Author: Om Malik

A few weeks ago, when News Corp’s digital chief, Jon Miller, fired MySpace CEO Owen Van Natta and replaced him with Co-presidents Mike Jones and Jason Hirschhorn, I decided it was time to write the social networking site’s epitaph. The recent exodus of executives and technical talent has only bolstered my belief that MySpace is nothing more than a carcass of its former self. In fact, it’s been rotting away for the past few years, as these charts illustrate.

The first graphic shows the comparison between Facebook and MySpace. The Johnny–come-lately controls 74 percent of the social networking market, according to data collected by Zscalar. And the gap between Facebook and its rivals is only widening.

Data from the Nielsen Company illustrates how over the past three years, Facebook has crushed the competition. Not only are people spending more and more time on Facebook — about 6.5 hours a month, on average, as of December 2009 — its number of users now tops 400 million. And that usage is coming at the expense of its rivals. During December, 67 percent of social media users visited the site.

The important thing to note in this graphic: the steady decline in the number of U.S. visitors to MySpace over the past three years. comScore’s data only bolsters that argument, though it shows a slight bump in December 2009 traffic. But that seems like a dead-cat bounce.

At this point I think it’s safe to say that there is a higher chance of me winning an Academy Award than the MySpace co-presidents (and their boss, Jon Miller) being able to execute a successful turnaround of the social network.

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As predicted, CA, the company formerly known as Computer Associates, is buying another cloud computing company. Instead of snapping up Eucalyptus or Cloudkick, as our own Derrick Harris thought, CA is going old school and buying Aliso Viejo, Calif.-based 3Tera for an undisclosed amount.

3Tera is one of the oldest companies focused on infrastructure management and monitoring. It tweaked its business a tad in order to go after the opportunities presented by the growing popularity of cloud computing. Its core product is AppLogic, which allows companies to configure and deploy applications to either private or public clouds.

Explaining why CA bought 3Tera, CA’s Jay Fry wrote on his blog:

Enterprises have been a little more reticent to make sure they know what they are getting into before making the leap to cloud. This is probably one of the areas that CA can help improve by backing the 3Tera innovations with significant resources: enterprises need to feel comfortable to move applications to the cloud. A 3Tera/CA combination will give enterprises a significant partner that’s providing a technology to make the steps possible – and much more doable. The 3Tera deal is certainly a very public acknowledgement by CA that cloud computing is front and center to what’s changing in IT. And, the deal drops another piece into place in a rapidly filling-out strategy by CA to address those changes.

The company in the recent past has acquired Cassatt, NetQos and Oblicore, making 3Tera its fourth acquisition in the cloud computing business. CA CEO William McCracken plans to spend about $300 million buying cloud computing startups.

With giants like IBM, HP and BMC Software looking to bottle the cloud computing magic, expect more cloud-related acquisitions in 2010.

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The Open Angel Forum, a free, meetup-style event held by technology industry raconteur Jason Calacanis, is coming to San Francisco. Calacanis launched the forum in an effort to offer an alternative to all the “pay-to-pitch schemes” out there, and so far this year has already held events — through which five startups are subsequently matched up with angel investors — in Los Angeles and Boulder, Colo. The SF event will he held on March 4th and will be led by two very active angels, Kevin Rose (of Digg) and Chris Sacca.

Bonus Link: Here is a list of all the upcoming startup schools/incubator deadlines, courtesy of Juri Kaljundi.

Spotify, one of my favorite new companies, is getting more money. Earlier today, Michael Arrington reported that he had heard from multiple sources that the Founders Fund has invested in the fast-growing European startup.

“We do not know the size of the investment; however, we believe it may have been a token amount to get [Founders Fund Managing Partner Sean] Parker’s involvement in the company,” Arrington wrote.

While my sources are confirming those rumors, they point out that the amount of money from the Founders Fund, contrary to Michael’s report, is actually substantial. It is said to be as much as multiple millions of dollars. Spotify wasn’t actively looking for funding and this new investment is being described as opportunistic.

With this rumored investment, Spotify now shares two major backers with Facebook – The Founders Fund and Chinese telecom mogul Li Ka-Shing. Spotify had previously raised $50 million from the Chinese mogul, who has also invested $100 million in Facebook. Whatever happens next, it is becoming clearer that Spotify will make a foray into the U.S.

Photo of Martin Lorentzon and Daniel Ek, co-founders, courtesy of Spotify.

Cisco Systems, no matter what happens, always seems to find a way to move forward. It grows its revenues and squeezes out profits even when the world is falling apart, thanks largely to its near-complete domination of its two core businesses, routers and switches. But it seems the 2009 recession, increased competition and the presence of low-cost hardware providers has started to cut into company’s seemingly unassailable position. (Related: Cisco vs All Comers)

Nikos Theodosopoulos, research analyst with UBS Research, today sent out a note to his clients that highlights data from market research firm, The Dell O’ro Group. Here are some of the highlights from his report:

• Cisco’s share of the Ethernet switching market declined to 67 percent in 2009 from 71 percent in 2008 and 72 percent in 2007. The reason: competition from HP, 3Com, Juniper Networks, Brocade, f5 Networks and Citrix. I’m not sure if the rivals are doing all that well so much as they’re causing Cisco some migraines.
• Alcatel-Lucent and Juniper claimed 20 and 19 percent of the carrier edge routing market respectively in 2009, while Cisco’s market share declined 8 percent to 43 percent.
• In the core routing business, Huawei increased it share in 2009 to 12.4 percent vs. 10.6 percent in 2008. Cisco, meanwhile, saw its share of the market slip 1 percent to stand at 55 percent.
• In the enterprise routing market, Cisco saw its share stay flat with 2008 at 82 percent.

So are these losses permanent? The answer is no, at least in the short term. The company is clearly working on new switches for the big shift to the next generation of switching. And ASR sales have picked up, so there is a pretty good chance Cisco can snap back in the edge routing business. However, over the longer term the company is going to find itself challenged by low-cost manufacturers and increasingly desperate competitors. The very fact Cisco has made enemies of former partners such as IBM is only going to hurt the company.

Forget everything you did today. Clear your schedule and spend the next half hour watching this video. It’s a presentation by Jesse Schell, founder of Schell Games and former creative director of the Disney Imagineering Virtual Reality Studio. A veteran game designer, he is also on the faculty of the Entertainment Technology Center at Carnegie Mellon University.

In a talk at the DICE 2010 conference held last week in Las Vegas, he gave a presentation called Design Outside the Box. It is the most mind-blowing thing I’ve seen in a long, long time. And while this presentation was about the future of games, Schell could very well be talking about the future of technology.

Schell, in a very articulate manner, weaves together various technologies — from the social web to reality television to the iPhone to geolocation data — and lays out the future as he sees it. And I buy it. He talks in particular about how no one saw Facebook games coming, and why they threw many people into a panic.

He quips that “there are more Farmville than there are Twitter accounts” and that in Facebook you “pay real money to get virtual money.” From the Playfish acquisition to billions of dollars in revenue generated by WiiFit and Guitar Hero, he talks about how the new games are essentially “psychological tricks.” For instance, Club Penguin offered everything free, including free virtual currency, but in order to spend the virtual money you needed to go to a store where you paid real money.

Schell points out that the future of games is in finding psychological angles and making experiences based in reality. If the past of games was about fantasy, today’s games are about reality (not realism), much like our collective obsession with reality TV.

Schell talks about why technological convergence is a total myth. Technologies are like species on the Galapagos islands, and like them they diverge. Of course, there are exceptions — such as the iPad, which is essentially a new kind of Swiss Army knife. It works as a Swiss Army knife because it fits in your pocket. In comparison, the iPad is stupid because it’s essentially a giant Swiss Army knife that doesn’t fit in your pocket.

I can go on and sum up the entire talk, but you should just watch it. I would never be able to do justice to its brilliance. (Hat tip. #)

Amazon.com is the top performing brand in the US based on two critical factors – trust and recommendation – according to a new report by market research firm, Millward Brown. The new report, “Beyond Trust: Engaging Consumers in the Post-Recession World” puts Amazon ahead of FedEx, Huggies and Downey.

The “Beyond Trust” study used a metric called “TrustR” which as you guessed is about trust and recommendation. The more people trust a brand, the more likely they are going to spend their money with that company.

Amazon’s recent stellar performance during the fourth quarter of 2009 is a testament to that fact. The company saw its sales jump 42 percent over the same quarter in 2008 to $9.5 billion. During the year, Amazon grew its sales by over 30 percent, in what was arguably the worst economic times in recent memory, a feat that pushed its share of the total online retail market to about 13.3 percent.

“We found that the number one “TrustR” brand in each of the 22 countries we researched was nearly seven times more likely to be purchased and consumers were 10 times more likely to have formed a strong bond with these brands,” Eileen Campbell, Global CEO of Millward Brown said in a press release. 

It was four years ago, when I first met Ted Rheingold. He had just started a company called Dogster, an early example of a niche social network that was growing pretty rapidly. At that time, it had about 200,000 registered users and gotten $1 million in investment from an impressive list of angel investors that included del.icio.us founder Joshua Schachter, Aydin Senkut, Brad Feld, and Jeff Clavier.

Over the next few years, social networks grew like weeds, and not surprisingly, like weeds, were eventually weeded out, bolstering my argument that social networking was merely a feature. First MySpace, then Facebook and more recently Twitter started to dominate, and some of the niche networks simply faded away.

Dogster, too, dropped out of the bright lights, only to be replaced by other shinier start-ups. I often wondered how the company was doing, and recently decided to catch up with Rheingold. In this video interview he gives us a sense of the state of his company. Here are some highlights from the interview:

• Dogster (and its sister site Catster) have over a million dog and cat profiles (or roughly a million registered users.)

• The Dogster network of sites gets 1.5 million unique visitors every month and generates about 15 million pages.

• The company logged sales of  around $3 million in revenues. It has 14 employees and the company is now profitable. It has about $500,000 in earnings in 2009.

In the interview, I ask why Dogster didn’t come up with a snuggie for dogs, or why didn’t he create Dog town, an equivalent of the super-popular social game, Farmville. Ted also gives me advice on what kind of dog to get.

Photo of Ted Rheingold courtesy of Joi Ito via Flickr.

Google last week announced Google Fiber, an experimental fiber-to-the-home (FTTH) network that the company plans to build and use to connect between 20,000 and 200,000 homes. And while we wait for that network to take shape, Reggefiber of the Netherlands is moving ahead and is upgrading its network to 1 Gbps. (Related post: So Where Else in the World Can You Get 1 Gbps to the Home?)

My friend David Isenberg, who organizes the wonderful Freedom 2 Connect (F2C) conference, sent me a link to a story this morning. The gist of the news is that ReggeFiber, in partnership with Dutch incumbent KPN, will make 1 Gbps the standard connection speed for all FTTH customers. The company currently has more than 300,000 customers and is on target to grow to a million subscribers. Zeewolde is the first city that will get the service.

How can Reggefiber do this? The company has seen steep declines in the price of equipment — from modems to central office stuff — which has allowed it to offer this service. Reggefiber uses networking equipment from Cisco Systems, Swedish gear maker Packet Front and modems made by a local company called Genexis.

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When it comes to cloud computing, the big discussion these days is around private clouds. Large companies are trying to figure out a way to build their own, sometimes seeking help from VMware, Cisco Systems and others. Even Microsoft views this as the next big technology oil field and has developed Azure to profit from it. Of course, on the other side are upstarts — many of them — that want to sell their own solutions to potential buyers.

Two-year-old startup VMOps of Cupertino, Calif., has developed software that in essence allows companies to deploy an equivalent of Amazon’s elastic computing (EC2) service using commodity hardware to build their own private cloud. Furthermore, VMOps allows its customers to use any type of virtual machine — Microsoft’s HyperV, Xensource, VMware — and any operating system software for a VMOps-based private cloud.

VMOps was started by Sheng Liang, former VP of engineering at SEVEN Networks. Liang also sold his application firewall company, Teros Networks, to Citrix, and worked on the team that developed the Java Virtual Machine.

VMOps has two main products: VMOps Cloud Management Server and VMOps Multitenant Hypervisor. And according to my sources, it’s getting a lot of attention from potential customers, which include mid-tier telecom companies such as XO Communications and Tata Communications. Others are also said to be kicking the tires on its products.

This early traction helps to explain why the company is in the process of closing a $11 million Series B round, which was apparently led by Index Ventures and includes investments from previous investors Satish Dharmraj of Redpoint Ventures and Nexus Venture Partners.

Index Ventures’ is the new investor in this round, with Mike Volpi, formerly of Joost and Cisco, leading a $6.5 million infusion as part of it. I wonder if Volpi’s old carrier connections are helping open doors for the company at telcos and data centers. VMOps is said to have raised a total of $17.6 million in prior two rounds of funding.

One thing is for sure: That pile of cash gives VMOps enough cushion to fine-tune its offering as it starts to compete with the likes of VMware’s vCloud and Eucalyptus, for this is going to be a fiercely contested marketplace. Eucalyptus, which raised $5.5 million in April 2009, is using its open source roots to find a role for itself. VMOps, on the other hand, is betting that its Swiss approach to virtual machines and operating systems is going to give it a leg up, especially against the deep-pocketed VMware.

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For Christmas this year, Liz Gannes, editor-at-large of NewTeeVee, keeping true to her affection for online video, gave me a subscription to Netflix. It came with an option to rent DVDs via mail and also stream videos directly over the Internet, either straight to my computer or to my big-screen television via a Samsung Blu-Ray DVD player. And boy, have I put that option to good use. In the past, I would typically use different hacks such as the Mac Mini plugged into the TV to watch some of these on-demand videos. Now, the easy integration of Netflix into the consumer electronics devices has made life a lot easier and simpler. Not to mention, there isn’t any cable clutter around my TV. I have been watching The Adventures of Sherlock Holmes, have caught up on Weeds and yes, I have also watched a couple of new films, though their names I don’t remember. In short, I am a prototype of Netflix’s future customer.

This claim can now be backed by data from The Diffusion Group, a Frisco, Texas-based research firm. It published a study today which points out that nearly “two-thirds of Netflix users that subscribe to a home broadband service are now viewing the ‘Watch Instantly’ streaming video service.” Furthermore, a third of broadband-enabled Netflix subscribers are watching this streaming video “exclusively only on their PCs, 8% view the content exclusively on their TVs, and 24% use both their PCs and TVs.” That’s matches pretty well with my experience and proves what Netflix CEO Reed Hastings told the audience of NewTeeVee Live last year: Netflix is the killer app for broadband.

I cut the cord more than three years ago, when we decided to launch NewTeeVee. Lately, it has become fashionable to cut the cable, so to speak. Instead of spending a hundred-odd dollars on cable TV, more and more people are using Hulu and on-demand video services such as Apple TV and Netflix to get their video fix.

That said, it still isn’t a mainstream activity and it won’t be for a while due to the complexity involved with such set-ups. Which is why I think Netflix is going to play a crucial role in establishing a new video consumption habit. Michael Greeson, TDG founding partner and director of research, in a press release lists some reasons as to why Netflix is tasting success with its service, among them:

• Netflix built a sizeable base of loyal service subscribers prior to launching its streaming service.
• These subscribers had already demonstrated an ability to think beyond traditional content distribution schemes (e.g., renting a DVD at the local video store). In other words, they were predisposed to try novel, unproven methods of video delivery (in this case, online DVD rental).
• Netflix was able to establish proof of concept by delivering streaming video to the PC before it tackled the more costly and uncertain issue of TV delivery (a market space littered with the corpses of well-intentioned efforts).
• Though initially dependent upon a dedicated set-top box (Roku), Netflix moved aggressively to embed its streaming solution in a wide array of traditional CE platforms, thus reducing (if not eliminating) the consumer risk associated with trying an unfamiliar and unproven delivery scheme.

Such devices, plus the old-fashioned DVD-via-mail service, are helping to train consumers to embark on a new way of consuming video. And that strategy is working. The company said that 48 percent of its subscribers streamed content in the fourth quarter of 2009 vs. 41 percent in the third quarter and 28 percent in the fourth quarter of 2008. As a result, it expects to become one of largest studio/network customers.

I think of all the points made by Greeson, No. 1 and No. 4 are the primary drivers of Netflix’s streaming strategy. The service is embedded in most popular game machines, including Sony Playstation and Xbox, and more than a dozen televisions and DVD players. Several dozen TVs and other devices are going to follow soon. And that is what is going to help prevent Netflix from becoming the next Blockbuster, Redbox or whatever and in the process become the iPod of Streaming Video.

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When I spoke to Skype CEO Josh Silverman yesterday regarding his partnership with Verizon , I asked him: When is Skype going to launch an upgrade to its iPhone app that would allow us to use the service over 3G networks? His answer: “Very soon.”

Skype is one of the most popular free apps in the iTunes App Store; it’s currently ranked No. 52. The company has been lobbying the FCC to make sure that mobile phone companies allow Skype usage over their 3G wireless broadband connections. The lack of VoIP support over AT&T’s 3G network has caused major consternation amongst iPhone owners. AT&T and Apple recently allowed VoIP calls over Ma Bell’s 3G wireless network, but Skype has been dragging its feet.

Skype said earlier this month that it was holding back the release of its app for a little while longer because it wanted people to get wideband audio and a good quality audio experience. Silverman said yesterday that Skype was “tuning” its software and the Skype users “will have it very soon.”

What he means by “very soon” is open to debate. If I had to guess, I would say we should expect upgrades in the second quarter of 2010. What is your best guess?

By now I’m convinced that, just like CES, the Mobile World Congress is all about making claims about products that aren’t going to hit the market for at least another six months. Yesterday, it was Symbian 3.0 and Microsoft’s Windows Phone 7 and today it’s about the BlackBerry. Research in Motion co-CEO Mike Lazaridis during his keynote at the conference in Barcelona said that his company is going to launch a new WebKit-based browser. Soon!

I could have told you that — after all last August RIM bought a startup, Torch Mobile, whose sole business was — you guessed it, making Webkit-based browsers. While he waxed eloquent about the browser (you’ll see how fast it downloads, how quickly it renders and how smooth it scrolls and zooms in, etc.), he didn’t give any specifics as to when it would be available.

If you ask me, RIM not having a decent browser is a travesty. When compared to those on the iPhone, Android phones and Palm Pre, the current BlackBerry browser is something out of the last century — slow and pretty much useless. How long before casual BlackBerry users start to defect to other platforms, especially Android, which will soon be offered on a whole slew of new touch- and keyboard-based web-ready phones?

The bigger question is, does RIM have the ability to innovate? The company made Storm as a response to Apple. It was late in launching an App Store, even though it had developers writing for its platform. It let Apple come up with the storefront idea. And it bought Torch Mobile about six months ago, and still no browser. But hey, it makes for a great speech in front of the world media.

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Many Mac users, especially bloggers like me who suffer from repetitive injury syndrome, have become fans of MacSpeech Dictate, a dictation software made by the Salem, N.H.-based company MacSpeech. The company used Nuance Communications’ core technology to offer this service. Today, Nuance, which owns Dragon NaturallySpeaking software, said it’s buying MacSpeech for an undisclosed amount. With sales of Apple’s computers on an upswing, it makes sense for Nuance to add the top speech recognition product to its portfolio. I, for one, am happy to see that MacSpeech is going to be around for awhile.

Symbian Foundation, the open source foundation, has (almost) launched its much-awaited Symbian 3 mobile operating system. If you watch the video, it looks like an OS desperately trying to catch up to its nemesis, the iPhone. From a user interaction perspective, Symbian 3 finally brings some of the features of the iPhone to the Symbian universe. For example, multiple pages and the ability to flick and move around those pages are new additions.

There are several other enhancements, many of them not visible to the naked eye. I have not seen the actual OS or even a working demo of it so far. Until I get to use the actual OS, I’m going to remain skeptical of Symbian’s claims — just as I’m skeptical of any other entity in a similar situation.

The phones using the Symbian 3 OS are going to hit the market in the second half of 2010. If you want to get a complete overview of  it, visit the web site. Meanwhile, watch the video to get a sense of what Symbian 3 looks like.