May Day in Berlin, and the Evolution of Photojournalism

Spambot Generated Apparel: The Assault on Editors and Authors

Tech Bubbles and the Amount of Fsck I Give

Instagram is Facebook’s $1b Bribe to Valley VCs

Look, I’ve always derided pundits in the past for being trigger-happy on the “we’re in a bubble” talk, but when you objectively look at the tech sector today and two major acquisitions making headlines, you have to be blind not to notice that everyone’s drinking the same Kool-Aid.

We had a major debate about the acquisition news this morning in the SiliconANGLE editorial chat room, but I threw out a few questions regarding the acquisition that no one had a ready answer for. I’ll use them as a launching point to discuss the topic today

1) Would it have cost Facebook $1b to devote an engineer or eight to replicate the functionality of Instagram?

Obviously not. Let’s say Facebook is paying twice or three times the average salary ask I see for iOS developers online, and it costs $375,000 to employ an engineer who can write for iOS. Instagram had an eight-person staff size. The salary requirements to replicate that staff would run about $3 million a year.

Let’s say that Facebook wants to accomplish what Instagram did in a 10th of the timeline, so they throw 80 over-paid engineers at the project; that’s still only $240,000,000 a year.

Would it really take 80 Facebook engineers to develop and deploy a well produced application that utilized Facebook’s photo app functionality, and added sepia filters? I think the obvious answer to that is no, and the evidence I have for that are the sheer number of knock-off competitors there are for Instagram on every mobile platform marketplace.

2) What would it have cost Facebook to promote the heck out of their alternative on the sidebar of their site to users of Instagram (FB knows who they are).

Since it costs nothing for Facebook to put ads for services they already own on their own site, the obvious answer to this question is $0. When I posed this question to the editorial chat room, John responded with the question: “What would it cost facebook in lost revenue to promote an alternative?”

So I did some math using Facebook’s “Sponsored Story” gimmick, the tool used to put ads in the right hand sidebar of Facebook. When you target just the users of a single app, the best I can tell, the cost is about $.69 per click-through. I ran that value through a formula based on the following constants: click-through to signup for a mobile install and new feature would be around 10% to 5% of all clicks, and that there are currently around 30 million registered users on Instagram.

($.69 / click) * (30,000,000 users) * (.1 – .05 CTR)

This formula yields a cost to acquire the entire userbase for Instagram of $136 million to $680 million. Again, this is likely the largest this number could possibly go, since what Facebook would realistically be advertising is an add-on feature very comparable to the added Skype functionality to pre-existing Facebook chat, and it also assumes that 100% of that ad inventory would have been sold, which is far from guaranteed.

3) Will FB ever recoup $1b out of the purchase of Instagram? Ever?

The clear answer here, at least in terms of direct monetization, is no. Facebook has yet to do any monetization on their own native applications yet, as Robert Scoble pointed out today, so the likelihood that they’ll get around to monetizing their new bauble before the main application is next to nil.

The blogosphere is just chock full of ways that Facebook to justify the price tag here; I’ll be honest, most of these justifications sound about as plausible as the average crackhead’s explanation why he just needs you to give him a dollar.

For instance, Om Malik claims that “Facebook was scared shitless and knew that for the first time in its life it arguably had a competitor that could not only eat its lunch, but also destroy its future prospects.”

As a brief aside, it’s worth mentioning that Tom Anderson (“MySpace Tom”) posted this theory to G+ an hour or two before Om, and it was as ridiculous then as it was when Om said it.

Instagram has 30 million registered users, which means that their active user base is much smaller. Granted that web traffic isn’t entirely indicative of mobile traffic, but all public quantifications show their website registering less than 650,000 unique visitors a month.

This means either one of the following two things are true: Instagram’s userbase has horrible engagement, or Instagram’s user retention is horrible.

Whichever is the case, Facebook has 845 million users. If it isn’t crackhead logic to think Facebook was threatened by this, I don’t know what is.

So what could possibly possess Facebook to waste $1b just prior to IPO?

One of the popular theories that keeps getting trotted out is that the cache and brand value associated with Instagram is worth its weight in gold.

This is a theory that doesn’t fly with me, either. The main attraction to Instagram is the same attraction to Apple products: they instill a feeling of elitism in their users. The difference between Instagram and Apple is that Apple has solid tech and innovation behind it to keep their users, where Instagram is a paper tiger that can be and has been been knocked off by dozens of tech teams.

As Esteban Contreras tried to explain to me on Facebook last Friday, the value of Instagram isn’t the app or the functionality, it’s the community.

If that’s the case, then Facebook has truly wasted money, since the community truly hates Facebook.

Others, like Dan Frommer, claimed that it wasn’t the community that made Instagram so valuable, it was the ease of sharing.

The biggest threat to Facebook is a mobile-only or mobile-first social network that captures the increasing amount of time spent on smartphones in a way Facebook can’t or doesn’t.

In my experience, that’s exactly what Instagram does. I’m still addicted to Facebook on the old desktop-browser web, but when I’m on my phone, I gravitate to Twitter and Instagram. Path is another example, but Instagram is more developed — that’s the deal I’d make, too.

Now, the last time I checked, whenever I take a photo in any smart phone, when it’s time to share the photo I have a number of options available to me – almost too many options (which is part of why I never installed any of these photo-sharing-specific apps; I want my share button list kept simple). What Frommer and other pundits are trying to say with this logic is that it’s easier to find Instagram on a list of sharing options than it is to find Facebook on that same list.

Facebook Didn’t Buy Instagram, They Bought VC Loyalty

As much as it pains me to say this, Robert Scoble is the only pundit that came up with a theory that didn’t insult my intelligence in a response to a question on Quora, where he threw some spitballs to peg why Facebook ponied up $1b.

Most of his answer mirrored some of the other garbage on the web today, but one part struck a chord:

Instagram will let Facebook develop a new kind of Open Graph advertising. One where Facebook will be able to offer mobile developers a lot of money in return for opening their apps up to Open Graph. Venture Capitalists in Silicon Valley are slobbering over this new potential revenue stream, so having lots of VC buyin (they just got a nice payday) will be very important. Imagine that Benchmark now "asks" all of its member companies to support such a new advertising scheme? This could result in billions of revenues for Facebook and member companies.

I’ve embarrassed myself over-estimating Facebook’s ingenuity before (see my predictions on Project Beacon prior to release in 2008 for evidence of such). Still, Instagram had nothing if not a pantheon of investors in the Valley. If you were to bribe nearly every investor in the Valley, $1b is a cheap pricetag for that.

Given that the mobile content consumption revolution shows no signs of slowing (last numbers I saw showed 29% of all content was consumed via a mobile device), Facebook needs a monetization strategy to compete with giants like Millennial Media, Google and Apple.

It doesn’t necessarily need to even be a mobile monetization strategy that Facebook is working on – just some sort of product that requires adoption by Valley startups where the value proposition isn’t obvious to entrepreneurs.

Think about it, though: what better way to gain instant wide-spread adoption than to have every Valley VC lean on their investments to adopt the Facebook monetization platform? Can you think of a quicker route?

… in which Jolie O’Dell trolls me. Again. [#yougotmegirl!]

If you read this blog religiously (and lets be honest, you don’t), you remember when Jolie O’Dell trolled me after SxSW that one time (so since you don’t remember, click through the links in that post, and get caught up).

In general, I like Jolie. We’re friends on Facebook (which is to say: we’ve never met face to face, but we’re in the same industry and I think she’s interesting enough to pay attention to occasionally).

I don’t always agree with her, though. More specifically, or perhaps accurately, I don’t always agree with her editorial. I sometimes get the feeling she trolls her audience in that way John C. Dvorak described to Dave Winer that one time.

She has a way of taking totally unreasonable positions and making me believe, after reading her editorial, that she truly believes what she’s saying.

Still, I can’t fathom that she actually believes that the right to free speech should be abridged, or that she doesn’t understand how the law she’s applauding not only violates the constitution, but threatens her livelihood as a professional writer.

Yet here we have her today, on the pages of Venturebeat, writing an OpEd in favor of Arizon’s House Bill 2549 (that passed both houses of congress, by the way), which broadens the cyberstalking and telephone harassment laws to include public communication on any digital or electronic device.

It’s being dubbed the “anti-trolling law.”

So, in effect, Jolie O’Dell’s livelihood, her bread and butter, what she’s remembered for – is threatened.

Her editorial is long and detailed. I won’t rebut it point-by-point because it doesn’t matter. Everything she says is condesnsed into one sentence found around the middle of her post:

Arizona wants to make it just as illegal to harass and intimidate people online as it already is over the phone or in person. The state wants to make it illegal to use laptops and GPS and any other devices we dream up in the future to hurt people.

Here’s the problem: you can’t abridge the right to free speech in such a broad way. It can’t be done. There’s a massive difference between speech in public and speech in private, and there’s no way that Jolie O’Dell, a technology and communications expert, can’t understand the difference there.

Under this new law, any time I write something online, in a blog, or on a social network, someone else can say it threatens or harms them emotionally, and I could go to jail. Hell, with the way the law is written, it doesn’t matter if I’m actually saying it to anyone – if I have a private diary kept in an electronic form, and I say something that could hurt someone’s feelings, I better hope know one guesses the password to that sucker, otherwise my next biggest concern will be not dropping the soap.

She even put a totally non-sequitor “media law lesson” at the end that has nothing to do with the verbiage of the law or anything else in her blog post.

Let’s have a little media law lesson about free speech, while we’re at it. You’re pretty much allowed to post whatever you like on your own website(s), for the most part and especially if you host it yourself on your own server. But if you’re posting something on someone else’s site, the laws of free speech no longer apply. The person who maintains the website controls the speech on that site, and you’re (literally) in his or her domain. So you can’t complain about your lack of “free speech rights” on Celine Dion’s Facebook wall or a blog’s comments section.

Everything she says here is technically true, but has no bearing on the law Arizona is passing, and certainly doesn’t work to support her argument.

Sorry, no. I call shens. There’s no way that Jolie O’Dell could truly be for this law. She’s trolling us all.

You got me, girl. I fell for it.

Good thing you don’t live in Arizona.

Automattic Finally Monetizes (Seven Years Too Late)

Earlier today at John Battelle’s Web 2.0 Summit, Federated Media and Automattic issued a joint announcement that they were now able to offer publishers of WordPress.com’s free blogging service the ability to run advertising on their blogs.

This is a break in tradition for Federated Media, since as an organization, they’ve never wanted to even open discussions with a blog unless they’ve been at a certain threshold of pageviews, usually in the hundreds of thousands. While WordPress.com has around 15 million pageviews a day, the average blog on the site receives just over 4 pageviews a day (yes, just four, as those 15 million pageviews are spread across 62 million individual blogs).

The advertising program will be completely opt-in, so no worries on whether or not it will be foisted upon unsuspecting bloggers.

FM Wins while Bloggers Lose

Still, this program and announcement has a ring of selling out, and for what?

When Blogger.com integrated AdSense all those years ago, folks like me were quickly excited by the prospect of financial reward for democratized media. As time wore on, it quickly became obvious to me and most of the rest of the world who tried that the only way to make serious money blogging was to gain “critical mass,” and mount up the pageviews.

Granted, this was with Google’s CPA model, which only pays when an action takes place (something advertisers love and publishers sometimes tolerate). Federated typically works on a CPM model (most of the time), and thus may give slightly higher payouts to publishing partners, but only when inventory is filled.

It’s also important to know that CPM means cost per 1000 pageviews – and that cost to the advertiser will in a perfect world go only as high as $40 on a great blog, and generally hovers between $4 and $7 CPM on your average blog. Federated Media’s standard contract takes at least 50% of the revenues, and we have to assume Automattic is taking a piece of the pie here, too (for the sake of argument, let’s say it’s only 25%, a conservative estimate).

Assuming (and this is highly unlikely) that FM sells 100% of the ad inventory, this puts the average WordPress.com publisher’s yearly salary between $2.26 and $3.09.

Meanwhile, Federated Media could potentially make between $10-19 million a year from the deal.

Automattic Sells Out Seven Years Late

After the announcement was made, John Battelle retook the stage and made a strange noise of excitement, apologized, and stated, “Sorry, it’s just good news. I’ve been working this for seven years so it just feels good.”

This would have been an attractive move for Automattic to make, if it were seven years ago. Unfortunately, the blogger math has been worked out for at least half that, and anyone with more than a month’s experience trying to monetize quickly realizes how insurmountable this is.

“Banner ads are not the future of the web, and is frankly the antithesis of what True Ventures should be investing in,” said SiliconANGLE Founding Editor John Furrier of the announcement. “The only people who make money from banner ads are blogs with volume. For everyone else, it’s a pyramid game.”

The overall theme from the Web 2.0 Summit up to this point had been one of deriving great value from big data. What Automattic has in it’s WordPress.com databases is a great deal of data with an immense amount of value – value they’re selling short by going with the second worst blog monetization strategy on the planet: CPM (what’s the first? Competitor Blogger.com’s CPA strategy).

“What would I love to see from Automattic? An innovative new ad model that rewards high quality content,” said Furrier. “Ad networks only work for the ‘big guys,’ and incentivize bad content models.”