jjprojects: our social web » business

“Great vampire squid” wraps itself around The Social Network.

John Johnston — Wed, 05 Jan 2011 02:21:53 +0000

I’ve wondered when this day would come. The start of a new decade is a fitting time I suppose. New decade. New blood.

On reading the news that Goldman Sachs has led a huge new investment in Facebook, I couldn’t help but recall with some amusement Matt Taibbi’s Rolling Stone article The Great American Bubble Machine, from April last year.

This rollicking take-down investigates how Goldman Sachs has helped engineer every major market manipulation since the Great Depression, including the tech stock bubble of the 1990s, the “housing craze” that lead to the global financial meltdown, the $4 a gallon petrol (or gas in American) bubble, and rigging the financial crisis bailout. The world’s most powerful investment bank is harshly described as:

a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.

Can you see why, after recalling this article, I seem to have this mental image of a vampire squid wrapped around a big, blue ‘F’?

Goldman Sachs seems to have been just about everywhere within capitalism, including ‘dot com’, ‘web 1.0′ IPOs leading up to the tech wreck, and now, it’s into ‘web 2.0′, social media.

With that in mind, here’s another harsh evaluation of the bank’s (and government’s) long history from said vampire squid article:

The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again

If you agree to any degree with this assessment, does that mean social media is about to be subjected to this? If you don’t, it’s all fine and dandy. I guess we’ll just have to wait and see what happens. I’ll reserve my judgment for later, because I’m not as cynical as you lot.

Any any case, let’s take a quick look at what has just happened with the Goldman Sachs/Facebook deal.

Facebook has just raised $475 million from Goldman Sachs.
In addition, the company intends to raise another $1.5 billion through a “special purpose vehicle” that Goldman Sachs will be initiating, to let its clients indirectly invest in Facebook.
The private sales would value Facebook at around $50 billion.
The minimum investment from clients is expected to be about $2 million.
Goldman’s offering of Facebook shares will surely be watched closely on Wall Street, as it could set an example for other private companies (who don’t wish to go public but still raise a lot of money) to do a similar thing.
A potential investor has said that Goldman is taking about 4.5 percent fee from the money invested into the fund.
By using Goldman’s “special purpose vehicle“, Facebook will avoid having its financial information disclosed to the SEC and published publicly. Its competitors won’t know the details of its earnings.
Using the “special vehicle”, Facebook still gets around $2 billion to use, without going over the 500 shareholder limit for disclosure, by having Goldman Sachs represent the investors on their behalf. Did someone say loophole?
The SEC may intervene and rule that the “special purpose vehicle” circumvents the Securities Exchange Act and require Facebook to then report its earnings.
It so happens that the SEC just last month began an inquiry into the surge of trading shares of privately held Internet companies.
As Mashable points out, if Facebook is required to eventually report it’s earnings, why would it not then just go for an IPO, after of course growing quite a lot more in the meantime?
Goldman Sachs is in the prime position to lead the lucrative IPO, whenever that occurs. Big fees.
As Dealbook points out, an eventual IPO would also unlock CEO Mark Zuckerberg’s huge paper wealth, which Goldman Sachs, as a lead Facebook investor, would have a “leg up” in the assignment of managing post IPO.
No doubt Twitter and other social media companies, and their investors, will be watching this whole developing situation with interest.

New hedge fund to use Twitter to predict stock market.

John Johnston — Thu, 23 Dec 2010 00:26:08 +0000

Further to my recent post on social media in relation to financial matters, but quite different, is appears that a new British hedge fund in planning to track Twitter in order to attempt to predict the direction of the stock market.

The initiative appears to be based on a recent paper by the University of Manchester and Indiana University, which found that the frequency of certain emotional words could be used, with a high degree of accuracy (87.9%), to predict daily moves in stock markets, between two and six days later.

An exclusive deal has been signed with Dr. Xiao-Jun Zeng, a doctor of computer science at the University of Manchester, to research trading models.

Are you skeptical about how successful this will be? I don’t blame you, but I’m going to try and follow this up to see how well they do in the markets. Apparently the fund is set to start trading with an initial 25 million pounds. Stay tuned.

FCC approves net neutrality rules – good compromise or welcoming your new ISP overlords?

John Johnston — Wed, 22 Dec 2010 01:33:53 +0000

The U.S. Federal Communications Commission (FCC) has adopted new rules in relation to net neutrality, or how internet providers handle traffic and various services.

Democrats on the panel have voted to approve the new enforceable net neutrality rules, which will restrict companies such as AT&T, Verizon and Comcast from blocking access to content unfavorable to them.

The Obama Administration has claimed a win in relation to its net neutrality campaign promise, maintaining it represents progress. Others are claiming the measures do not go nearly far enough. Obama has said:

As technology and the market continue to evolve at a rapid pace, my Administration will remain vigilant and see to it that innovation is allowed to flourish, that consumers are protected from abuse, and that the democratic spirit of the Internet remains intact.

Unsurprisingly, Republicans at the FCC and in Congress are opposed to the new measures, with Sen. Kay Baily from Texas labeling it an unprecedented power grab by unelected members. Republican FCC Commissioner Robert McDowell accused the FCC of becoming a vigilante group in order to help Obama with a misguided campaign promise.

However, there has also been disapproval dished out from many net neutrality advocates. The New America Foundation has said the new rules prioritise the profits of corporations such as AT&T over the public, internet entrepreneurs and local businesses. Public Knowledge maintains that the rules fall far short of what they could have been and Free Press has asserted that the rules amount to fake net neutrality. The Institute of Policy Integrity has labeled the new rules “tepid”.

The main criticisms seem to be that while wired broadband providers may not unreasonably (whatever unreasonably means) discriminate against any lawful traffic, the rules don’t apply to wireless providers. Also, “paid prioritisation” has not been banned. This means that providers may be able to set up paid priority access on networks. “Managed services” are allowed over ‘last mile’ broadband. Providers can sell prioritised IP services of any kind.

In short, critics say that the new rules are full of loopholes and grey areas, hence the distinct lack of celebration from net neutrality advocates. As Ars Technica has pointed out, “damning with faint praise” seems to sum up responses from long-time net neutrality supporters.

Read Write Web has a decent rundown of the “six key principles” underpinning the new rules if you are interested in looking a little closer.

Is social media being used to manipulate financial markets?

John Johnston — Tue, 14 Dec 2010 00:38:45 +0000

In India, the financial regulator, SEBI (Securities and Exchange Board of India), is planning to use a new suite of software tools to analyse conversations about financial markets in social media.

The software will analyse networks such as Facebook and Twitter, as well as blogs and more traditional social media such as forums. It is thought that some people may be using social media to try to manipulate markets. There has been a sudden rise in the number of cases of alleged manipulation.

SEBI has warned investors against websites offering stock tips, adding that people may expose themselves to undue risk by using unconfirmed information on websites and in social media.

I wonder if the use of such software by regulators to monitor conversations about financial markets and specific stocks will catch on in other countries too?

via The Economic Times

Internet war, what is it good for?

John Johnston — Fri, 10 Dec 2010 02:20:25 +0000

On Wednesday (US time), Dave Winer published a post entitled ‘Are we starting a full-out war on the Internet?‘. This may seem a bit extreme or at least overly dramatic to many, but given the goings on in relation to Wikileaks, and the ongoing fallout from the release US Embassy Cables, it has certainly given me pause to reflect on the question.

Winer states upfront:

I’m afraid it (the storm surrounding Wikileaks) also will draw us into a future that I’ve believed was coming and didn’t want to talk about.

This also reminded me of something that was said in the BBC documentary series I saw on TV here in Australia not long ago, The Virtual Revolution. At one point it asserted that mass warfare on the Web is a strong possibility for the 21st century, and it will be our choice as to whether we take it in that direction, and to what extent.

As far as I know, humans have always been in violent conflict with each other to varying degrees. Is there any reason to think life and actions online will be any different? I certainly hope so. There is the hope that we are heading into a new era where mass warfare may become a thing of the past, as our online global civilisation further develops. Not that there will not be conflict, it’s just that it may look more like civil conflict. In a more globally connected world, to what degree will it be ‘them and us’?

DDOS attacks such as the ones we’ve seen on Wikileaks, and then in retaliation from supporters, on multiple companies that withdrew their digital services from Wikileaks, are nothing new. As I write this, I see that Sarah Palin says she is also under heavy attack from London–based supporters of Wikileaks. What is new is the very high profile nature of this situation, and that it involves the US government, and many other governments around the world. It also goes to the heart of the rapidly changing media industry; many would say an industry in crisis.

As Winer implies, what we have seen in the past few days is a kind of mob mentality emerge, both online and off. It’s all in the spirit of “fighting the good fight” for free speech, on more than one side of the debate in fact. And before we know it, we could be in the middle of an online war that we find it impossible to extricate ourselves from.

As @deekdeekster on Twitter pointed out as I was thinking out loud about writing this post, “the implications of mob internet rule are scary, as much as the strangling of free speech”. There is certainly something to that.

There’s also something to the assertion that governments have been pushing around other governments and their people, and it’s not a surprise that people resent that, and citizens should know what governments are doing in their name. That is indeed a solid reason why Wikileaks (and other whistleblower organisations) should be vigorously defended, and be allowed to continue to exist.

It remains to be seen whether this is how 21st century wars will partly be fought, but it seems highly likely. Many societies are becoming more and more dependent on digital networks. What the present international situation shows is that we are getting to the point where attacking, disrupting and targeting information and the flow of information, and indeed revealing previously secret information, can have a major impact on the world as we know it.

Wikileaks is rocking our institutions to the core.

John Johnston — Thu, 02 Dec 2010 00:24:50 +0000

You’d have to have been living under a rock not to notice the massive and continuing fallout from the latest Wikileaks release of diplomatic ‘cables’, on top of the Iraq war logs released not long ago.

Add to this the probability that Wikileaks will release documents that will significantly impact some major banks (and other companies?) in the near future, and you have a full blown scramble to try and shut down Wikileaks as soon as possible.

Just in the last couple of days since the beginning of the latest release, among other developments, many governments seem to be in damage control; Wikileaks has been under DDOS attack on multiple occasions; Interpol has issued a ‘Wanted’ notice for Wikileaks founder Julian Assange; Amazon has cut off hosting to Wikileaks on its servers; and a senior advisor and strategist to the Canadian Prime Minister has even called for Assange’s assassination! What next?

Whether you think what Wikileaks is doing is right or wrong, there’s little doubt that they are so far succeeding in rocking many of our major institutions to the core, including ‘the media’, governments, and soon various large corporations. It also leaves little doubt about just how much impact the Internet is continuing to have on the world. Wow.

Mobile internet use set to soar [stats].

John Johnston — Tue, 30 Nov 2010 01:41:41 +0000

Here are 2 slides I think are interesting in relation to growing mobile internet use around the world.

The slides are from a recent presentation by former Morgan Stanley (now moving to Kleiner Perkins) tech analyst Mary Meeker. The full presentation can be downloaded from here. Click on the images below to see them in a larger size, in a new window.

In short, 3G subscription growth is climbing at very high rates in some countries with very large populations, such as Brazil, China, Indonesia and Russia, and is still around 25-35 percent year on year in many other countries around the world.

Additionally, it’s astonishing how steep the curve is when the Apple iPhone, iTouch and iPad are shown together, in comparison to the first 20 quarters from the launch of some other products and services. It seems clear that mobile still has a big future ahead.

The whole presentation is embedded over at Business Insider.

Can we move as one using social media? Twitter’s Biz Stone thinks so.

John Johnston — Fri, 26 Nov 2010 01:59:26 +0000

Here’s an interesting recent video interview with Twitter co-founder Biz Stone.

One point grabbed me as I was listening to the interview. He says:

One particular event opened our eyes to what we had on our hands. That was in March of 2007 at a festival called South by South West….We had about 75,000 users at that point and many of the people at the festival were using Twitter, and this was the first time we were able to see Twitter in the wild, so to speak. And there were a couple of things that happened at that festival that made us realize that people were using our service to come together and move as one…We rushed right back to San Francisco and formed Twitter Incorporated.

I find this interesting in the light of my recent thoughts on what a global civilization, aided by an increasingly social web, might start to look like. Is it possible that sometimes (only sometimes) we may be able to use the social web to come together and act as one, on a larger scale than anything previously achieved? Twitter has certainly become a lot bigger since then.

Web creator Tim Berners–Lee criticizes “some of its most successful inhabitants”.

John Johnston — Wed, 24 Nov 2010 12:16:45 +0000

In a comprehensive new article, Tim Berners–Lee calls for vigilance in maintaining open web standards and neutrality. He asserts that the egalitarian principles the web was founded on 2o years ago, are being threatened in different ways by “some of its most successful inhabitants”. He criticizes the likes of Facebook, Apple, Google, Verizon, some ISPs, even Twitter and Linkedin for various dubious and potentially dubious activities.

He asserts that the walling off of information from the rest of the web by large social networks (such as Facebook) threatens the web’s established universality and decentralization. He points out that large social networks such and Twitter and Linkedin capture users’ (voluntarily offered) data and assemble excellent databases, and then reuse this information to provide a value added service. However, this only happens within their walls, which segments off information and threatens the decentralized nature of the Web. Once we enter our data into one of these networks, it can’t easily be used by us on another site or network. The pages are on the web, but the data are not.

Not such a big deal you say? The stated threat is that the more this kind of structure spreads, the more the web becomes fragmented and the less it becomes a universally accessible information space. Another threat is that any one social network, search engine or web browser could get big and powerful enough to become a monopoly; of course Google and increasingly Facebook spring to mind here.

He also points out that some cable tv companies that provide connectivity are considering the possibility of limiting users to only their content mix. Some wireless internet providers are being tempted to slow traffic to sites which have not made deals with them, and governments both totalitarian and democratic, are monitoring people’s online habits, infringing human rights. My previous post, A year in a labour camp for one retweet!, is a shocking example of these very activities in action.

In terms of lack of openness and centralization, he singles out Apple’s iTunes system, which uses the proprietary “itunes” instead of the standard “http” to locate content. You can only access iTunes using Apple’s propietary iTunes application. You are no longer on the web, it’s walled off. It’s a single shop rather than an open marketplace, controlled by one large company. On a related side note, only today I was looking around for a particular audio book. It turned out that it was $32.99 on iTunes, and $10.47 elsewhere, for the same book.

Yet another development he finds disturbing because it’s off the web, is magazines and newspapers (for example) starting to create smartphone–only apps rather than web apps. You can’t bookmark pages within them or email a page link within an app. You can’t tweet out a page link from an app, without others having the app. He believes it’s better to build web apps that run on smartphone browsers. This may not seem like such a big deal, but if it turns out that one company, one walled garden, has too tight of a hold on the market, it could slow innovation, or worse.

Berners–Lee maintains that if these and other trends continue unchecked, the Web could be “broken into fragmented islands”. The freedom to connect to whichever sites we want could be lost, and this will extend to mobiles devices too. He points out that the web is a critical democracy, one that “makes possible a continuous worldwide conversation.” This could become more fragmented.

There is real food for thought in this article and I encourage you to read the whole thing, as I’ve only touched on some of the issues he mentions. It’s really worth reading when you have time. He makes some excellent points in relation to why we should care about all this. The web is ours. It’s a public resource on which we are coming to depend on more and more, for so many things.

Should we let the web become fragmented, and monopolized by a few big and powerful companies? Should we let governments chip away at our liberty by monitoring and filtering? Do we even have any power to stop these things happening if we want to?

Take Facebook – many people are aware of the walled-garden nature of Facebook, yet it’s grown to over 500 million users and doesn’t look like slowing down. Facebook is starting to make substantial revenue from its walled garden too. It’s a big company now.

Google has become a huge and profitable company is such a short time. It’s continually expanding its operations into new areas with some astonishing technology, while still making the vast majority of its money from advertising. It all seems to unfold before we realize what’s happening and can think of all the possible ramifications. It so often seems to be the case with new technology. We take the good with not so good, because the good seems to outweigh the not so good.

If there are significant dangers, perhaps we are safe in the knowledge that we can collectively change things if we really want to. For instance, at some point, if people decide to leave Facebook en masse, that would be it for Facebook. If Google steps over the line towards the opposite of “Don’t be evil”, we can always stop using Google. If something else that seems better comes along, we’ll start using it. We seem to be fickle like that when it comes to the web.

Google says govts blocking info flow are blocking free trade and economic growth.

John Johnston — Tue, 16 Nov 2010 01:15:59 +0000

With the release of a new white paper via its Public Policy Blog, Google is urging governments everywhere to take specific steps to “break down barriers to free trade and Internet commerce”.

Google maintains that according to one study, more than forty governments are now involved in the restriction of online information by such practices as blocking online services, imposing non-transparent regulation, and seeking to incorporate surveillance tools into their internet infrastructure.

With a focus firmly on commerce here, Google is asserting that these practices are the trade barriers of the 21st century, and steps should be taken to remove them. Google is calling for new international rules to provide increased protection against these 21st century trade barriers.

Do you think the economic benefits of the Internet are under threat from governments imposing limits on information flow? Are certain countries shooting themselves in the feet, economically speaking, by restricting, regulating and censoring information flowing in and out of their borders?

jjprojects: our social web » business

“Great vampire squid” wraps itself around The Social Network.

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