My participation at FT Global conference

Financial Times organized an interesting conference (M&A-Evolution: Strategies for the New Deal Landscape) on how the growth strategies (both organic and through acquisition) have changed given the new global trends such as the euro crisis, increased risks of regulations and partially astronomic evaluations.

I was invited to speak about the growth tactics in digital media. In particular about the fact that there are still a lot of potential in developed countries, which is fueled by numerous growth drivers. Such as:

• Continuous shift of offline -> online for a variety of industries (best example is Zalandoo  for the shoes distribution in Germany)
• Increasing eye-ball time for digital media (digital ad market is still booming)
• Increasing consumption of media while not at home or in the office (thanks to tablets, smart-phones, intelligent car systems etc)
• New business models such as virtual goods
• And finally technological innovations (3D movies, batteries, displays, processors, internet bandwith)

Here some photos from the event:

       

"Focusing is about saying no" - Steve Jobs (WWDC'97)

Probably one of the most wise business advices...

Interview with me in "Spiegel" etc.

Just saw that "Spiegel", "Welt", "Mitteldeutsche Zeitung", "Frankfurter Rundschau" (and few others) just published my interview with dpa about the "real" internet speed compared to the one as often advertised by the large DSL providers.

Key issue is that there is a clear discrepancy between the advertising and the actual internet speed (which is confirmed by millions of user speedtests on speed.io & Co). But (!) the source of the slow-downs is not necessarily the "just" provider. An old computer, an overloaded or wrongly configured Windows, a defect network card or a weak WiFi signal - have a direct negative impact on the achieved internet speed. And finally - even the fastest internet connection does not compensate a slowly website...

It is great to see that the topic is still hot and will be even more up-to-date - once we start paying more attention to the speed of our mobile data connections :-) ... where today we still assume that it is normal that it is slowly and unreliable

Roger - the god of tennis

It is just scary to watch Roger playing... just look at that shot (played now at US Open 2010)

The real sense of Inception

Haha... I can't deny, "Inception" has something... After you have watched it, you ask yourself about the big take away idea.

After a long search, I found it: "If you run a VM inside a VM inside a VM inside a VM, everything will be very slow" (via @mytz) ;-)

Truth about flights

Flying is great :-) You are excited to be in a completely different place many thousands kilometers away within only few hours...

But the flying experience is something that may scare you away. In-transparent ticket prices (typically not flexible and with 5 unmentioned service charges), long expensive transport to the airports, huge waiting lines for check-ins (if you have luggage), annoying security checks (sir, please put your shoes off... why??), lost time waiting for boarding then taking off, noisy neighbors, no space, no normal food or drinks (i have never seen such small portions of drinks or chips) etc etc..

It is a unique example where an industry managed to destroy the experience to such a level, where people would partially prefer a train of 7 hours over a short flight of 45 minutes just to avoid the stress.

A New York Times blogger published few very funny drawings he did about his transatlantic flight:

And here one of my favorite comments about the airline experience by George Colin:

Illusion of a neutral internet?

Is today's internet neutral? Hmm... no, but the situation could get much worse. Decisions and agreements which are now heavily discussed in the US may result in a global paradigm shift.

When it comes to internet, there are typically following 3 parties involved:

• Internet Service Provider (securing the infrastructure and access for users and publishers)
• Content Provider (providing the content)
• Users (paying for the internet access and consuming the content)

What is the issue?

Content Provider achieved to capture the vast majority of the value through clever business models (mostly based on advertising), but experience extreme competitive pressure through "everything for free" mentality which was established during the dot com boom among users.

Internet Service Provider on the other hand experienced a massive decline of their revenues (and profits) in the last years given increased costs through exponentially higher bandwidth and traffic while decreasing tariffs (through introduction of flat rates and low-cost competition).

A natural result is a shakeout of weak players, a market concentration and a stronger desire to capture even more value.

While Content Providers are relatively flexible in terms of business model (they can introduce subscriptions, mobile versions, affiliate partnerships, offline activities etc), ISPs are rather in a dead-end street. They tried to extend their offer through triple-play offers (internet, TV, mobile), but remained pushed to a niche of commodity products with very small possibility of differentiation - where the price decides everything.

And now - ISPs are trying to break free - their only chance is to change the rules of the game. What can they do?

1. They could enter the content business by offering own websites - but they are not as competitive given lack of know-how and resources.
2. They could ask users to pay more - hmm... :-) while internet access became commodity, they could artificially add value to their current offer, for example by offering faster access to certain highly popular websites such as facebook, youtube, google etc.
3. They could ask content providers to pay more - hmm... :-) while traffic became commodity, they could artificially add value to their current offer, for example by prioritizing of certain traffic.

Those last 2 alternatives sound like a hidden price cartel which would increase the tariffs - what is not far from reality, while the consequences are much more significant than just price increases.

Internet access is a regional business (independent whether mobile or fixed) and through market concentration there are a lot of oligopolies out there. In addition, there are also many integrated ISPs with one leg in the content business.

So imagine now a scenario, where e.g. France Telecom would prioritize the access to its own video website, so that all the content is loaded within seconds - while for example access to youtube.com would be degraded to slowly and unusable. Logical result - the market share of youtube.com would go significantly down.  Except... Google agrees to pay a premium fee to be also prioritized. If Google would not agree to pay - they could lose 40% of its users in France (who have France Telecom as their internet access operator). And if Google agrees to pay - other video websites would be in serious disadvantage. So what could those do? Correct - they would have to pay as well to stay competitive. Other ISPs would be stupid not to jump on the same train, by making the same conditions and establish an additional significant revenue stream.

And towards the end-users the principle would be similar as it is already the case with cable operators. A client would need to book an extra option which would allow him to access e.g. youtube.com in a fast way.

What does it mean for us?

1. Internet access would be more expensive - excluding low income persons and cutting them off from modern technologies even more.
2. Content market would get even more concentrated - only the big players would survive, reducing competition.
3. Entry barriers for new start-ups would increase artificially - limiting innovation and competition.
4. Through higher operating costs, free content would become more rare - limiting choice and attractiveness of the internet.

Sounds like a really worst case, isn't it?

In reality - I see the presumption that our today's internet is neutral nothing more than an illusion.

ISPs are already prioritizing different content. Own video and VoIP services have always priority over normal websites thanks to QoS (Quality of Service). (I)llegal P2P traffic is already limited or even blocked. Free VoIP services such as Skype are also partially blocked (especially on mobile data) with excuses of net stability etc. In terms of charges, ISPs are already earning nice revenues by offering unlimited bandwidth for its own B2B clients which use their datacenters, while limiting access from external low-cost networks (sometimes even tier 1).

Take aways:

• Internet's neutrality is a clear illusion, if taking into account that it was already always controlled by large corporations (both access and content).
• Attempts of ISPs to change the rules by becoming a gate control - could create more than just a temporary price increase. But rather a paradigm shift, from internet being a battleground where the best concept and content wins into an oligopoly with large corporations dividing the market among themselves.

Solution:

I have my doubts that this development can be prevented (on the mid-term) through governmental control. I rather believe in the force of users and new innovative open technologies which would counterpart any "walled garden".  At the same time net neutrality from the technical point of view is impossible to establish anyway, a company whose servers are better connected will be faster by definition and a law ruling can not solve this situation. Web 2.0. demonstrated that internet users evolved and are not passive "lean back" content consumers anymore, but active contributors who would not accept change in game rules with such negative impact, but rather penalize those who try to establish it.