Piracy, Privacy and Money, Money, Money - Part III

This is the third and final part of a series.

Money. Money, Money

Deep Throat: Follow the money.
Bob Woodward : What do you mean? Where?
Deep Throat : Oh, I can't tell you that.
Bob Woodward : But you could tell me that.
Deep Throat : No, I have to do this my way. You tell me what you know, and I'll confirm. I'll keep you in the right direction if I can, but that's all. Just... follow the money. 

All the President's Men

Social networking, Internet businesses and technology are big business today.

Facebook has $4 Billion in cash and has filed papers to go public with speculation that its initial public offering price may put the value of the company at $100 Billion.  Facebook recently made an offer to acquire Instagram, photo sharing social networking site, for a reported $1 Billion.

"I'm excited to share the news that we've agreed to acquire Instagram and that their talented team will be joining Facebook."  Mark Zuckerberg

Apple, once counted out as an interesting piece of technological history, has seen its market capitalization eclipse the once mighty Microsoft and oil behemoth Exxon.  It is the biggest company on the planet.  If you go to the link at the beginning of this paragraph, the list of market capitalization includes Microsoft (now No. 4), followed by IBM (No. 5).  Google is at No. 11, just ahead of Warren Buffet's Berkshire-Hathaway.  Remember when we thought IBM was relic of the past?  There may be hope still for Yahoo!

Money makes the world go round
The world go round, the world go round
Money makes the world go round
It makes the world go round.

Money, Money, Money - Cabaret

This surely could be the sign of another technology bubble in the stock market, but it also is a sign of how important technology has become to our economy as well as the world economy.

Let's reflect a bit more.  In a prior column, I wrote about a new the new music service Spotify.  Spotify did not start in the U.S.  It started in Europe and became very popular there before coming to America.  Spotify had to negotiate first with the Neolithic music industry in this country, which seems unable to grasp the potential and power of digital distribution of music and unable to figure out how to fashion a new business model to capture that potential and power.  The U.S. music industry (and its global counterparts) seem to want the money, but only if they can collect it in the old fashion way -- one record, cassette tape, compact disk, song (??) at a time.  The music (and film) industry seems to be spending more time and money fixated on digital piracy.  It has failed again and again to realize that times have changed.  To paraphrase Satchel Paige, looking backward is likely to reveal that someone is catching up with you.

Most technological successes  did not start out as the product of trickle-down capitalism.  Whether you were named Hewlett or Packard, Steve Jobs or Steve Wozniak, Zuckerberg, or Gates, or Paige or Brin, their first was an idea, then there was a lot of  scrambling and tinkering and writing code, some fortuitous opportunities seen and taken, and, finally, in the modern era, a form of trickle-down capitalism:  venture capital firms.  NPR recently did an interesting series of reports on the rise of Silicon Valley, including a timeline and a profile of the early venture capitalists.

Venture capitalists started out driving around Silicon Valley almost literally trying to give money away (in return for a piece of the action).  Now, the investment side of the technology business is more like a tech version of American Idol, with bright innovators auditioning their start-ups to see if they can get funding from the venture capitalists.

So what are the venture capitalists looking for?  What, for that matter, is Mark Zuckerberg looking for when Facebook acquires Instagram for $1 Billion?  Look in the mirror.  Money is chasing money, specifically the money that we ("we" being the great huddled masses, the 99%) have.  We are were the real money is, and all of this consumer-based or social networking technology, in one way or another, is looking for us as users so that it can get to our dollars.  And in order to get to our dollars, these businesses need to know a lot about us; they need to create profiles of our likes, dislikes, interests, questions, searches.  From this information , these businesses can create a picture of us, so that, either directly or indirectly, someone can sell us something.

There are easy illustrations that I have used before.  Facebook posts ads on our pages that result from knowing what we "like" and, thus, are targeted to sell us something we are predisposed to like or want.  Facebook is being paid to broker this kind of advertising.  Amazon recommends products to us based on our shopping history, knowing that we are predisposed toward these items based on what we bought in the past.

Here is a more interesting example reported by Marketplace Tech in late April.  When we think of Walmart, the most immediate imagine may be of a mom & pop store gone wild.  The old  5 and 10 cent stores of another era on steroids.  (Interestingly, in typing this, I noticed that the modern computer keyboard no longer as key for the cent sign; you have to select it as a symbol and Google's Blogger does not seem to have this function.)

Well, Walmart also sells things online.  Walmart noticed an interest fact about its in-store shoppers.  Many of them pay in cash.  (Many Walmart shoppers are a true part of the 99%, part of a cash based economy, which the Walmart spokesperson described as:

unbanked or underbanked, “meaning they either don't have access to a bank or they have limited banking services or they don't have credit."

Walmart also figured that many of these customers would like the convenience of shopping online but for one small, but important problem:  you cannot stuff cash into your computer to pay for your purchases.  So, Walmart is now letting people order online, then come into a Walmart store and pay in cash and have the items purchased online shipped to them.  This, of course, also gets the customer into the store and may result in them wander around and spending more money.  (Presumably, as the customer has to go to the store to pay, Walmart has enough stuff available online that the customer cannot simply buy in-store or that the customer may purchase online more readily than they would want to wander around the store looking for.)

Let's go a bit further.  Let's examine the concept of "free."  If you have a iPhone or Android smartphone, an iPod Touch, or a iPad or other tablet computer, you probably have apps (short of applications), those tiny little titles which take you to all kind of stuff.   iTunes tells me that I have 155 apps on my iPhone, iPod Touch and one that I purchased for an iPad that my partner loaned to me.  Some of these cost money, like the Brian Eno ambient music apps, Bloom and Trope, or the Notetaker HD app that I purchased for my partner's iPad.

Many apps are "free," which encourages you to grab a big handful of them each time go to the app store.  It seems like there is an app for nearly everything, so why not try these free apps and see how they work.  After all, they are "free."  Not exactly.

Most free apps do one or both of the following:  (1) try to sell you upgraded versions that cost money or other related apps and/or (2) mine your activities for data on you and your usage of the app.  This still may seem like a sweet deal, because you can ignore the ads and who really cares if you just played "exhalent" in Words with Friends for a ton of points (a word which the spell checking in Google Blogger does not recognize, but Words with Friends accepts, much to the delight of my wife, who played it in a game with me.)

Stop playing Words with Friends for a minute and think a bit more.  Like many newer apps, Words with Friends is designed as social interaction with others and pretty much requires that you connect through social networking sites like Facebook so that you can connect with your friends who also have the app.  (I admit that I took the easy way of connecting through Facebook, which allows me the joy of regularly being beaten by my youngest daughter.  There may be a way to connect using Facebook or other social networks, but is not likely to be as easy to use.)  This tie-in fosters more users for Words with Friends and for Facebook.

The dark side is in the details when you decide to connect to Facebook.  In a brief notice before you connect, you are told that in making the connection, you are allowing the app and Facebook to access your personal information and usage records.  You want to play the game with your friends, so you click and move on thinking that one day you will have to go review those privacy setting in Facebook.

There’s a saying that’s used a lot in the online world: if you’re not paying anything, you’re not the customer, you’re the product.

Where is all this going?  Go over to Marketplace Tech Report and listen to/look at this linked report:  Send a $5 gift card to your friend free? What’s the catch?  It tells the story of a new app called "Wrapp," which enables you to send "free" gift cards to your friends.  What a deal!  "Free" right?  Not really.  Wrapp requires that you allow access to your data on Facebook.  The social networking connection here is essential.  Merchants are not giving away free gift cards; they are buying customers much more cheaply and effectively than an old fashion sales ad in the newspaper.  As the Marketplace report states:

So instead of the newspaper bringing the product to the consumer, you bring the product to your friend.  “We already know that ties between people in social networks can be power channel for marketing a product or brand,” says Alessandro Acquisti, co-director of Carnegie Mellon University's Center for Behavioral Decision Research. “This new application takes things one step further, effectively enlisting your friends as their own marketing agents.”

So you are really selling yourself and your friends in return for those "free" gift cards.  Are you at the crossroads about to sell your soul?  May be not, but before you agree to the "access my personal information" deal the next time, thing a bit more about what that means and what your are sharing.  Perhaps all of that personal information results in a small window to your soul.

The best things in life are free
But you can give it to the birds and bees
I need mon-ey
(That's what I want)
That's what I want, hey!
(That's what I want)
I need money, that's what I want
That's what I want

source: http://www.lyricsondemand.com/soundtracks/m/madmoneylyrics/moneythatswhatiwantlyrics.html