Copyright Flickr Creative Commons - Mykl Roventine

Whenever I’ve spoke with former Yahoo! employees in the past few years, the overriding theme seems to be anger and disappointment. One does not feel emotional in this way about a company that cannot achieve; it is the mismanagement, lost opportunities and loss of direction of a team that used to consider itself a world-leader that results in such a temperament.

The question remains though, regardless of what happens in the near-term with their current CEO. Can (or should) Yahoo! be turned around, or should it be torn apart and sold for scrap?

This is the billion dollar question for its board and management, one which they have not been able to come to grips with in the five or so years during which it has been raised.

Perhaps the question should be rephrased: does the company collectively have any fight left in it, and barring that, can it be rallied by a “fight them on the beaches” moment?

Leaving this aside for a moment, the question of how Yahoo! (or any other struggling business for that matter) can be turned around is a fascinating one, one which I’ve spent significant time thinking about since the downturn. I’ve read a large number of articles on this topic (I’ll link to some of them at the bottom), and it is interesting to see the diversity of opinions on how this could be managed.

What it really boils down to is the following: there are significant challenges both in the short term and long term for them. Four CEOs (possibly soon to be five) in five years, each with their own set of priorities and direction, combined with a significant split in the board and a shareholder rebellion mean that a fix is going to involve a delicate balancing act.

A longer term return to growth is going to require incremental changes like organically growing market share, and yet simultaneously rebuilding momentum and market confidence will require (minimally) the appearance of radical, decisive action.

The fundamental problem (and it is an obvious one) is that the business has stagnated. I’ve lived this one personally: it is easy for a growing, profitable business to paper over very significant internal issues; once the growth stops though, the infighting begins, and it is never pretty.

Yahoo!’s business is fundamentally based on advertising revenue, specifically on what is referred to as display advertising, which are the large, graphic, mass media and consumer market-oriented banner ads that you can see on (for instance) their home page.

Its really just an online version of the television commercial, and indeed Yahoo! considers itself to be primarily a media company.

In order to sell ads, Yahoo! produces as much content as it possibly can, in the form of a variety of web properties (“portals”) that try to attract different kinds of users. All of its products combined, Yahoo! is still has massive (although long declining) traffic.

The issue is obvious though: there is immense competition for advertising dollars, particularly in a generally unsettled economy, and many of Yahoo!’s competitors have simply done a better job of competing.

In addition, ad revenue is making a decades-long transition that has a longer-term implication for any company that makes its money this way. From mass media to big internet media to personalized, targeted internet advertising, and now to the mobile environment, the objective has always been to find a better way to connect the advertiser to the end consumer. This has always been a competitive, fast-evolving, cut-throat industry, and it is easy for even the greatest market leaders to fall behind.

So again, does Yahoo! have the “fight” for this challenge? Because its going to take some doing.

Let’s go through some of the key items that they’re likely discussing right this minute – a SWOT analysis if you will – and see what points of interest we can find.

 The Good News

We might as well start off with the good news, because it certainly isn’t all bad.

• Yahoo! still has immense quantities of traffic – I’m not sure if this is current, but the last I heard they had around 700 million active users.
• They have some incredible “properties” – YMail, Flickr, Yahoo! Finance and many others.
• They have almost no debt, and $1.5 billion in cash and cash equivalents (after the latest layoffs, that looks like around 1 to 1.5 year’s worth of burn-rate, assuming no additional income).
• They’re still profitable.
• They still own 40% or so of Alibaba.
• The last I heard, they still own a large number of shares of Google. Can somebody confirm if this is still the case?
• They’ve built some great technologies – YUI (a JavaScript library that competes with JQuery), their IM client, toolbars, YMail, plus their contributions to the Open Source movement (particularly in the NoSQL sphere).
• The cutting is already done. At some point cutting further will cut muscle, not fat. I don’t know enough to know if that point has been reached, but a lot of the hard decisions there have already been made.
• Plus their share price is already discounted to the point where it is likely below their real book value.

The Bad News

There’s certainly a fair bit of bad news. Given the amount of laundry aired in public over the past few years, this has been discussed regularly. Not sure if I’ve covered off everything here, but here are some of the things that they’re facing:

• Many changes of management in recent years, with each new CEO bringing their own direction (or lack thereof); this has resulted in confusion.
• A lack of board cohesion.
• An open minority shareholder rebellion.
• Regular public airing of laundry.
• Staff leaving in droves.
• Loss of brand, traffic, revenue to competitors.
• Loss of control over traffic sources to Facebook.
• Microsoft (and maybe others) still circling.
• Apparently (I’ve heard this second-hand, but have not been a witness in person obviously) – lack of internal communication, lack of accountability, and some cultural issues that are hampering change.
• The possible loss in the near future, of Alibaba, which is considered by many to be their “crown jewels”.
• A potentially nasty new patent infringement lawsuit against Facebook that could divert attention and resources away from important efforts for years, and could have a variety of unpleasant ramifications.

 The Short Term

There are a number of serious fires that need to be put out, before the serious reconstruction can even begin:

• The board needs to make a decision quickly with regards to their CEO, and then needs to commit to that decision;
• In the meantime, four members of the board are leaving, and being replaced by new ones;
• While that is happening, a significant shareholder is trying to force the board to accept himself and several allies as members;
• And, to top it off, Alibaba is using every trick at its disposal in order to acquire back the 40% stake in itself that Yahoo! owns.

In the very short term, Yahoo! is going to have to make decisions about its management, board, and indeed entire direction – all full time jobs that will make it hard to begin the real hard work.

Medium Term

Once the pressing issues have been dealt with – or temporarily shelved – Yahoo! will need to start making strategic decisions about what it is, what it wishes to be, and how it intends to get there.

Each of the following items is going to involve challenges:

• Determine what the longer term strategy is going to be. This is a big one. I’ll discuss some of the (many) possibilities below. None of them are entirely satisfactory, and I’ve heard strong arguments from very well informed people for and against each one.
• Decide how to fix the culture. Changing the culture of a company is not something that happens overnight. The process might take a decade or more, and it isn’t clear whether they have that amount of time. Looking at comparative situations, they need to flatten their management structure significantly, enhance internal communication and cohesion, provide facilities for innovation to flourish, build more customer-centricity in, become more competitive and profit-oriented – without losing sight of longer term goals… I could go on. This is a large list of difficult tasks. Now that said, I’ve worked for wildly successful companies with terrible culture, and vice-versa.
• Start the process of building leadership internally. I know that there are people who disagree with this one, but I still believe that the leaders of a company should come from within. Fostering and developing leaders is a lengthy task that requires immense patience, and an ability to tolerate failure. Whether the “landing strip” is long enough for this to succeed in this case isn’t clear to me.
• Create appropriate metrics to ensure that progress can be tracked. As an outsider, I don’t know much about what they currently have. I can only quote anecdotal stories (a search online brings up many) that claim that there’s poor discipline. I’ve seen this sort of thing happen at first-hand though, and when it happens it makes the process of actually enforcing change difficult. Creating the right metrics (which is a difficult problem itself), measuring them regularly, ensuring that they align correctly with goals, and making sure that there are consequences when they are not met can help.

Long Term

The long term goal – of course – is to return Y! to growth, ensure its future prosperity and stability, and – obviously – to produce wealth for the stakeholders.

Subsidiary goals could include: cultural changes, enhanced market share in particular areas, diversifying their revenue.

In order to do this, it makes sense to take a quick look at what the world will likely look like in a few year’s time, and what kinds of changes Yahoo! will need to make in order to arrive there in good order.

It is also worthwhile to look at a few of their competitors, and what they are doing themselves to prepare for the future.

None of what I’m about to write will come as any kind of surprise.

The Strategic Landscape

Even More Mobile

The existing trend towards miniaturization of technology, higher performance, and more ubiquitous connectivity isn’t likely to change.

That means more people in the future will be working from always-connected, tiny and powerful gadgets that may very well use interfaces such as verbal communication far more than they do visual interfaces.

How to serve up advertising to this audience is already a major preoccupation at companies ranging from Apple to Google and Facebook – in addition to many non-traditional competitors such at the hardware manufacturers themselves.

The cost structure of the mobile market is currently based on heavily subsidized hardware, combined with long term profit from data plans. This is already been eroded by a) the rapidly declining price of hardware, and b) the availability in many places of free WiFi connections, which combined with VoIP can make it hard for telecom companies to make a buck.

As a result, everybody is trying to find ways to support this ecosystem via various kinds of advertising – be it extreme localization of ads, sponsorships, or the more intrusive variety that eat up screen space.

This process is already taking ad revenue away from “traditional” internet media, and the process is unlikely to decelerate. At some point, it is going to make it much more difficult to sell an ad spot on a website though, since people will not necessarily be viewing websites in browsers like they do today, but may instead be asking their phones for information, which will come back in a variety of distilled formats including audio.

Closed vs Open

The growth of closed platform, walled garden-type social websites is also going to be a challenge.

Yahoo! has been involved for years in the effort to force open the process of online social interaction via participation in OpenID and other endeavors. This is also one of the underlying rationales behind Google’s G+ system, since Google also faces the same problem (perhaps even to a larger degree).

It isn’t clear yet whether the open web, or a set of closed proprietary systems will dominate in the next decade or so – and Yahoo!’s strategy needs to accommodate both possibilities, while allowing for unexpected circumstances.

An example of how this can move against them is current news – Yahoo! has spent much effort on integrating Facebook’s login system, and on attempting to build traffic from within Facebook, with some success; this has recently been placed at risk by its patent-infringement lawsuit against Facebook. I don’t follow the strategic intent of this lawsuit, but it is fraught with risk.

Hardware Envy

It looks like pure-play software companies are losing out to companies featuring both software and hardware products. The success of Apple’s iPhone and Microsoft’s gaming platform have lead to hardware investments from companies like Oracle and Google.

Many hardware manufacturers, suffering from changes in the mobile market (RIM, Nokia and others) have consequently sought partnerships with software companies to try to combat the erosion of their formerly powerful platforms. I’m far from certain that this is wise, and whether it will last, but what I’ve been calling hardware envy has been infecting many software companies as a result.

There are three approaches Y! can take to this – either try to join ‘em (i.e. via strategic partnerships or acquisitions), try to disrupt the market by doing something that undermines the “other guys” (I have literally dozens of ideas here, none of them entirely original, and all of them too long for this article!), or just wait it out and hope that the end-game isn’t worse.

Geography

Its easy to make fatuous remarks here, so I’m going to limit what I say in order to avoid foot in mouth syndrome. Obviously there are a number of developing markets with their own languages, idiosyncratic markets, internal challenges and opportunities. Y! went international early on, and currently support a large number of languages. Further study of opportunities and potential threats arising from these markets is obviously required.

Key Areas of Focus

Bearing in mind the above, there are several key areas that they need to address over the next few years:

1. Increase ad revenue

According to the most recent statistics I could find (not sure if this number is still current), Y! has about 17% market share in online display advertising in North America.

One goal could be to try to reach 20%.

They could likely buy 1% of that through acquisitions (their history of managing purchased companies will be discussed further below!), and then attempt to gain the rest through organic sales effort.

Yahoo! used to own an advertising network called Yahoo! Publisher Network. This was only available in the US, and was closed down in 2010. Ad publishing networks, such as Google’s AdSense, can be – if run properly – powerful ways to extend advertising business out to the mass market.

The key here is that they need to be actively managed. Google’s system is usually thought of as being completely automated, but they have built a massive sales and support infrastructure globally in order to ensure that it works effectively.

The question is could (or should?) Yahoo rebuild or acquire such a network in order to start gaining market share again, bearing in mind that ownership of such a network entails its own challenges, and also could potentially alienate some of their partners.

One possible benefit from selling all or part of their share in Alibaba would be that they would then have cash with which to make some strategic purchases. ValueClick (Commission Junction) – already a Y! partner – could probably be bought for around $2 billion, for instance (a bit above where it is currently trading).

Yahoo! still has a high quality customer list for display advertising, including many of the large consumer brands. This could allow them to improve the ad quality of an acquired publishing network, while extending reach and market share.

Other possibilities could include:

• At $2 billion market cap, AOL could be a target. Yes, AOL is potentially a can of worms, but there are some interesting possibilities here.
• An adjacent move into real world banner marketing, or purchase of ad agencies themselves might be an area to explore (some obvious downsides could include alienating some of their existing customers)
• Purchase of media properties from one of the big conglomerates – examples could include radio or television stations.
• Other possible purchases (not necessarily related to ad revenue) could include hardware manufacturers, an attempt to buy and graft on a consulting business (hey, everyone else seems to be doing that too!), or opportunistic e-commerce plays.

 2. Increase Traffic

Yahoo! has a vast amount of traffic already, but obviously the more they have, the more advertising revenue they can claim.

What things can they do to: a) increase traffic to existing portals, b) acquire new properties that increase traffic, c) extend traffic to new domains such as mobile?

Can Yahoo! forge new partnerships (or extend existing partnerships, such as with Microsoft or AOL) with other companies in order to tear chunks of business off of the market leaders in these areas (i.e. partnering with cellphone manufacturers, building new technologies to split that market, coming up with a better way to deliver ads to phones, finding new revenue models like ad-supported cellular service etc)?

What do they need to adjust in their content production and delivery, in order to win and support increased traffic. It might be worthwhile looking at Bloomberg’s automated content system, for instance.

3. Improve Customer Service

People forget Google’s enormous global sales and support network is what actually drives their ad sales. What things can Yahoo! do to improve the experience of their ad customers, and to drive sales of new customers?

My experience dealing with Yahoo!’s support team in the past (particularly their hosting and domain business) has been frustrating. I have heard that the support that they offer to ad agencies and large advertising customers is significantly better though.

Building a customer-centric culture into an existing organization is a very long-term endeavor, but they need to start somewhere.

 4. Diversify Revenue

Like everything else in this article, this one is easier said than done, and many of their competitors have had little luck doing so either.

Where Yahoo! might succeed is that they have developed a large number of internal technologies that have been open sourced, and which have significant usage elsewhere.

Building a service business to try and score revenue off of these technologies might be feasible. A close examination of other technology companies that have had success in this area might provide clues.

As an “underdog”, it is also possible that an attempt to build a platform of technologies used to build the web would not be viewed as a threat competitors, and would also be viewed as benign and helpful by potential customers.

Yahoo!’s existing support for several Open Source communities could also be examined for potential revenue streams.

Buy vs Build vs Exit

Like many other companies, Yahoo! has a decidedly mixed history when it comes to managing large acquisitions. The process of realizing just how difficult it is to integrate a purchase is something that the business world has only really come to grips with since Dot Crunch. They’ve often bought companies only to resell them for significantly less later on, or to lose key personnel as soon as the options vest. This isn’t unique at all; it should, however, be factored into any recovery strategy that includes purchases, particularly large ones.

Yahoo! clearly has some ability to build new technologies in-house, but they seem to want to view themselves primarily as a media company, and that may reduce the desire to do so in the future.

There’s also been a significant effort over the past few years to close or sell non-core or non-profitable businesses.

Obviously, Y!’s strategy is going to include a mix of these three approaches, but there needs to be a general direction to it all, rather than random pruning of anything that sticks out. I find GE’s famous strategy (1st, 2nd or out) to be slightly too Manichean for my taste, but perhaps something like it might apply here.

 The Competition

Its pretty clear that Yahoo! considers Facebook to be its primary competitor, likely followed by Google, Microsoft and Apple, not necessarily in that order.

Here’s the thing though: I firmly believe that’s looking much too short term. I’ll give you an example:

Apple makes money by building wonderful little gizmos that they sell to telecom companies for $800, and then the telcos turn around and sell them to millions of consumers for $600 or less, with the hope of eventually profiting off the monthly phone and data plans that come attached.

Now picture a new gizmo. It sells for $5, can do everything that the Apple gizmo can do, only better, and the best part of all – it doesn’t even need a phone company to work. These are all existing technologies, at the lab or hobbiest level today. Its going to happen at some point. And then the whole market will be strategically disrupted and everything will change.

The same thing applies to every one of Y!’s competitors, in addition to Yahoo! itself. This is why viewing any one of these companies – and reacting to it – as if it was primarily a competitor is a silly short term game. By all means compete with them, but also partner with them, build relationships with them and whoever eventually replaces them, and (this is the critical part) focus on innovation and long term strategy.

Conclusions

Can Yahoo! be fixed? Should it?

I’m not sure. I’ve met many people who would love to try though.

It would be a challenge on the same level faced by Gerstner or Welch or any of the other folks now featured in MBA textbooks. A challenge of monumental, historical proportions.

I don’t know if it is fair or not to the shareholders – or the staff – of the company to take on that challenge.

The safe bet now is the same as it was in 2007 when Microsoft came knocking, although obviously the price would be quite different now.

It looked to me like their board of directors had decided to go for the glory in January, but the latest scandal may cause them (or whoever replaces them at the next AGM) to reconsider.

Either way though, I’ll be watching with great interest.

Some Links

There are a large number of topics I didn’t have room to discuss at all in this post. If I had tried, it would have been much longer than it already is, and even more unreadable. Some of these brilliant people have already talked about many of the things I had in mind, and in some cases a long time ago.

• More about “resume-gate” (there are hundreds of other articles now): here and also here, and for an opposing viewpoint here.
• Speculation about Alibaba buying back at least part of Yahoo!’s stake: article from Forbes
• About the Facebook patent lawsuit: here and also here
• Regarding customer service: here
• A few posts elsewhere on various strategic topics: here, here, here, here and here.
• And on fixing their culture: here

The objective of the following rules is to dramatically reduce the number of issues that occur when a web mockup that was designed and tested in [pick your designer's favorite web browser of the moment] is suddenly subjected to [some other browser]. Some of them may seem arbitrary, but they’re based on experience. Ignore at your peril.

Rule 1: Validate Your Code

• All html / css should be run through a validator (i.e. http://validator.w3.org/) and as many issues as possible should be fixed. This alone will prevent 60%+ of the issues you will encounter.
• Make sure you do at least some cursory testing of your mockups in the following browsers before submitting them for further coding: At least one version of Firefox (reasonably recent), the three most recent versions of IE (compliance mode is a fairly decent – but not perfect – simulator of IE7. Remember that IE8 and 9 aren’t always perfectly identical across different operating systems). If you have time and the right equipment, check Safari on a Mac, and FF’s Mac version (different from a PC). It is OK if the site isn’t perfect in IE6 or lower, although if you follow the rules below it will (often) actually be surprisingly decent.
• This section also contained an extended (and somewhat profane) rant, which has been removed!

Rule 2: Follow the Box Model

This is an extremely important rule. If you can follow it (some unfortunate exceptions listed below), it will resolve the vast majority of remaining cross-browser issues.

• The only type of tag that should (ever) have large scale css positioning attached to it is a “<div>”. It is acceptable to have very small adjustments to positioning associated with other tags, but only after you have everything in pretty much the right place using divs. If you’re moving a tag around by more than a few pixels, consider wrapping it with a div, and using that to do the positioning. The reason is that even if you set the other tag to “display: block;”, you cannot trust all browsers to render them the same way.
• I’m not going to quantify this, because I’m pretty sure people will take it out of context: if you need to position an element by more than a few pixels, wrap it in a div!
• Repeat: Do not try to do large scale positioning using any other element than a div. Position the [censored] div first, and then place the content inside of it.
• All content should be wrapped inside of a div. Divs should generally also be inside a div (unless its the main wrapper). If you have one div per row, a separate div inside of that div per column, and then another div wrapping each piece of content inside of the column, you will reduce the number of alignment issues that you need to fix later on. Exception: divs are for alignment. “<p>” tags are for paragraphs. Don’t confuse ‘em!
• Taking into account the previous item, relative positioning is strongly preferred. Absolute positioning is for special cases, and should have a reasonable justification.
• Margins and padding – if done correctly – do not need to break IE. Make sure you use them correctly. Remember that padding is added onto the width of an element (i.e. the browser considers an element’s width to be the sum of the width set in css, plus any padding – and similarly for height). For this reason, use padding primarily in order to determine the appearance of an individual element, and use margins primarily for fiddly positioning.
• A short aside: Do not assume that text will magically appear inside of a “<p>” tag. Text is frequently generated by code, or submitted by users. If you set fonts / sizing in a way that assumes that all text is inside of a paragraph tag, there’s a good change that parts of the website will appear broken.
• One notable exception with regards to divs: some content management systems and development frameworks (ahem, the culprits know who they are) generate markup such as forms automatically, and either wrap form elements inconsistently, or with tags other than divs. In some cases it can take a significant amount of coding work to fix the problem. It is also often compounded by not putting appropriate ID or CLASS parameters on tags, making it difficult to properly lay out forms in such a way as to make them cross-browser compliant. The people responsible for these systems thus lose much karma.

Rule 3: Open and Close Tags Properly

It still astonishes me how many issues are due to improperly closed tags. Most problems of this nature will be caught be a W3C validator, but it is still worth expanding on:

• If you open a tag, close it after. Surprisingly, this doesn’t appear to be obvious.
• Divs for big sections MUST have an appropriate comment after (i.e. an html comment with the name of the div is fine). For example, if your div has an ID “mytag”, put the following after your closing tag: <!– //mytag –>. This way, you can easily spot where broken tags are located (code folding in an editor window will not always help with this).
• Do NOT close a div like this: “<div />”. It will break most browsers (yes, it looks fine in FF). Don’t do it anyway. If you’re using a program that does this, you may want to check your html by hand after. There are only two tags where this sort of short form is acceptable: “<img />” and “<br />”. Image tags will be discussed in more detail below.
• In a list (“<ul>” or “<ol>”), the ONLY tag that should be a direct descendant is an “<li>” tag. I have frequently encountered situations where designers do things like this: <ul><form><li></li><li></li></form></ul>. This works well in some browsers, and breaks horribly in others. It is better to place the form tag completely outside of the list. Alternatively, consider using something else to position the individual elements of a form (i.e. divs, a table, or if you want to “get semantic”, a dl/dt/dd structure).
• Do NOT place a link around a div (i.e. “<a><div>…</div></a>”). If you need a div to be click-able, there are lots of W3C compliant ways to accomplish this.

To Be Continued…

Flickr Creative Commons

It seems like a strange idea – that people can build things that are so complex that they no longer understand them fully. It is more common in the realm of large projects where thousands of people work together on a single goal (think of the Space Shuttle, with its millions of moving parts), but it also happens on occasion in software development.

I can think of a handful of projects that I have worked on that have reached this point. One in particular, although the number of lines of code is not exceptionally large, has so many moving parts that it is actually impossible to determine in advance what effect any given change will have on its operation. Modifying its core functionality becomes a delicate game of trial and error.

A lot has been written in recent years about simplicity: the slow food movement, the advantages of simple film plots, or the longing in some quarters for smaller government. Perhaps we live in a complex age, and this is merely a reaction, a desire for a world that is understandable. Perhaps in a more bucolic age, people long for complexity.

This thought occurred to me recently while pondering chess – why are piece swaps so common? By exchanging two equal pieces, the players reduce the number of options open to them in the future, and (unless part of a larger plan), both players come out of the swap without additional advantage. From a psychological perspective, why would players do this? Perhaps the reason lies in simplicity itself: by reducing the number of pieces on the board, and hence the number of possible moves, both players gain the advantage of a better understanding of potential outcomes.

Returning to software, I’m reminded of projects where the goal is to integrate a large number of third-party components. As I always explain to the customer, when you build something that works with three external parts, it isn’t just one and a half times as complex as communicating with two. Rather it is an order of magnitude more complicated. Add another outside component, and you increase the complexity by a further order of magnitude, and so on. At some point the complexity introduces a significant amount of risk to the project; in my experience these are often projects that are doomed to failure from the outset.

Perhaps it is no surprise that the most successful software (and hardware) projects have been those that simplify complexity, that square the circle by providing an understandable interface for a complex morass of components. The dashboard of a SaaS (software as a service) product, conveying massive amounts of information in a few simple graphs, or the clean, chunky graphics of the Web 2.0 movement. The user interface of an Apple product, shielding the user from the messy internal operations that make it run (and sometimes driving power-users to distraction), or the classic hidden front panel of the consumer electronic gizmo.

The lesson for the developer is thus: perhaps it isn’t possible always to Keep It Simple, Stupid – but it should always be a goal to keep it as simple as possible. And where simplicity is not feasible, to ensure that the interface is as streamlined as it can be.

Most of them are web / software based, but oriented more towards B2B rather than consumer web. The resources and skillset necessary to implement vary significantly, so if you’re serious we’ll need to discuss. All of them will take hard work to build, but they’re scalable (I don’t bother writing down the small stuff).

I have limited time to get involved in implementation, but can take on an advisory role if wanted (I would want some equity if that’s the case, otherwise I’m just handing this stuff out). Will also connect you up to my network, such as it is.

Please feel free to share this post, in case somebody else finds this useful.

Its time to finally do something about it (no use thinking about wasted time).

I will be including interesting posts that I’ve found elsewhere, plus some unique content that will only be available via the newsletter.

If you’re worried about subscription management, I will only be sending this out once per month, and the list will be managed via MailChimp, so you can always unsubscribe if it sucks!

Please feel free to subscribe via the form on the right hand side of the page (only if you’re interested).

Several people have asked me my opinion, so here goes.

1. I’ve made a habit of always logging out of Google services before searching. Not that I really care if they have a connection between an actual profile and my searched (after all, they have my IP address anyhow). I just think its none of their business, and as such I’m not going to make it easier for them. Based on what I’ve seen so far of the G+ modifications, I’m going to continue doing just that. The quality of the search results with G+ content included is poor. Google is either going to need to tweak this feature substantially in order to make it usable – or more likely they’ll quietly make it disappear in a few months.

2. A number of people have written about the dangers of excessive filtering – if everything that we see online have been selected for us based on our preferences, how do we ever hear about opposing points of view? Or anything new at all for that matter? I personally feel that the G+ mod is an example of this. One of my friends sent me a search that he did for “jeremy”, and fully half of the front page of results had to do with either my G+ profile, my website, or postings that I’ve made on G+. The issue is that if search results only pertain to your circle, then you’re being isolated from other information.

3. Of course, once he sent me a snapshot of his search results, I immediately did the same search – and was given a completely different set of results. If you and I both search for the same thing, and we see completely different things, how can we compare or share results? Its bad enough that Google already does this sort of thing based on locale (don’t get me started on this one – locale is useful if you’re looking for a restaurant, and stupid if you’re looking for anything else).

4. People don’t usually search for things that they already know. If they do, they’re looking for new info on the topic, not things that they’ve almost certainly already seen.

5. The vast majority of postings on any social site (G+ included) are one-off comments that are specific to a conversational context, or a particular time or place. I’m being generous and ignoring the fact that most posts aren’t even relevant there. Seriously – if I do a search and all I see is out of context posts from people in my circles (few of whom I actually know in real life anyway), how will I be able to find what I’m actually looking for? The signal to noise ratio just reached the babble point.

6. This is really, really bad for the SEO and web marketing crowd. Search just became completely unpredictable. Or maybe Google isn’t stupid – if you want to be found, perhaps paid search just became completely indispensable.

Anyhow, my take on this is that: a) this degrades search quality, b) people are going to avoid using it if possible, and c) its likely to go away soon.

The new theme, in case anybody is interested, is a heavily modified version of WordPress’ Twenty Eleven theme. It takes surprisingly little time to modify it to look completely different than it does out of the box.

I also used a number of typography cues from a web marketing site called Social Triggers. You can see the specific post here. The goal was to make the site easier to read, which I hope this accomplishes.

International Pile of Money - Flickr Creative Commons - epSos.de

One standard piece of advice given to startups is to pick an industry that will permit scale, so that it is at least feasible that somebody in that industry at some point in time could build a large company doing it.

I saw a video on Yahoo Finance a while back where somebody claimed that Apple will be the first trillion dollar company (barring a brief stint by Cisco during DotCom).

Obviously it is hard to tell right now whether that’s true or not, but an industry that can support a trillion dollar company sounds like a good place to start, doesn’t it?

We know that this is possible in consumer electronics then, but what other industries would make this feasible? The goal here is to list industries that are big enough to support large companies (possibly even trillion dollar ones), and yet are still at least somewhat feasible for startups (potentially requiring substantial – but not unfeasible – capital).

I’m going to start with some of the obvious ones, just to get them out of the way. Then I’ll move on to extensions of existing industries that look like they could be large markets, and lastly I’ll throw in some speculative possibilities.

Please feel free to comment if I’ve missed any.

 Existing Industries

1. Resources. There’s few companies in the world that are as large as big mining or petroleum companies. The barriers to entry are significant for startups, but Glencore did it. I also want to thank @EzraSedek for pointing out that wood products (particularly as used in construction) are a huge percentage of GDP in many countries.
2. Pharmaceuticals. Developing a new consumer drug is an expensive proposition. There are lots of other entry points into the pharma industry though, and the technology needed gets cheaper and more accessible every year. A related industry that is still just forming is genetics, which has the potential to be huge.
3. Consumer hardware. The success of several companies in the Maker community seems to indicate that it is feasible to enter this industry as a startup. And its certainly a large (if fickle) market. The primary barrier to entry is probably marketing – selling a few hundred million gizmos is harder than making them.
4. Consumer products. Somewhere in the world, somebody is baking the cookie that will eventually lead to the next P&G.
5. Agriculture. There are any number of reasons why traditional agriculture is frequently a marginal business. There are a number of large-scale companies making money making food though. Everybody has to eat, right? A friend of mine tried a startup in this area a few years back. He had the right idea, but it didn’t succeed. There’s plenty of room for small but scalable ventures here though. Small greenhouses that are close to niche markets are one plausible entry point.
6. Construction. As many management consultants have pointed out, boring, stable industries are the best ones to disrupt. There are a number of companies working on ways to automate the building process, or to invent new and improved construction materials. Process improvements are another potential entry point for startups – there’s a lot of different steps involved in building, starting from design, to the permit process etc. Finding new ways to integrate or separate these steps may be profitable.
7. Financials. They’re not doing so well right now, but will eventually recover. Its easy to overlook how much innovation occurs in the financial sector – a few decades ago, there was no mutual fund industry, for example. Regulation is a major barrier to entry, but can be overcome. Several interesting areas include the “final mile” problem (i.e. how transactions between customers and merchants occur), digital wallets, and digital currency.
8. Robotics. The consumer robotics industry is still fairly small (vacuum cleaners aside), and its hard to say how large it will be. On an industrial level though, robots are already a huge industry (think: Japanese auto industry). Several million new industrial robots per year = scale. Competition and technical skill are the primary barriers to entry.
9. Chemicals. As part of the industrial sector, this is a highly cyclical, generally low margin, high startup cost industry. Could be ripe for innovation? One area that is starting to take off in parts of the world is to locate chemical plants in clusters, such that the waste products of one become the inputs of another. Chemical production through biotech is another.
10. Water filtration and environmental reclamation. Delivery of clean drinking water is already a huge industry (although nationalized in many places). Many countries in drier climes are investing huge sums of money to build saltwater reclamation plants or closed cycle systems for their cities. Startups would probably best focus on better and cheaper ways to filter water. Environmental reclamation, particularly brownfield reclamation is a large and growing sector. Again, finding ways to reduce cost is a good place to start.
11. Marketing/sales/advertising. Its a question whether this should be on the list – this is a large industry, but its total size worldwide is probably less than a trillion dollars, and it is highly fragmented. On the other hand, there isn’t a large barrier to entry.
12. Education. I’m not certain about market size, but world-wide there are still many places with literacy rates under 50%, so this is going to be a growth industry for a long time. In developed nations, there is a competitive battle to become more educated, in order to secure better jobs. Delivery of education is a hot area for startups right now (I’m working with one company in this area).
13. Software / IT. I’ve got this down at the bottom of the list because there is so much overlap between software and virtually any other business model. As a certain well-known individual has claimed, software is eating the world. Or large chunks of it, anyhow.
14. Other: Feel free to let me know!

Extensions of Existing Industries

Most of the following exist to some extent already. In most cases, the size of the market is still relatively small, but they have huge potential.

1. Micro-scale manufacturing. There are a number of cheap 3D printers on the market already (RepRap, MakerBot and many others), but this is still a very new industry. The potential is here to completely revolutionize the manufacturing of virtually all consumer products though.
2. Next-gen telecom. Ad-hoc wireless mesh networks are rapidly becoming feasible. When they appear, the traditional telecom companies will need to adapt or die.
3. Social everything. We think of social media as being fairly established, but it is really still in its infancy. Right now it has a firm foothold in how people talk to each other, and how they share and comment on content. Two areas that have barely been touched yet:
• Business processes. Yes, SalesForce has a nice P/E ratio. What I’m thinking of is a situation where your accounting software and ERP are integrated into Facebook; where you and your supplier’s supply chains are completely integrated through social media, such that your staff and theirs, and your customers can all collaborate transparently to build your product. Right now the only efforts I’m aware of in this area are job hunting and rudimentary business networking (done by people who only understand job hunting).
• Creativity. I’m working on several projects in this area right now, so I have to be careful what I discuss online! Current social media is great for sharing content, but lousy for working together to make it.

New Industries / Blue-sky

1. Nanotechnology. The last few years have seen the first “real” nanotech products, primarily focused on new materials (fabrics, paints etc). Right now the startup costs are unfeasibly high, but eventually the relevant equipment will become cheap off-the-shelf commodities, and then the real boom will begin.
2. Space mining. Currently it is economically unfeasible to mine asteroids for resources. The key to bear in mind though is that an average sized asteroid contains several trillion dollars worth of minerals. The first company to succeed will essentially have complete control over the price of virtually all metals, to the extent that they can then create a “moat” around their business by undercutting the profit margins of any potential competitors. Once space hardware becomes off-the-shelf, expect this industry to become hot.
3. Replacement for existing marketing methods. There are two current methods for letting potential customers know about your business: broadcast (i.e. a newspaper ad, a TV spot, or a banner ad) and targeted (i.e. Google AdWords, YellowPages etc). Eventually somebody will come out with a better model for matching up businesses with customers. What that will look like is anybody’s guess.
4. The next “X”. Be it Google or Facebook or any other big web company, eventually something will come along that is more interesting or works better. The Next Facebook could be Facebook itself in a future iteration, or it could be something else entirely.

Have I missed any industries? Am I completely off-base about some of the ones I’ve listed? Please let me know!

From Flickr Creative Commons - emilymcmc

I’ve briefly mentioned the Great Pacific Garbage Patch here before. It consists of a vast quantity of particulate plastic, floating in the middle of the Pacific Ocean (there’s similar ones in other oceans too).

There’s a lot of people out there who have come up with ideas for cleaning it up, including several with ideas to build floating islands out of recycled plastic.

I just came across something that might be easier and cheaper to implement.

There’s a substance called pykrete which is ice mixed with sawdust (or some other kind of fibre). You may have seen the episode of Mythbusters where they fired bullets at it (they bounced off) and then built a boat of the stuff.

Materials like pykrete can be made out of a wide variety of substances (in this case small bits of plastic) suspended in water and then frozen; the results can be stronger than concrete, and (obviously) lighter than water. The only problem is keeping it cold.

My idea is as follows:

• Build a mold in the shape of a pipe. Use plastic particles dredged out of the ocean and filtered pure water to make a pykrete pipe from the mold. The result will look like a PVC pipe (except colder).
• Freeze the pipe into the middle of a larger cube of pykrete.
• Join frozen blocks together so that the pipes connect.
• Attach a pumping station and refrigeration unit, and run low temperature brine through the pipes to keep the whole thing cold.
• The pumps can possibly be run by solar panels sitting on top.
• Once the platform is large enough (and thick enough), put on an insulating layer and top it off with a few meters of topsoil. Then build on it. Or plant crops.

I haven’t looked at this in detail, but I think it can be made into a self-sustaining system fairly easily, once the platform is large enough to support a water recycling system, a refrigeration unit, a pump, and something to power it all. I don’t think it would be particularly expensive to bootstrap a project like this either.

For reference: there’s estimated to be around 5kg of particulate plastic per square kilometer of water in the Gyre. A boat with a large dredge and a small water filtration system could make a few big blocks of pykrete per day. Within a few weeks, it might be possible to build a big enough platform to move all of the equipment over, and to continue operations from it instead.

UPDATE: This summer (2012) I’d like to try building a small scale model to see if this is feasible. Location would be a lake somewhere in Southern Ontario (if someone has a cottage that could work, please let me know). I’d be interested in hearing from anybody who wants to help out – particularly if they have access to a refrigerated shipping container.

• The Polish IT security magazine hakin9 has published an article of mine on the topic of BitCoins. I believe there’s a free download off their website. The magazine is published in English. I don’t speak Polish, sorry!
• I’m working on several mid-length posts for the blog, but have been very busy with work the past few weeks. Upcoming topics include an update to the “how to make money online” post from 2009, a few thoughts on SEO (yeah, I don’t usually like talking about that), a couple of interesting projects I’ve been working on, and some more business strategy stuff. Feel free to request topics as well.