Listen very closely… do you hear it? That hissing you hear is the sound of air escaping from The Great Web 2.0 Scam. The signs are accumulating that the faux-economy of venture capital and Google ads that underpin an infinite number of worthless internet startups may finally have run its course: last Friday, Google “The Mother of All Bubbles” closed at $600.25 — down 20% from it’s intra-day high of $747.24 set last November 6 and far outpacing the 13% decline in the S&P 500 over the same period. And that may not be the worst — last week, the [dour pronouncements] of a media macher about declining prices for online advertising combined with numbers from Nielsen showing a [decline in search market share] for Google suggest that when Google presents their 4Q earnings on January 31 there could be some very sober faces standing around the foosball tables of Silicon Valley.

But when the history of this strange period is written I have a feeling that the peak of “irrational exuberance” in this bizarre bubble may well be seen to have occurred last week when [Business Week], [TechCrunch] and others published news that a company called Slide, founded by the guy who created PayPal, was valued at 500 million dollars. Slide, in case you aren’t familiar, is an online application that allows people to upload photos into a customized “slideshow” and then share their work of art (which, from looking at their site, consists mostly of slideshows of half-naked babes). That’s it. In a normal world this thing would be called a blog plug-in and people would say, “Oh, cool… stupid” and move on. To put this valuation in some perspective, it took Microsoft 10 years to reach a valuation of $500 million and that was just after they went public in 1986. Their operating systems were already on hundreds of millions of computers, Windows had just been released, they were about to release Excel, the cornerstone of their Office suite and they were generating about $200 million a year in revenue. That was what a half-billion dollar company looked like, then. Twenty years later, this is what one looks like:

Jaron Lanier is one of the [venerable] not-so-old men of the digital age. I first learned of him during the fracas that arose over an essay entitled [Digital Maoism: The Hazards of the New Online Collectivism] that he published on a site for brainiacs called The Edge. In it, he dared to challenge the online status quo by raising questions about the social risks of the wisdom of crowds and the devaluation of meritocracy in favor of a techno-driven faux populism.

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A bubble in search of a pin…

I’ll tell you, there’s a Pulitzer Prize waiting for the diligent reporter out there who writes the definitive exposé of the role of corporate public relations in driving tech journalism. Of course anyone with a half-functioning frontal lobe fully expects that what they read in tech blogs like Techcrunch and [Scoble] is often just lightly re-heated PR fodder fed to them by the flacks they live by. Occasionally even [wiser heads] succumb to the PR siren song. But it is another thing to see The New York Times publish a 3,600 word article entitled [Google Gets Ready to Rumble With Microsoft] that could have been (and was) pieced together from various bits of “news” seeded into the blogosphere by Google’s PR department over the past few months. The article, which slavishly adopts the David vs. Goliath storyline that has been the prevailing narrative associated with the release of Google’s online productivity application suite, ticks off every one of the “talking points” that the good folks in Mountain View have been pushing:

• Google and Microsoft are engaged in an epic battle for enterprise users
  of productivity software
• Google’s vision of "cloud computing" is the wave of the future
• Google’s massive investment in distributed server farms gives them an
  early advantage
• Google’s development model better matches the web 2.0 space where
  "velocity matters"
• Google’s application offerings are being adopted at a fast rate

Contrary to what you might have come to expect from an august news source like the New York Times, these propositions are taken pretty much as they were received from Google with hardly any investigation. How many companies, and of what size, have adopted Google Apps? David Girouard of Google is quoted as saying that about 2,000 companies a day sign up for Google Apps. But most use the free version. And how many churn? Don’t know, the Times didn’t ask. What is Google’s revenue growth rate from these investments? Don’t know. How is Google going to manage Sarbanes-Oxley compliance issues for its enterprise customers and how well does their “perpetually beta” development model map against the need for corporate standards? Oops, doesn’t come up in an article about enterprise software use.

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Apple’s new store at 14th Street and 9th Avenue.

Following up on the [rant] about hyper-development in the nabe… Apple unveiled their third Manhattan store in the Meatpacking district over the weekend. Granted, the long-term residents of the area would probably prefer to still have the [discount grocery store] that used to be at that location, but in the relentless reinvention of the neighborhood an Apple store is at least more useful than another silly fashion boutique. Pix after the jump…

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On Monday, November 5, Google is expected to announce that it is rolling out a platform of mobile phone services as part of an “Open Handset Alliance” with various wireless hardware manufacturers and, perhaps even, a carrier or two. The move has been anticipated for months and has helped drive the company’s stock valuation to stratospheric heights (but still nowhere near the heights seen in the last tech bubble). As a result, the breathless Google boosters in the tech blogosphere are emitting even more hot air than usual, going so far as to declare that Google, a company with ["a global strategy so sweeping and audacious that it is breathtaking"], is on its way to becoming the [biggest company in history] !

While the move into mobile has some obvious business logic for Google — they are an advertising company always on the lookout for new places to stick ads — it’s not immediately obvious that their decision to go into direct competition with Microsoft in yet another space (mobile OS) and with carriers who like to control the software ecosystem of their products is such a guaranteed win for them. To figure out what might be driving their strategy I looked at Google’s 2nd quarter 10-Q SEC filings for the past four years and found some trends that suggest they have little choice about entering the mobile market, if they have any hope of maintaining the kind of momentum that investors have come to expect from them.

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There have been a few times when, in perusing the Google News site, it has appeared to me that stories that show their main competitor, Microsoft, in a bad light get prominent coverage, but good news not as much. Yesterday settled any doubts I had about the objectivity of that exercise in New Media: on a day when Microsoft made a very significant announcement about the launch of their health care initiative, HealthVault, there was nary a mention of it on Google News. I checked throughout the day and it never showed up. Not in the Sci/Tech section. Not in the Health section. Not even in the Business section. Could the Microsoft news blackout on Google News have anything to do with the fact that Google is also developing a product to manage consumer health information, though [not as successfully] as Microsoft?

[Link] that opens a new window with archive of Google News from yesterday.

Clicking the image link to the right will bring up an archived view of what Google News was publishing at about 6:30pm yesterday when I got home from work. This is at a point in the day when many people go looking for news and when it should be clear what the most important news stories of the day are — but there’s nothing about HealthVault. It can’t be that the information wasn’t “news worthy”, because the New York Times featured the launch prominently on their site. Prominent tech sites like [TechCrunch] covered it. In fact, using another news aggregator (that is not in direct competition with Microsoft), Techmeme, we can look back at [an archived view] of that site at 6pm yesterday and the prominence of the Microsoft announcement is apparent. [According to Google], “Our articles are selected and ranked by computers that evaluate, among other things, how often and on what sites a story appears online. As a result, stories are sorted without regard to political viewpoint or ideology and you can choose from a wide variety of perspectives on any given story”. Without regard to political viewpoint or ideology. They don’t say anything about regard to Google’s PR. This is not merely a curious glitch in the vaunted computer algorithms — it is, I suspect, evidence that news selections that appear on the Google News page are subject to some very old-fashioned human filtering.

Things like this should be enough to put a cork in some of the more [hyperbolic] New Media [bloviators] who constantly herald the death of traditional media forms while touting the virtues of “Web 2.0″ bounders. With Asperger-like devotion to all things algorithmic and inhuman, they conveniently overlook the fact that it has taken generations to build trustworthy journalistic institutions where objectivity — if not perfectly met — is at least aspired to and professional standards include more than merely serving the bottom-line. When it comes to the commercial takeover of the Net, we are subject to upstarts who care little about time-tested standards. Their standards are profit-making and self-serving PR and information is merely the means to those ends.

Don’t be evil. Yeah, got it.

Not so Precious? Apple fanboys feel the pain.

In the world of marketing, the most valuable customer — the holy grail — is the customer who becomes an advocate for the brand. They are literally worth their weight in gold or, to be more accurate, saved marketing costs. Not only are they locked into your product(s), saving costs that might have been spent on retention programs, but they do the heavy lifting of brand building by energetically recommending your wares to their friends via face-to-face and, in an ever more connected world, online interactions. Apple has been masterful at turning legions of their customers into advocates by creating an aesthetic ecosystem that their customers move into and inhabit. Part of the appeal of that aesthetic has been its adherence to design integrity — to the point of accepting niche status in a market of commoditized digital products in order to maintain total control of quality. Purchase of an Apple product bought one admission into a walled garden. As with any exclusive club, one couldn’t enjoy every benefit available to the throngs outside the enclave. No matter — choice is, by its nature, deeply antithetical to a rigorous adherence to design. Everything was going fine until the unheard of happened: Apple products became popular…

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Last week saw announcements from Google and IBM about office productivity app launches that, according to the tech punditocracy at least, promise serious threats to Microsoft’s lucrative hegemony on the enterprise desktop. Of course, one would expect the bloggers and other pseudo-journalists to get [fired up] about a new assault on the Death Star — even if they have to overlook that the “rebels” gunning for Microsoft are, themselves, two of the most hegemonic companies in the world.

Let’s forget for a moment that IBM has had competitive products in the marketplace for a decade that have made little headway against Office. Their current embrace of Open Office is akin to starting a race over from the blocks with [one foot hobbled]. Let’s also forget that the people at Google [don't even use] their own products. Why would anyone think that going up against Microsoft in its stronghold was a good business plan? More sober heads, who actually know something about how IT departments purchase and use software, [pretty much dismiss] the likelihood of IBM or — especially — Google breaking the lock that Microsoft has over business apps. Cripes, even Google’s partners [can't make a case] for their business model. Which begs the question, what are they really up to?

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