Ok I’m biased. I got a good conversation and a free meal out of somebody I hooked up with via Linked In so I’m a believer. I’ve been bribed and my opinion is now obviously suspect.

That said, I think that a lot of people who are railing against these sites are missing the point. I find that ironic since so many of them are actually experts on the pattern I see unfolding here.

The pattern: systems come along that are a cartoon of what an expert knows, in this case an expert at social networking, and they on the one hand drive the experts crazy and on the other hand they empower hordes of amateurs to start playing – like a children’s game – in the field.

We saw this with desk top publishing which enabled an army of church newsletters that were all so hugly that professional graphic designers wept. I remember going to one MacWorld many years ago and describing it as an alien blood bath.

We saw this with drum machines that enabled no end of bogus things. That MacWorld was painful on different sensory channel.

I would argue that the presentation software did this too. There I think the network effect caused a lot of extinction of presentation skills; since these days people demand a power-point and it’s a lousy framework for many variations on good story telling. In the case of powerpoint the standard it set killed.

Some fields, when attacked by these amateur empowering cartoons, have a literature of “ for dummies” books standing by that assures that when the amateurs get curious and go down to the library they can read up on: graphic design, drumming, story telling. I’m a little concerned that the social network field may not have this stuff written down, increasing the chance that the amateurs will have to rediscover it all from scratch.

In the happy versions of this pattern the field is invogorated by the influx of fresh blood. The experts end up happy because suddenly a huge audience appears that cares about what they care about. The ivory tower may not be quite so high anymore; but the hill it stands on becomes a mountain.

So much of the design problems people work on in semantic net design, product design, protcol design sessions is about how finely drawn a cartoon they are going to standardize on. One fear is that the cartoon will be so stark it will cut people and they will bleed. One fear is that if the standard takes, it has powerful network effects (or worse if it’s bundled with something else that does) all more sophisticated models will become second class citizens. Or worse the diversity of models will go extinct.

The current generation of this social networking stuff sure is a cartoon! It’s quite clear that what’s going on in over at friendster is game playing than sophisticated social networking.

Tim O’Reilly want’s it:

I wish that the various web services data vendors (including Amazon, Google, EBay, Salesforce.com, and many others) would realize that they comprise the building blocks of a future “internet operating system”, and act accordingly, engaging with each other to interoperate. It seems to me that the original Unix/Linux architecture, and the architecture of the internet, are based on a model of “small pieces loosely joined” (to quote David Weinberger). Web services can also operate on this model. However, there are alternate visions, including .Net and J2EE, in which there is a quest for “one ring to bind them all.” There’s a history in our industry in which application vendors mark out new territory, but then lose that territory to someone who figures out how to control that space with platform-level APIs. If instead, we can consciously keep to the current open standards model of the internet, we will continue to leave opportunities for new innovations, and new market entrants. Unfortunately, I worry that the competition between Amazon, Google and EBay will lead them rivalries that make them forget the foundation of their success in the open internet. (But I’m hopeful that the companies in question are smart enough to avoid this trap.)

My model of exchange standards has three agents. These three go by many names. For example: buyer, seller, and middleman; boy, girl, matchmaker; application, hardware, operating system; or client, server, protocol. The last of the three, the broker, is the most often ignored and most often the one with the most power. My father used to say that one of the problems the communists ran into was an insistence that the middleman is nothing but a parasite.

In addition to these most situations are populated by numerious agents of these agents. For example both buyer and seller may have a bank and that bank will, by virtue of aggregating a relationship with a large number of small and hence marginally powerful players, become a key player in setting exchange standards about how transactions take place. Sticking to the currency exchange standards, examples of middlemen include the the check clearing houses, the treasury, and the body of practices, rules, and laws that frame how the work gets done and the disputes get resolved.

As much as the middleman is often overlooked in discussions of this stuff the agents are even more likely to remain below the radar. I’d even say that one of the key foolishness with Libertarians is their blindness to the power of the agents.

The setting of the standards, rules, laws, etc. etc. that forms the frame or foundation for the entire enterprise is negotiated by the players. Happenstance, path dependencies, ethics, and the power of the various players and their agents shape how the standards emerge and evolve. The entire tangle of organizational politics comes to bear.

Here’s an interesting example of that. In the 1960s a number of consumer protection laws were passed.  These included laws requiring clear labeling on products; i.e. what ingredients were in the food, how much the can of coffee weighted, or the legality of making claims about the health benefits of your product.  It maybe hard to imagine by there was a time when a can of coffee didn’t say what it weighted and after the law was passed we discovered that some cans were a pound while others were 12 ounces.
All of these were passed because the buyer’s agents were in the ascendancy (i.e. the Democrats), helped along by some very shocking scandals.  These days the seller’s agents (i.e. the Republicans) are more in the ascendancy.  So we get this example.

We currently have a Republican governor, he’s claim to fame is having been an early investor in Staples. His attorney general decided sometime ago to stop enforcing the law that requires that items for sale must be clearly marked with their price.  Now the state has repealed the law that requires prices to be marked.  The law now requires that every 5,000 square feet have a scanner available that consumers can walk to, scan the item and hence determine the price (at that instant).

What triggered this posting was this line in the article in the paper:

“John Simley, a spokesman for Home Depot, who said price stickers are not important to most customers.”

In the seller’s dreams the buyer’s don’t care about prices.

I’ve described before that one of threat hangs over any standards actvity is the stick-up, i.e. that at some point down the road, after everybody is locked-in, a patent holder shows up at the party and demands that we all fork royality a payment.

Here is a fine example. Microsoft has decided to start charging a toll on many of those little memory cards people stick into cameras. The folks that designed that standard screwed up. There were plenty of open standard proven alternatives. It was obvious that the designs were encumbered by Microsoft IP. Fools.

But, more importantly is a story that people thinking about adopting the WS protocol stack or sticking Window’s CE .Net into their appliances should be very careful to think thru. Do you really want to pay a milli-cent tarrif on ever transaction your organization does a few years down the road?

The #1 measure of sucess for an exchange standard is how many transactions per second take place via that standard. This is of course a pain in the neck for an emerging standard which since for a long period that number is zero.

Advocates of a standard will substitute other metrics to both create the impression of success, but also to measure the precursors of sucess. They might report how many users have could transact if they wanted to, i.e. how many have the ablity to send/recieve a fax. Or they might report that certain large vendors have indicated they will adopt, as Microsoft does or doesn’t intent to support SVG. But, these measures aren’t the #1 measure and until you have the #1 measure the standard’s success remains a risky proposition.

Here’s a nice example of something picking up real momenteum by that measure.

“a brand new weblog is created every 11 seconds. We’re also seeing about 100,000 weblogs update every day as well, which means that on average, a weblog is updated every 0.86 seconds.”

    – Technorati

Following Walmart another big buyer of stuff mandates that their suppliers adopt RFID tags, i.e. the
DOD

A nice example of an exchange standard that’s driven by the buyer side of the supply chain, though I presume the platform suppliers are also hard at work advocating this as well.

I also find it interesting that back in the 60’s and 70’s the DOD often lead standardization efforts; now they seem to be much more a follower – somebody you want to get onto you bandwagon after commercial interests have done defined the standard.

Meanwhile over at MIT where much of the work was done to bootstrap the RFID effort they are winding down their effort. Universities provide a good venue for coordinating an emerging standard; as long as you can manage to shut down the effort when it’s no longer an research or design problem.

Early adopters always risk that they will be stranded when the market goes left and while they went right. Sometime you can gloss things over with an adaptor or a converter. Sometime you can’t.

This note attempts to put a valuation on the Site Finder hack. I estimate it’s worth about $3 Billion dollars, to Verisign. I don’t make any attempt to estimate it’s cost to it’s victums. One reason I got to thinking about this was that since it leverages people’s typo’s and misspellings I, as a dyslexic, find it particularly offensive. About one in five people suffer from dyslexia. Think of us as a market segment.

Computing the value of things is hard but necessary work. For example google needs to rank sites to decide which site to present first in a query. They want to have the ‘highest quality’ response to the query come first. Their solution is to use links as a proxy for quality. Sites with more links are presumed better than sites with fewer links. Of course their algorithums aren’t as simple as that.

The success of a standard is similar. You can measure how many people have adopted, linked up with, the standard. A better measure is how much traffic is moving over the standard. A number of people may speak Latin, but how many words of Latin are spoken each day? A number of people many know the secret boy scout handshake, but how many secret handshakes are actually consumated each day?

In the web world traffic statistics are collected by sampling. Alexia, a venerable firm acquired by Amazon some years ago, does that. They collect the data by signing up volunteers and installing something into their web browser that reports back traffic data.

If you want to value a company you have the same problem. You can count how many people link to the company (i.e. how many customers it has) or you can try to measure the amount of traffic the company has with those customers (i.e. how much money each customer hands over in a given unit of time). For example the Visa system has around 1,023,707,000 cards issued; but that doesn’t tell you much about the volume of traffic moving thru their system. They report that they do about 36,284,000,000 transactions a year.

Of course, Latin speakers will, for example, argue that their conversations are higher value than the conversations in many more pedestrian languages.
Currency exchange standards are unique because you can actually do better than even the amount of traffic. You can measure the value of those transactions. For example Visa reports they moved $2,668,821,000,000 thru the system in one year.

Alexa ranks Yahoo as the site with the most traffic on the net, while the market values it as worth $27.37 Billion. AOL on the other hand is ranked at 20 in Alexia’s traffic ranking.

Web traffic is power-law distributed, and if we assume that the exponent of this distribution is 1 then AOL get’s a tenth the traffic of Yahoo. And if we assume that all traffic is equally valuable (the Latin speakers will point out that this is obviously false) then we can roughly estimate that AOL is worth $2.7 Billion. On reason this is obviously false is that AOL has a subscription relationship with it’s users where as Yahoo doesn’t; and a subscription relationship is clearly more durable than a non-subscription one.

Ok, now notice this article from Alexia about the traffic levels that Site Finder managed to garner. It’s a little hard to see exactly how much traffic they managed to capture; but if you look at can see they managed to move up to aproximately the same rank as AOL.

The operation of the internet domain registry is a beautiful example of a public good platform or standard. The number of beneficiaries is huge, there are for example at least 44 million web sites that benefit along with at least a few hundred of million users.

The goverance of such a public good is a complex mess. But in this case it surprises me that the top twenty web sites haven’t made more of a fuss about the Site Finder’s arival as a major competitor. Well maybe it doesn’t; the beneficaries of the Internet standards have a ways to go before they realize how much of their fate is in the hands of standards bodies that don’t necessarily report back to them.

It’s interesting to look at this from Verisign’s point of view. If the hack is worth $3 Billion and they figure they have only a 10% chance of winning the day and being allowed to get away with it. Then that’s still enough money, $300 million, to make it worth spending a few million sending your advocates to the various standards bodies to argue the case. They can probably buy some pretty good advocacy for that kind of money.