I have been a Netflix customer for some time now and it has been interesting to see the company grow and evolve, given the changing dynamics of their space. Netflix pioneered the DVD rentals-by-mail market and have managed to grow to over two million subscribers since their launch in 1999. With their success, they have attracted the attention of 800 lb gorillas such as Blockbuster and WalMart who recently launched similar services.

This pattern of innovators (usually startups) creating a market and then attracting followers (usually larger companies) is something that we all see again and again in the technology space. The billion dollar question for Netflix is, can it survive and continue to lead the market?

Friendster recently announced that Scott Sassa, former President of NBC West Coast, will be taking over the CEO role from interim CEO, Tim Koogle, former CEO of Yahoo. Scott Sassa is the former wunderkind at Fox Network, Turner Entertainment, NBC, etc. where he has a solid track record of hits such as 'West Wing', 'Fear Factor', and 'Law & Order: SVU'.

Scott Sassa is an interesting choice to run a company like Friendster. I think it makes sense because internet companies are essentially becoming media companies. AOL was one of the first internet companies that went through this transformation and now they're part of a big media conglomerate. With the hiring of Terry Semel, Yahoo is also going through the transformation into a media company dependent on advertising and subscription revenue, just like network television and cable TV.

One of the great things about blogging is the spirit of information sharing within the community. An example of this is Jeff Nolan's summary of the Accel/SNRC symposium on Service-Oriented Flexible Computing on his blog. Instead of paying $350, you can read Jeff's blog to get the highlights. Of course, you're missing out on the networking and offline discussions, but given the cost of admission to Jeff's blog, it's the next best thing.

There is a lot of useful information here, and my understanding from Jeff's notes is that service oriented flexible computing is about server side distributed computing. The conference seem to focus on the shifts that are going to occur in the software, hardware, and network layer as a result of this shift in computing architectures. This shift has been happening for some time and there are companies attacking the network, hardware, and systems software (ie. grid computing) side of the problem. However, I don't see how this is all going to work until you address the higher level integration and implementation of business processes in a service oriented architecture.

You can have the flexibility in network infrastructure, distributed storage and computing cycles, and distibuted web services, but you still have to link and orchestrate flows of information across this architecture to implement business processes. Providing tools and standards to make this orchestration happen is not an easy problem. Maybe this will be addressed in day 2 of the conference. I hope Jeff continues to write about it on his blog.

Sony announced today that they will be exiting the PDA market in the US and European markets. On the surface, this seems surprising since Sony was the third largest vendor of handheld PDA's in 2003 with a 14% market share. It's also a significant blow to the Palm OS platform and PalmSoure, the licensor of the Palm OS platform, since Sony was the second largest seller of Palm OS devices after Palm One.

One of the reasons cited for Sony's exit from the handheld PDA market is that the handheld PDA market is not a growth market. You could also make the argument that the handheld PDA space was never Sony's core competence.

I can’t recall the last time I used the Yellow Pages and it looks like companies are beginning to recognize this trend. The New York Times has an article on a study by the Kelsey Group which indicates that small companies less than 10 years old rely more on online advertising than listings on print Yellow Pages. The study found that 90% of small businesses less than 10 years old had a web site, 73% spent money on search engine optimization, and that 72% listed themselves on a specialized online or print directory. However, only 52% of small businesses less than 10 years old were listed in the print Yellow Pages.

One of the great things about living in Silicon Valley is the plethora of events featuring some of the most influential people and top thinkers in technology. If you have the time and interest, you can always find events that feature some famous (and usually successful) person willing to share their experiences and thoughts. You also have numerous peer networking events where people get together to discuss ideas and opinions in a collaborative environment. There really isn’t any other place like Silicon Valley, despite the attempt of many cities and governments to re-create the Silicon Valley environment and culture.

The only other environment that comes close to the Silicon Valley environment of knowledge sharing and open discussions isn’t a physical location but an online medium: blogging. In Silicon Valley, you can read about thought leaders in mainstream media and find events or conferences where they are giving a talk on a hot topic. Nowadays, chances are that they also have a blog, where they have captured their ongoing thoughts, opinions, and reactions to hot topics and emerging trends. Just like most of the talks in Silicon Valley, they’re not blogging for the money. They’re usually doing it to share their experiences and insights or to express a point of view and influence people.

One of the unwritten rules in Marketing is that you do not make major product announcements on April 1. For some reason, the smart people at Google's ignored this rule and soft-launched the widely anticipated Google email service (Gmail) on April 1. Give the date of the announcement, some people (even well known bloggers such as Doc Searls) actually thought that it was an April Fool's joke from Google.

It's not a surprise that some people thought the Gmail announcement was a joke since it sounded too good to be true. Google announced that they would be offering a free email service with 1 gigabyte of email storage. To put this in perspective, Yahoo charges $49.99/year for 100 MB of email storage. Apparently, Google has run their numbers and they feel that it's going to cost them $2/year to support 1 gigabyte of email storage. This must mean that either Google has superior infrastructure that is more efficient and cost effective than Yahoo's email infrastructure, or Yahoo has a huge margin on their email service which is not justified.

It seems that every time you go to a talk held by a luminary in Silicon Valley, one question keeps coming up again and again. Everybody wants to know what the luminary thinks is the next big thing. After all, if they're important enough to be speaking in front of a large audience, they must have some valuable insight into where we should be investing our energy, time, and money. Everyone has a different answer (nanotech, personalized medicine, Wi-Fi, PC/TV convergence, etc.) but one interesting response was what Paul Saffo discussed during his talk at a SDForum event. The talk was titled "It's the Media Stupid", but as usual, Paul Saffo spent two very entertaining hours covering a wide range of topics.

The topic that I found to be most interesting in Paul's talk was his discussion of the technology adoption S-curve. Bascially, if you look at the rate of technology adoption, it looks like a horizontally stretched "S" when you map adoption/penetration on the Y-axis and time on the X-axis. What this means is that when a technology is first developed, it takes a while for either the technology or market conditions to develop to the point where it hits an inflection point and achieves rapid adoption. Eventually, you reach market saturation and then the curve flattens out. Some examples that he cited include the mouse which was invented by Doug Engelbart in 1968 while he was at SRI. It was only in the late eighties/early nineties that the mouse really took off with the arrival of the Macintosh and Windows. Other examples included pen computing which was around in the eighties with Go and Apple's Newton but only took off with Palm in the nineties.

So, how does this all relate to where we should be investing our energy, time, and money?

With all this attention from mainstream media and VC's, it seems inevitable that social networking is destined to go through a mini bubble and crash, hopefully followed by a sustainable recovery, much like the internet bubble. It's pretty clear what's sustaining the bubble. Whenever you hear about $50M+ valuations for companies with no revenue and no clear business model, it's usually a good sign that we're in a bubble. The interesting question is what is going to cause the crash, and is there anything that can be done to prevent it?

There are many issues with social networking that could cause it to fail such as privacy and the lack of clear busines models. However, I think the single biggest thing that is going to kill social networking is also the one thing that is driving the boom in social networking today. Basically, social networking is going to end up being the victim of its own success. If you look at what's driving the investment in social networking, it's the viral spread and network effect of the technology. Bill Gurley from Benchmark states:

"Free e-mail like Hotmail had viral marketing but not increasing returns. I see both in this social-networking thing. As the network gets bigger and bigger, there's more value to incremental users"

If the appealing thing about social networking companies is their ability to create large communities of connected users, you then want to go out and sign up as many users as possible. After all, more users equals bigger network, more viral spread, and hence sustainable increase in eyeballs for subcriptions, targeted ads, etc. If you follow this logic, the ultimate end goal for social networking is to have everyone connected via six degrees of separation. In fact, this is exactly what's happening today with social networking and therein lies the problem.

I think it's fair to say that we're starting to see the end of the honeymoon between Google and mainstream media. If you do a search for news articles in the past year, you'll see a steady stream of positive, almost gushing, articles on Google's culture, technology, and happy users. However, now that Google is about to go public we're starting to see more balanced articles, such as the recent article in Fortune titled "Can Google Grow Up?".

I'm glad to see people take a more balanced and skeptical look at Google's success and future prospects. Given what we know about their past track record, you have to admit that if they continue to execute the way they have done in the past, a $20 Billion dollar valuation is not unreasonable. Although Google has great technology, I always thought that the more impressive aspect of their success has been their ability to generate increasing revenue while maintaining high margins using Adwords, which is Google's take on search engine pay for placement that was pioneered by Overture. The other often overlooked part of Google's success is their phenomenal success in generating positive PR and coverage based on word of mouth and good will from their users.

As the article points out, there are some cracks that are starting to appear in the rosy Google success story. The obvious ones are management issues, cultural shifts, and other growing pains that a fast growing company will need to overcome. There is also the threat of competitors such as Yahoo, AOL, and Microsoft who are starting to see Google more of a threat than a partner. However, I think the biggest weakness for Google is the lack of an ongoing relationship with their customers and advertisers.