Symantec sues Microsoft over storage tech

The suit, filed Thursday in U.S. District Court for the Western District of Washington in Seattle, seeks unspecified damages and an injunction barring Microsoft from using the Symantec technology, which would include a halt on Windows Vista and the Longhorn server, according to a copy of the filing.

“We are accusing them of misusing certain intellectual property that they had access to…and (saying) that they misused our intellectual property in operating system products,” Michael Schallop, the director of legal affairs at the security company, said in an interview. It is the first time Microsoft and Symantec have been pitted against each other in court, he said.

I know the blogosphere hates software, and most people dont remember the days of QEMM and Dr. Dos. But this was pretty much unthinkable just 10 - 15 years ago. From valley rumours from that era, Symantec basically had an agreement with Microsoft to “protect its flank” . . . MSFT shared product roadmap to Symantec who made sofwares that MSFT didnt want/or bother to make (mostly utilities). In return, Symantec made sure to protect MSFT from disintermediation and encroachment from common enemies (why didnt symantec build a browser was a question I always wondered). Furthermore, Symantex tacitly allowed Microsoft to “extend and embrase” itself toward Symantec’s product lines while seeking higher grounds / smaller niches for new application opportunities that MSFT didnt have an immediate roadmap.

How times have changed . . . former bed buddies now enemies. . . speaks to 1) how much Symantec has grown 2) how little opportunities are left for Symantec w/o taking on MSFT frontal 3) How the MSFT flank is so wide open Symantec can no longer play its role effectively 4) How Veritas is changing Symantec culture 5) how much less scary MSFT now seems (can you imaging ANYONE suing BillG in the mid 90’s?) 6) and how diverse the software industry has become. . .

In the physical world scarcity is what leads to value.

In the digital world abundance is what leads to value.

Or atleast thats what Fred Wilson claims (follow up post)

In econ 101, they try to teach you that the demand curve slopes downwards, that as P (price) increases, (Q)demand decreases. Furthermore, the supply curve behaves the opposite way, as P (price) increases, (Q) supply or willingness of sellers to sell in quantity increases. The equilibrium price and quantity sold/bought is when the two curves meet.

“Scarcity” is an interesting concept in economics . . . because it can be either real or manipulated (cartels, monopolies). Eitherway, scarcity shifts the supply curve up wards and to the left - for whatever reason, the producer (increase in marginal cost?) decides that for the same price, it is now willing to produce LESS. . . or to sell the same amount, it would like to get paid more. Scarcity in economic terms is about the supply curve rather than about the demand curve. Because of the shift in supply curve, price goes up as the supply curve intersects the demand curve at the higher point. (note that the demand curve did nto move)

Fred’s first sentence is suppose to be a popular way of explaining this situation . . .

In the physical world scarcity is what leads to value.

What technically it should say is “increase in price” rather than value because value is an amorphous term that might not be correct to use here. AND only when a existing demand curve exists.

In the digital world abundance is what leads to value

Here lies the crazy supposition with the second thesis. . . that if the supply curve shifts down and to the right due to abundance, because seller is willing to sell more at the same price, the intersection with the demand curve will actually be higher than before NOT lower! . . . thats technically not possible. . . ! according to most economic theories. . .

After I read more the example that Fred gave, I realized that Fred is using the wrong terms. . . scarcity/abundance applies to the supply curve (no duh), but the use cases he gave actually works on the DEMAND curve rather than supply curve. . .

The photobooth example and the Jonas Brother example is more about using pervasive (or “abundant”)marketing techniqeues to increase awareness & distribution and thus induce demand from consumers and thus shifting the demand curve up and to the right causing prices to go up.

This is really not that revolutionary. . . to sell shampoo you gotta make sure you get it wide distribution at everywhere your target customers are . . . and if you can give away samples to prove value and stoke demand. . . you do it even if its at a loss.

What DIGITAL goods do get you (as we know from 1999) is cheap, wide, self-replicating distribution channels with significant word of mouth that creates opportunities to increase awareness and prove value proposition. All web 2.0 has done is to increase the DEMAND curve up and to the right leveraging more effective marketing/distribution channels.

I would modify Fred’s thesis in the following ways

In the physical world scarcity is what leads to value ONLY when an existing demand exists

In the digital world abundance is what creates awareness and enables peer distribution which leads to increase in demand

Both of which are complementary, adheres to basic econmic theories, and is basic business pratices . . .

The caveat here is that given “unlimited” and easy supply of a good (not just awareness or distribution, but the actual good. . . like if downloading free mp3 is as easy as itunes, for example), you might be able to increase demand, but monetizing that demand will be hard because there are unlimited supply (ie demand and supply curves are shifting at the same time).

The way to monetize this is do what Jonas Brother is doing through upselling CD’s . . . by creating a second complementary good that does not have unlimited supply. . . . its again the classic loss leader strategy.

The South Korean cigarette maker currently fighting off a hostile takeover attempt by legendary corporate raider Carl Icahn, is doing rather well at the moment. Its latest brand of cancer sticks, called Esse Soun (presumably it sounds better in Korean) has notched up record sales of 11 million packs just two weeks after its launch, giving the new brand a 9% market share. Together with the company’s six other ciggie lines, among them Lo Crux, Indigo, Entz and Arirang (they really must sound better in Korean), KT&G now controls 38% of the Korean market. And it’s all because of Icahn. South Koreans, incensed at the foreign takeover attempt of KT&G, are now buying patriotically, shunning imported products in favour of home-grown brands. “I used to smoke foreign cigarettes, but now I smoke Korean ones only,” coughed one hardened Seoul smoker. “The primary reason is Icahn’s attempt to take over a Korean company.”

From print version of HFMweek

One has to wonder if Google can ever beat Baidu . . .and finally understand why Yahoo sold out . . . and why Naver is kicking Google ass . . . and not mentioning eBay in Korea & China . . . .

is Liquidity . . .

Snap has been tauting the value of PPA (Pay per Action ) for a while, and I certainly believes that in many ways its a superior model to PPC as pioneered by Overture/Google. (less spamming, higher monetization, less agency issues. . .etc) (What is eBay BTW then a PPA network?, so I do think the model has significant merits . . . AFTER liquidity has been achieved)

Today, Snap launched a whole bunch of new features hoping to gain the kind of buzz ASK did the last few months. And ofcourse, spent some time tauting PPA again.

Snap Rethinks Search
Snap, a search engine promising pay-per-action
Ads? Content? Snap.com Blurs the Line
Snap Realizes Own Desperation, Uses it as a Marketing Angle

The problem with PPA is liquidity. In the PPC world, agents (aka SEM firms, spammers, arbitragers, speculators, brokers, market makers etc) actually play a very very important role in the Google ad market. (No, they are not just parasites) Just like the stock, bonds, or commodities market, agents brings liquidity in the market which enables

1) efficient pricing
2) enable principals to hedge out and offload risk to third parties
3) enable principles to participate in the market semi-passively/arms length
4) helps the marketplace scale significantly faster

In the PPA world, the arbitragers do not play a role becaues conversion requirements of PPA . . . requiring principals to participate in the purchase of “advertising” directly. As a result, keyword auctions will often not recieve enough participants to be priced correctly especially in early days of ramp up. Furthermore, PPA networks will need to invest in directly acquiring retailers instead of relying on speculators (keyword spammers?) to bridge the gap between the market and retailer - thus increasing marketing cost. Speculators also help a market grow and scale as Google did between 2000-2003 when keyword arbitragers helped Google scale before principal advertisers (retailers in this case) began joining Google enmass as well.

All is not lost of course if spam becomes a bigger issue for GYM . . . for now though, Snap needs to partner more broadly to offset its liquidity issues.

I’ve been really wary of putting my contact info on my blog for the fear of getting spammed. However, it seems like people ends up finding me anyways through LinkedIn , Stanford, Wharton, Friendster, MySpace or just simply guessing at my email address. . . (entrepreneurs are by definition resourceful) so instead of being coy, I’ve opened up a test email account and I’m gonna post it here hoping bots wont be able to pick it up. In some ways its an experiment too, I wonder how smart the email harvester are in deciphering email address. . . so here goes, feel free to drop me a note anytime . . .

willhsu -at- Google-email-system -dot- com. . .

cryptic enough?

In March, I wrote a post lamenting the fact that web 2.0 companies are facing a huge problem crossing the chasm after capturing the “TechCrunch” early adopter crowd of a tens of thousands of users. . .

How big is this early adopter market? Let’s do some quick calculation. . . Techcrunch is a must read for the blogosphere . . . 35K RSS subscribers. . . aggressively assuming the same # of email subscribers and same # of good ole typed in traffic. . . we get to around 100K people that actually CARE about all the random startups. . . Another proxy . . . Delicious has about 300K users. . and it is by far the largest web 2.0 company. . . So at best the tech blogosphere is probably around 250K users. . . Crossing the Chasm 2.0

I would venture to guess that the chasm for web 2.0 plays is bewteen 100K to 500K users. If I was a VC’s I would not even touch a company until I see a clear trajectory to 500K users and beyond. There are way too many web 2.0 companies stuck at 20-50K users hoping to cross the chasm when their userbase hit a wall.

Both Brad Feld and Josh Kopelman echoed the same thoughts lately . . .

Brad’s Web 2.0: The First 25,000 Users Are Irrelevant. Brad went as far as me in using Techcrunch to estimate the “early adopter/trial” user base. . .

Josh Kopelman has a perfect post up today called 53,651. This is the number of RSS subscribers to Michael Arrington’s great TechCruch blog, and is exactly at the core of the “first 25,000 user” issue. Since there are 53,651 RSS subscribers of TechCrunch (at least as of 5/12/06) , if something gets reviewed there, it’s likely to get 5,000 to 10,000 users in the next 24 hours “just to try it out.” As so many traffic graphs of these “TechCrunched” products show, there is a huge spike in use for a day or two, and then it goes right back down to where things were before they were TechCrunched.

Josh’s 53,651 post also uses TechCrunch as a measuring stick . . .

As more and more entrepreneurs start building what Fred Wilson referred to as second derivative companies, I think they run a big risk of designing a product/service that is targeted at too small of an audience. Too many companies are targeting an audience of 53,651. That’s how many people subscribe to Michael Arrington’s TechCrunch blog feed. I’m a big fan of Techcrunch – and read it every day. However, the Techcrunch audience is NOT a mainstream America audience.

Given that TechCrunch is growing significantly, notice that they added 20K new subscribers since March, the good news is that atleast the growth of the web 2.0 crowd is not slowing down. . . but in the end, I rather ride on a train that is bigger and faster growing ala MySpace . . . (think Paypal on eBay, YouTube on MySpace, Slide on Myspace) . .

So whats the point of the post? Its to feed my ego and claim that great minds think a like and I deserve to be in the companies of Josh and Brad . . . . . . I wish

Actually most of the Analyst Day Presentation is fluff that purposely hides some of the nuggets on eBay’s strategy for addressing its myriad of problems challenges. As always, Rob Hoff (who, btw, is the only blogger that actually writes about eBay ) has a good summary of the key issue cutting through all the marketing speak.

* Most interesting of all, eBay CEO Meg Whitman suggested that eBay’s reputation system, PayPal’s wallet, and Skype’s ability to let people have a constant online presence each could be decoupled from their respective services and offered as components of entirely new kinds of services. Meg didn’t specifically mentions offering them up to software developers, but said they could become the building blocks for a more customized Web.

So yes, eBay is now trying to stay ahead of the innovation curve by attempting to “micro-chunk” web services and not just content. Not so revolutionary from some perspective but defintely important for all the startups in the space.

In the end, its comforting to know that all the issues/ideas/projects do end up being bubbled up to senior executives . . . hopefully through the right business owners and not just another strategy thought piece ( ala the infamous McKinsey dossier)

“Defeating Feature Fatigue,” Harvard Business Review is the first academic research I’ve came across that tried to quantify the negative impact of feature creep while attempting to manage trade-offs from reduced sales. To put it in another angle, in the world of iPod, “less is more” is fastly becoming the new mantra (deservedly so) but as with everything, moderation is always the happy medium.

To get the right mix of capability and usability in a product, managers need much more guidance than the general advice that “less is more.” On the basis of our results, we developed an analytical model to help managers balance the sales benefits of adding features against the customer equity costs of feature fatigue. The model steers decision makers away from the extremes—too few features to capture initial sales or too many features to ensure ease of use—and toward a middle ground that maximizes the net present value of the typical customer’s profit stream. The model also demonstrates that the optimal number of features depends on a company’s objectives.

Furthermore, the study cautions that buyer loves to BUY features but hates to USE features. As a result, a feature rich product might generate huge marketshare gains initially from first time buyers, it might not recieve word of mouth support because these buyers ended up with feature fatique (eventhough they bought the product for the features in the first place).

One way or another, managers must correct for the misleading information that many market-research techniques deliver. As noted, our findings call into question the predictive power of attribute-based models for determining the optimal number of features. If companies conduct market research by asking consumers to evaluate products without using them, too much weight will be given to capability, and the result will likely be products with too many features. Instead, designing research that gives consumers an opportunity to use actual products or prototypes may increase the importance of usability so that its relevance in choice approaches its relevance in use.

Another interesting nugget is that packing features into a product is actually the anti-thesis of segment based marketing and product design. Find your target market, design a product for the market with the feature set that these users will LOVE to use, and no more . . . packing in everything ensures that your product is good enough for everyone, but never the best for a particular user.

Particularly in cases where a company has packed one model with many features to address market heterogeneity, consumer satisfaction might be greatly enhanced by tailoring products with limited sets of capabilities for various segments.

Perhaps device convergence is a pipe dream after all . . . or atleast in the current incarnation . . .

I had argue eons ago that eBay is THE first web 2.0 companies - that eBay’s most important asset is not hard assets (buildings, computers), nor its employees (certainly not me), but its community . . . and THAT is the defining characteristic of a web 2.0 company.

eBay’s “travails” with its own community are now beginning to be repeated in other companies as web 2.0 startups begin to gain critical mass. In an ironic way, these events validates and empowers the past direction, decisions, and strategies of eBay and further proves that scaling a network effects is not as simple as just seat back and let the community grow.

Jeff Nolan alerted me to user revolts at youTube over heavy handed management of its community. Miel, a power user of YouTube has “quit” youTube. In his own words.

Okay. I’m out of YouTube. I refuse to use the service any longer. Recent changes made it very obvious they don’t want users with large archives. The site is very very slow and I have over 30 pages of videos. Browsing to page 28 took me exactly 12 minutes, whereas before the interface update I could just click the page I wanted to see. Turns out a few of my uploaded videos were rejected due to inappropriate content, which I totally don’t get, because nobody got killed, no nudity was shown and no dirty language was in it. It didn’t feature any stolen music and I didn’t sing. Then why is it inappropriate? Because some puritan mind flagged the movie in the hopes it would make the world a better place? Well I’ve had it with these random rejections. I don’t take it anymore. There is totally no way to defend you against this, you get no warning at all if a clip has been flagged, you just have to come to the conclusion whilst browsing your video archive. This particular clip was uploaded in September last year. It’s been on there for months, and all of the sudden the content isn’t appropriate anymore?

more here

Ofcourse Miel’s buddy, Nathan, joined in as well and thus the ripple grows. . .

Don Dodge has a really good analysis of MySpace’s and youTube’s problems from a very “technical” (and important) perspective. However, from the community perspective, the issues are much more holistic and emotional. To the community, it is a matter of OWNERSHIP rather than moralitie, ethics, or legalities. It is about the community believing their contribution to the success of the company entitle them to a say in the directions and decisions of the company.

Many of these companies can learn much by studying eBay’s past. That these web 2.0 communities will

1) “unionize” to gain greater influence
2) Increase heterogeneity and fragment to create conflicts between groups (which companies will have to manage)
3) An “elite” class of power users or influential mavens will develop
4) Community will increase sophistication of their method of influence to the company relying on press, lobbies, and other media (beyond venting on BBS’s or blogs)

And, these web 2.0 companies will respond in many the same way that eBay has.

1) integrte the “voice” of the community into the producment development process
2) create far reaching and powerful customer councils to influence and guide company decision making
3) “co-opt” hopefully in a good and productive way for the community these leaders through customer councils or even hrie them as employees
4) Build entire departments to do community outreach as big as many companies scale their PR/Media departments
5)and ofcourse, repeatly screw up by attempting to “manage” the community rather than listen, enable, and scale

And in the end, there will always be times when the best interest of the community conflict with that of the company. When that happens, (at least once a year) the true mettle of the company will be proven.

(Unfortunately, as mentioned by Adam Nash in the comment section of a previous post, by tightly integrating yourself into a particular segment of you customer base, it leaves open opportunities for competitors to target underved, small, and but rapidly growing segments to gain marketshare)