbols and no small amount of imagination. The third step is putting it all together in a way that combines the symbols into a single coherent interpretation. This last step seems to require practice and a touch of omniscience.

Well, for a person like me who doesn’t drink tea, I guess I’ll have to stick to “reading tea leaves” on the Internet!

Next Week: Internet Tea Leaves (continued)

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TECH TALK: Internet Tea Leaves: Google’s Intent

Many people (other than Google’s own staff!) have commented on Google’s future plans based on their past product offerings and brought sharply into focus with their decision to raise $4 billion and launch the Sidebar and IM offerings. Let us sample some of the writings.

Walter Mossberg wrote in the Wall Street Journal:

For most Internet users, Google is synonymous with online search. Millions of people begin every Web session at Google's famous, plain home page.
But that's not good enough for the bright young upstarts who run Google. They want Google to be your constant companion even if searching or browsing the Web is the furthest thing from your mind. They are working hard to make Google software a fixture on computer desktops.

That is the aim of two new, free products the search giant released this week. One is an instant-messaging program called Google Talk, intended to be your primary means of real-time digital communication. The other is an information-management utility called Google Desktop 2, designed to become a permanent part of your desktop, grabbing space from Microsoft's Windows desktop.

David Pogue wrote in the New York Times: “In a single week, then, Google, the software company, addressed deficiencies in Windows, tried to create a grand unified chat and voice network, and opened up its clean, capable, capacious e-mail system to all comers. All of this software is beautifully done, quick to download and fun to use - not to mention free…Wish they'd cut it out. Trying to figure out what this company's really up to is enough to drive you crazy.”

Greg Sterling wrote:

People are out there this morning second-guessing this: What is it; is it a preview of the rumored Google Browser or OS? Putting aside that speculation, this is a tool that functionally sits somewhere in between a toolbar and a browser (with a taste of OS functionality), allowing users to do a bunch of things without having to go to separate places on their machines or on the Web.

The tool gives users a running inventory of email, recent files and Web pages viewed, photos, stocks, weather, personalized news and RSS reader ("Web Clips") and several other tools. In one way of looking at it, it’s an alternative version of the Google Personalized Homepage and Search History with an RSS reader thrown in.
…
Now that Google is the dominant search engine and making gobs of money people have become suspicious of the company’s motives ("But what are they really doing here?"). From speaking to the product manager, Nikhil Bhatla, I don’t believe that there’s a hidden motivation or agenda behind this product.
It’s a helpful tool that brings together a great deal of useful information in an accessible way. Of course, if users download and adopt it, it will reinforce Google usage. And that will necessarily come at the expense of some of Google’s competitors.

David Card (Jupiter Research) wrote:

I guess the plan is to demote browser to "rendering engine," and combine all its other functions into "desktop search," er, that is, "Google Desktop." Gee, it wasn't that long ago when Microsoft set the agenda for personal technology nomenclature. What's next, "operating system" becomes "device drivers" and "graphics libraries?" (File system functions are already under assault...)
I reiterate the mantra that built Microsoft: who controls the UI controls the user; who controls the API controls the programmer. Great businesses are made of this.

Tomorrow: Google’s Intent (continued)

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TECH TALK: Internet Tea Leaves: Google's Intent (Part 2)

News.com thinks that Google has joined the battle to woo developers: “Google is taking a page from Microsoft's well-worn playbook for tech industry domination: Rather than just rolling out new products and features, the search giant is trying to win the hearts and minds of Web developers…Longtime Microsoft watchers believe it wasn't just the OS that made Microsoft the most profitable company on the planet. The software titan's vaunted developer-outreach network created a rich "ecosystem" of applications that run on Windows and Office, its desktop application suite, driving adoption of the company's core products…Some say that's exactly what Google is now trying to re-create on the Web.”

Om Malik had, earlier in August, speculated about GoogleNet: “What if Google wanted to give Wi-Fi access to everyone in America? And what if it had technology capable of targeting advertising to a user’s precise location? The gatekeeper of the world’s information could become one of the globe’s biggest Internet providers and one of its most powerful ad sellers, basically supplanting telecoms in one fell swoop. Sounds crazy, but how might Google go about it?"

Jason Kottke expanded on a meme he has discussed earlier – that Google is effectively building a WebOS.

This is my best guess as to how an "operating system" based on the Web (which I will refer to as "WebOS") will work. There are three main parts to the system:

The Web browser (along with other browser-ish applications like Konfabulator) becomes the primary application interface through which the user views content, performs services, and manages data on their local machine and on the Web, often without even knowing the difference. Something like Firefox, Safari, or IE...ideally browser agnostic.

Web applications of the sort we're all familiar with: Gmail, Flickr, and Bloglines, as well as other applications that are making the Web an ever richer environment for getting stuff done. (And ideally all Ajaxed up to provide an experience closer to that of traditional desktop apps.)

A local Web server to handle the data delivery and content display from the local machine to the browser. This local server will likely be highly optimized for its task, but would be capable of running locally installed Web applications (e.g. a local copy of Gmail and all its associated data).

That's it. Aside from the browser and the Web server, applications will be written for the WebOS and won't be specific to Windows, OS X, or Linux. This is also completely feasible, I think, for organizations like Google, Yahoo, Apple, Microsoft, or the Mozilla Foundation to make happen.

Jason Kottke’s post was the subject of a lot of comment and discussion around the blogosphere. John Battelle added: “Jason ties together the Google Desktop (which he reminds us was launched as "Desktop Search" but is now just, well, your "Desktop....."), local web servers, and next generation web apps and browsers. In short, he is saying, the Web OS is nearly here. It's why Yahoo bought Konfabulator, and why MSFT is integrating the web into Vista, it's Apple's strategy too.”

Tomorrow: Google’s Intent (continued)

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TECH TALK: Internet Tea Leaves: Google’s Intent (Part 3)

Continuing with the response to Jason Kottke’s WebOS post, Dare Obasanjo (who works at Microsoft) wrote: “I disagree with some of his post; I think desktop web servers are a bad idea and also that the claims of the end of Microsoft's operating system dominance are premature. He is also mistaken about MSN not building stuff for browsers other than IE. Of course, overestimating Microsoft's stupidity is a common trait among web developer types…However the rest of his post does jibe with a lot of thinking I did while on vacation in Nigeria. I'd suggest that anyone interested in current and future trends in web application development should check it out.”

Nicholas Carr differed from Jason Kottke in a couple of areas: “First, [Kottke] doesn't pay enough attention to the interests of businesses in the evolution of personal computing. Photo-sharing, music-playing, and blog-reading applications are certainly important and interesting, but most people's computing decisions are determined as much or more by the needs of their employers as by their own personal interests and diversions. Cost, security and reliability concerns will ultimately lead companies to demand even less local data and applications than Kottke imagines. The user devices will become ever thinner, as applications, data and even the user operating system resides in central servers. Whether you're using Word on Windows or Google Word Processing on Google Desktop, it will all be supplied over the Internet rather than from the bowels of your own PC. Second, and related, Kottke's assumption that a lot of content needs to be replicated locally (so you can continue working when, for instance, on a plane) reflects the current gaps in connectivity. Those gaps aren't going to be around forever. In five or ten years, we'll have ubiquitous high-speed network connections, and at that point the need for local data, apps and web servers goes away. Your personal desktop, residing entirely on a distant server, will be easily accessible from any device wherever you go. Personal computing will have broken free of the personal computer.”

Robert Young thinks that Google’s plan is to use “free” to devalue Microsoft’s advantages and assets:

I believe they are once again going counterintuitive, but in a manner that hits Microsoft where it hurts most. Google will make Microsoft’s entire strategic plan and mission, which revolves around the continued proliferation and dominance of the desktop PC operating system, obsolete by making Google itself the operating system. The model they are pursuing is very similar to Sun Microsystems’ (Jonathan Schwartz’s) vision of turning computing into a utility, like electricity. The only difference is that Google is already almost there.

To some extent, Google is bringing back the architecture of the mainframe to render Microsoft obsolete. In the future, all computing devices, whether it be the PC, mobile phone, TV, etc., will simply be terminals that “plug-in” to Google’s massive server grid and application services. With the increasing price/performance of CPUs, memory, bandwidth, and storage, Google’s strategic edge will be based on their advantageous cost of processing bits. And as long as users are comfortable sharing their private data and behavior with Google, all services will remain free (and supported by advertising).

It’s not too difficult for me to imagine a day, very soon, when I rely on Google for almost all my computing needs and I buy hardware devices based on such criteria. That’s the day Google will have become my operating system. We all know that the internet has a deflationary effect on the assets of every industry it touches, whether it be printing & publishing, media & entertainment, telephony, etc. If what I pose above is indeed true, Google is using the internet to systematically devalue Microsoft’s assets. Perhaps there will be a day on Wall Street sometime in the future that’ll be known as “Microsoft’s Black Monday.”

Tomorrow: Google’s Intent (continued)

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TECH TALK: Internet Tea Leaves: Google’s Intent (Part 4)

Forbes wrote about the potential importance of Google Talk: “By distributing the program, Google could also cash in on its core business of helping Internet users find information, selling advertising space on those search results. Ultimately, Google could charge advertisers extra for a "call me" button, providing consumers with a direct link to call a business they find in a search. Imagine searching on Google for details about a local restaurant and calling for reservations without leaving your search results page… The true promise of Google Talk --and the company's likely goal--is to eventually provide full telephone capabilities, and to make a user's Gmail address their primary point of contact, on or offline…By using the same identifying name for several different kinds of communication, Google hopes to put itself at the center of all of its customer's communications.”

Phil Windley builds on the concept of Identity: “Google's strategy is based on becoming the Internet OS and integrating commodity components (i.e. Linux, OS X, and Windows). Google can't build an integration point without an identity strategy and their identity strategy has to include synchronous messaging and presence–things they get in spades and on the cheap from a IM system built on XMPP.”

The Pondering Primate wrote about Google’s decision to link a Gmail ID with the user’s mobile number:

Looking closer at Google's Talk, I realize they are in the process of dominating the mobile space as well. One of the ways to get GoogleTalk is is if you have Gmail (or are invited for a Gmail account).

Now you can get a Gmail account AND GoogleTalk if you just give Google your mobile number. What a smart way to not only to get people to sign up, but to get a mobile phone number database.
…
Things I see Google does with this if they create a mobile messenger.

Google would have a permanent search window on your mobile for search, IM, or VOIP.

Google SMS would be incorporated into this search window.

Google would keep track of all of your mobile search requests in your Gmail that you could review later on the big screen.

See an interesting product and want more info? Type in the barcode or take a picture and send to Google SMS. Get info back on the product and that info is stored in your Gmail account under "Things I Mobile Googled Today".

The Pondering Primate had this to say about Google’s purchase of Android:

Would you download a Google toolbar for your mobile? Instead of going to www.google.com, you had a little search box that you could type a search query in.

What if that search window incorporated GPS into your search query?

What would Google have to offer you, to make this part of your mobile screen?

Do you see where this is going? When you agree to download this mobile toolbar, you have given Google (and their clients) permission to advertise to you.

Think of taking Google's keyword revenue model and DOUBLING IT by offering a mobile version.

Tomorrow: Google’s Intent (continued)

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TECH TALK: Internet Tea Leaves: Google’s Intent (Part 5)

Robert Cringely differed from many and wrote that Google is raising money because “it is there.” He added:

What Google WILL do is roll-out incremental products at a blinding pace. Not long ago, PayPal co-founder Max Levchin explained to me that rapid development is an important key to market dominance.

"What you want to do," he said, "is listen to your customers and bring out every two weeks improved versions that would each take your competitor two months to complete. That's when you are on a rocket -- they can't keep up so they can't compete. They lose hope and pretty soon you have the market pretty much to yourself."
...
What if everyone is mainly wrong? What if search and PageRank and AdSense are Google's corporate apex. Most companies would be content with that, but Google isn't supposed to be like most companies. But what if they are? I hear a lot of talk about Google doing deals for video and music distribution, but where are those deals? So far it is all just talk.
...
I think Microsoft's clearest threat still comes from Apple, though not the way most people expect. Yes, Apple is about to take Microsoft to the woodshed when it comes to Internet movie distribution. Yes, Apple already super-dominates the music player market where Microsoft doesn't even really exist. But the real jewel is one Microsoft has to lose, not gain -- the PC platform, itself.

What could Apple do to take down Windows, with or without the help of Intel?… What if Apple introduces OS 10.5, its next super-duper operating system release, and at the same time starts loading FOR FREE the current operating system version -- OS 10.4 -- on every new iPod in a version that runs on generic Intel boxes? What if they also make 10.4 a free download through the iTunes Music Store?

So, one company, one month, four actions, and plenty of opinions. In fact, amongst all this, the New York Times even had an article suggesting that Google was starting to replace Microsoft as the new “evil empire.” One thing, though, is clear. Just as Microsoft shaped the desktop era and then Netscape, Yahoo, eBay and Amazon shaped the first part of the consumer Internet era, Google is now in a dominant position to shape the next phase of the Internet.

Rather than focusing only on Google’s actions and wondering about its motives, we need to understand the opportunities that the new Internet is opening up. This New Internet will also be somewhat different in the world’s emerging markets from that in the developed markets. By looking at how this Internet is different, entrepreneurs can create innovative solutions and successful companies – Google or no Google!

We will start next week by considering what this New Internet is shaping up to be. Google’s actions have only made the tea leaves that much clearer to read. Acting on what the August tea leaves foretell and working to build the future is what we need to focus on.

Next Week: Internet Tea Leaves (continued)

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TECH TALK: Internet Tea Leaves: The New Internet

I wrote an article recently for Business Today (reproduced below; actual print article may differ) for its issue celebrating 10 years of the Internet in India. In fact, August 1995 saw not just the launch of the Internet but also mobile telephony in India. Going ahead, the next versions of both will redefine the way we live and work.

As the Indian Internet celebrates its tenth anniversary, one can look back at the past decade as a tale of missed opportunities. We should have had 100 million users (we have about a quarter of that), we should have had “real” high-speed broadband available cost-effectively and on-demand across the country (we are just about starting on this), and we should have had a wide variety of innovative services to make the Internet a utility in our lives (we are still far away from that).

The Internet could have been the transformative force in its wired and wireless forms for both consumers and enterprises – but it hasn't. A lack of vision from policymakers, the high cost of bandwidth, a paucity of venture capital, the relatively high cost of computers, and perhaps most importantly, a dearth of compelling content and innovative services have limited the growth of Internet 1.0 in India.

Going ahead, though, the story can and will be very different. The second decade of the Indian Internet will go a long way in fulfilling the promise of the first. Converged next-generation networks will make the “Evernet” - a ubiquitous, always-available, high-speed network envelope – a reality, limiting the impact of flawed policies. Bandwidth prices are falling rapidly due to competition and a realisation that the more one gives, the more people will want. Venture capital will be increasingly available as India's user base rises and investors see another China-like story in the making. Cheaper computers along with alternative platforms like network computers and mobiles will make access available to much larger numbers. Content and services, too, will become more relevant – completing a positive feedback loop to accelerate reach and usage.

There are two key drivers which will define tomorrow's Internet: broadband networks and mobile phones.

With an always-on, flat-priced broadband connection, there is no worry about running up big bills. The usage of the Internet changes and it starts to become more of a utility in people’s lives. The proliferation of these networks will create demand for zero-management network computers, making the computer almost as easy to use as a TV. Broadband will also spur the creation and dissemination of multimedia content, which will drive the twin consumer application areas of education and entertainment. User-generated content in the form of weblogs and podcasts will add a richer tapestry to the Internet. For enterprises, broadband will enable software-as-a-service, as application service providers make available integrated stacks of encoded business processes to power the real-time flow of information.

Internet-enabled mobile phones will make all the new services available to people wherever they are. In emerging markets like India, more people will access the Internet from their mobile phone than the computer. The mobile Internet will bring connectivity to swathes of India untouched by the data revolution. Mobile phones are also two-way devices – besides displaying received content, they also enable their owners to create content and share it with others almost instantaneously. Thus, photos and videos now don't just get consigned to archives but can spur conversation “now” between people separated by distanced but linked with their mobiles. The mobile phone will be the “social computer” for India's next generation of Internet users.

Tomorrow: The New Internet (continued)

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TECH TALK: Internet Tea Leaves: The New Internet (Part 2)

So, from an infrastructure point of view, what does the New and Next Internet portend? What are its characteristics?

Always-on: We are moving in India from a pay-per-use pricing model to a flat rate subscription model (in some cases, with download limits). But the instant availability of the Internet connection will fundamentally change the way we use the Internet – everything now becomes a few clicks and a few seconds away.

Ubiquitous: As data networks envelop us, the Internet will become pervasive. Already, the presence of cellular networks provides computer users the ability to connect from anywhere. In the coming years, technologies like WiMax and mesh wireless will blanket much of urban and semi-urban India.

High-speed: The narrowband speeds that we are used to will give away to higher speeds as real broadband makes its way to the mainstream. The world wide ‘wait’ will be a thing of the past. What this will do is encourage the use of more media-rich content.

On-demand: As connectivity improves, there will be little difference between online and offline. If it is out there, it is instantly available. This will lead to the rise of centralised services – especially for business applications. We will have control over when we want entertainment delivered.

Multi-format: The computer will no longer be the only device accessing the Internet. Smartphones with wireless data networks will provide equally viable alternatives. This means that there will be two screen footprints that content providers will need to cater to.

Two-way: The growth of weblogs is a harbinger of the publish-subscribe Internet. Readers and surfers will have the ability to participate in the content creation process. Cellphones with cameras can turn device owners into content producers.

Personalised: The Internet will also become more individualised as websites (especially search engines and portals) build up increasingly sophisticated profiles based on what we do. This will enable highly targeted advertising.

Not Free: This new Internet will not be built around the free access model that we have been used to. The eyeballs-centric business model is a thing of the past. As we find content and services of value, we are more likely to start to pay for them.

This New Internet will make possible path-breaking applications and services. From voice-over-IP which will allow phone calls anywhere in the country for a flat fee to video-on-demand which can provide education and entertainment to users when they want it, from software-as-a-service for businesses to automate all their processes to multi-player gaming platforms which will transform leisure time, the New Internet will create new opportunities – as well as threaten conventional business models. It will force players in computing, entertainment, consumer electronics and entertainment to tread into each other's territories.
What, then, is the endgame? What will the next decade of the Internet bring? This vision for the future is best captured in the concept of a “Mirror World” which was first espoused by David Gelernter in 1991.

Over the past decade, we have been spending an increasing amount of our time in so-called cyberspace. Companies and individuals have created virtual representations of their products and services. Our communications have also moved to conversing with identities (email IDs, IM monickers, SMSing to mobile numbers) rather than directly with people. Mirror Worlds takes this to its logical conclusion: we will have a parallel world that we will increasingly inhabit which is a copy of the real world. Today, maps can provide us the spatial copy. But they do not give us the real-time component. That is where a mix of next-generation mobiles, sensors and user-generated content will come in and embellish the other world. So, Mirror Worlds are microcosms of all that we see around us – as updated as the real world that they resemble. These Mirror Worlds are accessible to us through screens on the devices we have – our mobiles, computers, and networked TVs.

Ubiquitously available computers, mobile phones and next-generation networks are what will make all this possible. What has been missing are the applications to leverage this emerging new order. This is where lie the opportunities of Internet 2.0.

Tomorrow: Defining Themes

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TECH TALK: Internet Tea Leaves: Defining Themes

The two key drivers of the next Internet, as I outlined in my Business Today article, will be next-generation networks and mobile phones. The majority of the next users will come from the world’s emerging markets. In addition, server-based computing will be the norm as applications and services shift away from the desktop to the web. The next web will go beyond text and be built around rich media. User-generated content will be another important element of this web. Subscriptions will be an important element of the next Internet – both for content and computing. So, if you project the current trends, what would one do with infinite bandwidth, zero cost for processing power, and infinite storage? What is the single most important commodity in this world? It is the user's attention. Money will be made by monetising that attention.

Let us discuss each of these points in greater detail.

Next-Generation Networks will be broadband and ubiquitously available. They will be IP-based and provide a digital infrastructure for all kinds of services – voice, data and video. They will be available in our homes and offices, and also accessible from our mobile phones and other handheld devices. They will create the foundation for a converged world where we can get the applications and services we want where we want them and on the device of our choice. The endpoints of these high-speed pipes will be screens of varying sizes and multiple input options (small keypads like on a phone, full-size keyboards which are part of a computer, and also voice).

Mobile Phones will be the devices we will carry with us everywhere. Already, nearly two billion people in the world have mobile phones. With next-generation networks (3G, WiFi, WiMax) being rolled out, the devices will also become much more sophisticated than the ones we see today. Consider this news item from Wireless Watch Japan: “NTT DoCoMo and Sony Ericsson have introduced a new concept model called the RADIDEN, claiming the world's first cell phone that has been equipped with a three-band AM/FM/TV tuner. The handset incorporates a dual-front design: one side can be used as a cell phone, and on the other side is a radio designed for the 2G MOVA network. The radio features easy-to-select channels, a dedicated single-color sub-display (16.7x23.1mm), as well as visible buttons allowing the user to use i-mode while listening to the radio.”

Complementing mobiles phones will be network computers. These devices will have limited local processing power and storage. Instead they will rely on the high-speed pipes of the next-generation networks to connect them to computing grids. This will make computing not just affordable but also more manageable.

Interestingly, these technologies will find greater use and acceptance in the world’s emerging markets. These countries have, for the most part, seen only a small penetration of communications and computing technologies. Driven by mobiles phones and network computers, the world’s billions in the emerging markets will finally be connected and integrated into the global village. Their limited legacy infrastructure and the desire for rapid development will see them as early adopters of the New Internet.

Tomorrow: Defining Themes (continued)

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TECH TALK: Internet Tea Leaves: Defining Themes (Part 2)

Server-based Computing is what Google has highlighted more dramatically than perhaps any other company. For Google to win, they have to almost be the anti-Microsoft. What the desktop is to Microsoft, the Web is for Google – a “CommPuting Grid” as a platform for delivering services.

Russell Buckley lays out a future a few years hence: “You're out shopping, with your mobile phone, obviously. Your mobile has taken over as your primary means of making all voice calls - using Google Net's VoIP, naturally. Why would you use anything else, when it's free and works everywhere? You don't even have to search for a good connection like those old GSM phones. Your phone has also become your primary means of accessing the internet, again via Google Net, obviously. Your phone is a thin client, with most storage and processing done on the web. Most people don't have even a PC anymore. If they want to do work that involves a keyboard and a bigger screen, they just pop their phone into the nearest docking station and away they go. With the added advantage that the phone has ensured that the screen layout, favourite apps, bookmarks and files are all available exactly as you'd want them.”

The opportunity is still open for the Google of the Emerging Markets (GEM) – and I don’t think it will be Google. History has demonstrated that every time there is a platform shift, there is a new winner. We are now on the threshold of just such a platform shift – along with a market shift. The next five years will see a billion users from the emerging markets get on the Internet – and they will do so via their mobile phones and network computers. While companies like Microsoft and Google with their entrenched positions and cash reserves do have excellent chances of winning the hearts and minds of these new users, I believe that in five years, we will have a different company – one that is perhaps just starting up today.

The key drivers for building out GEM will be around leveraging user-generated content, the two-way, multimedia capabilities of the phones, capitalising on the shift from search to subscriptions, and capturing and monetising the user’s attention. Think of this as the publish-subscribe web, where everyone can be a publisher. I can take photos or short videos from my mobile phone, and then publish them on to a server for sharing with friends and family. They would have set up subscriptions on content published by me and would be alerted immediately (on their mobile phones) of the new content that has been published.

The fact that everyone we know and want to reach can be reached instantly opens up a new world of possibilities – it is very different from today’s world. In countries like the US, the computer connected to broadband networks is still the centre of the world. That is why I believe this new world will first happen in countries like India. Here, the mobile phone has rapidly emerged as the one device which is available with “everyone we know.” But the phones are still mostly the voice-SMS devices. This will change with the emergence of 3G networks and better, cheaper phones. India can, thus be, the showcase for tomorrow’s world.

Tomorrow: Endgame

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TECH TALK: Internet Tea Leaves: Endgame

The next logical question is: what is the endgame? Where are we heading towards? I can think of the answer as a combination of the Memex and Mirror Worlds. The Memex is a manifestation of Vannevar Bush’s idea of 1945. Mirror Worlds are what David Gelernter proposed in his book of the same name in 1991. (Another related theme is the Metaverse idea put forth by Neal Stephenson is his 1992 book “Snow Crash.”)

The Memex (meaning memory extender) can be thought of as a sort of forget-me-not. Today, we use Google as the window to the world of information. But search is just one way to navigate the web. Consider the analogy with a printed book. A book has 3 ways to browse it: table of contents (think of this as a directory or outline), index (the equivalent of search), or jumping to a page (typing a specific URL or finding it, quite literally, via a bookmark). On the Web, the index/search option has become the primary mechanism.

What the Memex does is make possible the option of navigation via directories. Users can create their own trails through the web of information. Others can follow these trails. For example, if my passion is science fiction, I am likely to have created a set of links and comments on books and ideas which would also be relevant to others interested in that topic. Others can “include” my directory and build further. This is how the Memex can get constructed – through the creation of millions of directories.

Mirror Worlds are, quite literally, a replica of what we see happening around us. With a mix of user-generated content from their mobiles along with webcams and sensors, it will be possible to almost recreate the real world in the Grid. Mirror Worlds are, thus, microcosms of all that we see around us as updated as the real world that they resemble. They are accessible to us through screens on the devices we have our mobiles, computers, and perhaps, networked TVs.

From an enterprise perspective, the equivalent of the Memex-Mirror World combo is the real-time enterprise. It is a theme that has been talked about for a long time. Software along with the access devices and complements like RFIDs will go a long way in making the RTE a reality.

This, then, is what I read in the tea leaves of August. Emerging markets like India and China are where the future of the Internet lies. Google’s actions only highlight the need for a Google for Emerging Markets – one that has to emerge from these markets themselves. That is the next big opportunity. This New Internet is going to be significantly different from what we have seen in the past decade. The time to get started to building it out is now.

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