The new Digital Divide

The New York Times shows how mobile app designers devise new ways to get teenagers' attention during the day,

Push notifications — those incessant reminders that make your phone light up and ding — are the infantry of app warfare, cracking the attention span to remind users that someone on the Internet might be talking about them. All summer Wishbone had been sending out alerts four times a day, but the three men were thinking about adding more and, now that students were back in class, trying to recalibrate around the school day. 

“Can we have a friends feed at noon?” Mr. Jones asked Mr. Vatere. “It would be great to do ‘Your friends have updated.’ ”

“And you talk about it while you’re at school,” Mr. Pham added.

What are the implications: not for the business and advertisers, which the NYT article discusses, but for the kids, their families and the society at large?

We already know that frequent interruptions worsen kids' learning performance. We also know that pre-teens and teens are becoming addicted to their mobiles. Given that well-funded and market-savvy mobile app developers create new ways to target kids during school hours, we can predict that there will be a learning gap between kids who can manage their mobile distractions and those who cannot.

The old Digital Divide existed between people who had online access and those who had not. The underlying assumption was that the former were better off because they had access to all the information information needed to learn effectively.

I believe the assumption is no longer valid. Having access to the internet all the time is becoming detrimental to learning. Arguably, it's worse than television because kids get bombarded with distractions and advertisement all the time, rather than during the leisure hours.

The new Digital Divide is going to emerge between those who can manage their online time and those who cannot. Online learning may even broaden this divide because it will provide the motivated with greater opportunities to excel. Most likely, we already seeing signs of things to come through the low completion rates in virtual universities — 3-5%: few get huge benefits, while the majority does not. Paradoxically, online learning has become a natural selection environment for the next generation of schoolchildren addicted to their ubiquitous social interactions.

tags: psychology, mobile, learning, virtual, media, advertisement

Leadership principles in hi-tech.

John Riccitiello, the CEO of Electronic Arts, describes his two principles of leadership:

(Nov 26, 2011. NYT) - So you’ve got to find a way to be incredibly consistent, so when other people repeat the same thing it conjures up the same picture, the same vision for everyone else.
...people are afraid, and you need to paint a picture that everyone can buy into, even though you’re not even sure yourself it’s going to work because you’re trying to see to the other side of a technology transformation. And if you’re not confident, then they remain scared. 

And the second thing is that if you were a key contributor to a process of bringing a great product to market, not only were we going to support you, but my No. 1 job is to get the blockers out of the way so your product can find a marketplace.

Very similar to Steve Jobs' "reality distortion field" and Jeff Bezos' long-term bets, which is also a form of making people believe into a certain future. 

tags: niche construction, control, infrastructure, virtual

Lunch Talk. Infinite Reality: Avatars, Eternal Life and New Worlds.

"Jeremy Bailenson [of Stanford University] shares his research on virtual reality, avatars, transformed social interaction, and related communication and psychological theories, as well as implications for citizens living in the digital age."

tags: information, entertainment, virtual, environment

The 21st century Facebook Utopia.

Can you imagine a country of 800 million people successfully policed by just some 30 of them? No courts, no jails, no lawyers involved. For comparison, the United Nations recommends a minimum police strength of 222 per 100,000 people.

(26 October 2011. New Scientist. )Known as the Facebook Immune System (FIS), the massive defense network appears to be successful: numbers released by the company this week show that less than 1 per cent of users experience spam.

The system is overseen by a team of 30 people, but it can learn in real time and is able to take action without checking with a human supervisor.

It took just three years for FIS to evolve from basic beginnings into an all-seeing set of algorithms that monitors every photo posted to the network, every status update– indeed, every click made by every one of the 800 million users. There are more than 25 billion of these "read and write actions" every day. At peak activity the system checks 650,000 actions a second.

The only network bigger, Larus suspects, is the web itself. That makes Facebook's defense system one of the largest in existence.

 The efficiencies of the virtual world are totally unprecedented in human history. The Matrix is turning out to be a very cool place.

tags: virtual, synthesis, infrastructure, control, security, facebook,10x

Invention of the Day: Virtual guest of a real event.

Bill Gates and a dozen of other people from Microsoft invented a virtual guest:

From the US Patent 8,012,023 issued today:

... a virtual reality generation component that emulates real-life activities of a guest that is remotely viewing a spectator event that takes place outside of a virtual environment into corresponding virtual activities of a virtual guest representation in the virtual environment;
....

The idea is to let virtual and real guest mingle during a spectator event. The figures from the patent (below) show a bunch of bio sensors, but the physical can also be a brain reader too.

 

The best part of the patent is that it references our ( Mike Schmitt and I) 2002 patent application, where we claim a system that allows external spectators watch and participate in online games.

tags: games, virtual, social, information, biology, patent, example, ideality

Facebook Credits, the reserve currency of the future.

Facebook and Zynga are taking great strides in making social commerce a reality:

Because Facebook appears to favor Zynga more than other game developer, including through an unusual growth-target agreement, those two companies seem to be just about joined at the hip.

A year ago, Zynga’s chief executive Mark Pincus told employees that Zynga planned to expand beyond Facebook and start its own Zynga Live web site as a portal for its own social games. That never happened because Facebook cut the deal on Facebook Credits with Zynga.

Zynga already has enormous advantages over other developers on Facebook, with more than 264 million monthly active users on the social network, more than the top 15 other game companies combined.

If this partnership is a long-term cooperation game like the one Intel and Microsoft played in 1980-2000, Google will have a hard time catching up with this freight train. Facebook Credits represents a new transactions technology, which has a chance to become a platform for new commercial applications beyond games, e.g. video conferencing, content sales, etc. You can see Netflix's cooperation with Facebook as an example of a possible Zynga-like play in a different entertainment domain.

Can you finance a Facebook revolution with Facebook Credits? ;)

A couple of diagrams to illustrate the transition from social networking to social commerce.

tags: games, facebook, commerce, virtual, deontic, payload, platform, 4q diagram, social, control point, business model

Invention of the day: Depreciation of virtual goods.

WSJ reports on novel accounting rules used in Zynga's books.

Zynga Inc.'s filing to become a public company answers the question of how the social gamer plans to book real money from the sale of virtual goods, which make up the vast majority of its revenue, expected to total more than $1 billion this year.

For example, a player of Zynga's CityVille might purchase energy, which Zynga classifies as a consumable because its full use comes at the election of the player. When the player buys the energy, Zynga records the purchase as deferred revenue on the balance sheet, and when that player uses the energy in gameplay, the revenue is recognized on the income statement.

Conversely, a player might buy a tractor on FarmVille to help manage a virtual farm. Similarly, the revenue is immediately classified as deferred, but it is recognized on the income statement ratably over its estimated useful life, just like a durable good in real life.

Except in Zynga's case, it isn't rust or a broken axle that will determine when the tractor has outlived its usefulness, it's when the player stops playing the game.

Very clever. Like with any other toy, things become worthless when they are no longer fun to the player. Instead of attention span, we can now talk about "fun span" of users to characterize their interest in a particular item. In a world where the difference between real and virtual is becoming smaller and smaller, changes in fun span could have a major impact on the country's GDP. Also, imagine opportunities in trading fun options along with oil and pork belly futures!

By the way, I checked with Google search and it appears that I just invented the term "fun span."

tag: invention, innovation, virtual, games, economics, psychology.

Channeling free money

Another sign that virtual goods are becoming as important as real goods and services:

Visa has agreed to buy virtual goods company PlaySpan for $190 million in a big move into the market for digital goods.

PlaySpan enables game companies and video publishers to make money through the buying and selling of virtual goods. It’s a key part of the food chain in the free-to-play business model.

Also related, according to NYT, Apple wants to channel all in-application sales through its AppStore:

Apple is now saying the app makers must allow those purchases to happen within the app, not in a separate browser window, with Apple getting its standard 30 percent cut of the transaction. At the moment this applies only to e-book purchases.

tags: money, virtual, games, social, market, communications, 4q diagram, control

Cloud computing: the gossip of virtual crops

Each day, Facebook game developer and FarmVille creator Zynga delivers about a petabyte of data — that’s 1 million gigabytes, or more than six Libraries of Congress — for its array of social games, chief technology officer Cadir Lee said.

The challenge for Zynga is unique compared to other large sites that are “read-only” or “input-only,” such as photo-sharing sites like Flickr or e-commerce sites like Amazon.com, Lee said. Zynga instead faces an environment that is constantly updating, with each new crop planted or fertilized and each message left on a friend’s farm.

In many ways today's gaming environments create a ubiquitous communications fabric reminiscent of the planet Pandora from James Cameron's movie Avatar; environments where virtual plants and animals communicate to real people, generating enormous streams of information, connecting experiences bordering on magic, giving players a feeling of being a part of a growing social organism.
It would be an interesting experiment to use these messages to drive Leo Villareal's LED art mentioned in my previous post. Some incredible light patterns may emerge from the gossip of virtual crops.

tags: games, cloud, information, communications, environment, virtual, art, 10x, content, synthesis

Electronic gold

I just finished re-reading A History of Money, by Glyn Davies. It's a very competent book on evolution of money from cowrie shells to electronic transactions. Since I believe that money is one of the greatest innovations of all time, I'm going through this and other books on history of finance searching for recurring invention patterns that can be re-used in various technology domains. After all, transaction money is just a control signal that the buyer sends to the seller in order to obtain the goods. Capital is another interesting function of money that follows innovation patterns in storage technologies. The days of the gold standard are long gone, but even today all central banks hold tons of this precious metal in their secure vaults. Just in case, people will trust useless metal more than useless paper or useless electronic signals.
It is interesting though that something very similar to the gold standard is being developed in the virtual world today. Here's an excerpt from an article on Facebook Credits:

How do I set up my own currency?
You permit the user to purchase only one thing with Facebook Credits: your currency. Once the users have exchanged Facebook Credits for your currency, they can participate in the broader game economy. There should be no direct purchase of any items or anything other than your currency with Facebook Credits.

Once the exchange is made, you’ve locked up the value of those Credits in your own currency, ensuring it won’t move off to another application.

Replace "Facebook Credits" with "Gold Coins" and you get the good old gold standard. In Facebook we trust! Funny, how history runs in circles.

tags: control, money, business, signal, commerce, games, virtual, market, payload

a 10X change in mobile app revenue model

About a month ago, I cited a study showing that on average revenues from iPod/iPad applications don't cover development expenses. But it appears that a certain type of applications emerged to solve this problem. The key to revenue seems to be in-application purchases:

Apple turned on the in-app purchase feature for the iPhone last fall. That enabled game developers to embrace the same “free to play” business model that has made companies such as Zynga so successful on Facebook. In that model, companies offer their games for free, but they charge real money for virtual goods such as better weapons or online multiplayer play. The in-app purchase feature allows gamers to purchase their goods without leaving their games at all.

The results are surprisingly good. In January, Flurry said that the games that it tracked generated revenue of $9 per user per year, on average. In June, that number had risen to $14.66 per user per year. Previously, these games were generating around 99 cents to $1.99 per user per year.

I think this approach can work for all kinds of digital content, including books. Essentially, we need to create a new product placement technology where the product is sold, rather than advertised, within the context of the story.

A 10X diagram note for my students: by increasing the frequency of transactions, we are moving to the left along the time axis of the diagram.

tags: 10x, content, commerce, money, business, games, mobile, apple, market, book, virtual, problem, solution, course

History in the making.

According to VentureBeat:

Crowdstar is giving a big endorsement to Facebook Credits. The social gaming company has made a five-year commitment to using Facebook’s virtual currency.

The use of Facebook Credits is important to Facebook as a way to monetize its vast audience of nearly 500 million monthly active users. Davis said early results show that Facebook Credits is increasing both the revenue per paying user and the number of people who are buying things in apps. He acknowledged that changes that Facebook made to its platform this spring have slowed growth of games, but he said that newly launched Facebook games are seeing rapid growth.

History of money shows that introduction of a widely accepted currency is key to the development of a market for services. So far, we've seen trading in goods only. One reason for that would be narrow scope of most gaming scenarios and lack of service development tools. Another, a steep tax (30%) that Facebook imposes on all transactions.

tags: commerce, money, payload, service, control, market, scale, games, virtual

An important emerging technology market:

Financial analyst Piper Jaffray estimates that US citizens will spend $621 million in 2009 in virtual worlds; estimates of the Asian market are even larger. Research firm Plus Eight Star puts spending at $5 billion in the last year.

Over in Second Life, trade remains robust. The value of transactions between residents in the second quarter of this year was $144 million, a year-on-year increase of 94 per cent. With its users swapping virtual goods and services worth around $600 million per year, Second Life has the largest economy of any virtual world

and a new problem:

Just as the digital revolution has facilitated piracy and copyright theft in other spheres, those who make a living running businesses in Second Life have seen their profits eroded by users who have found ways to copy their intellectual property (IP).

The easier it is to implement and replicate somebody-else's idea, the important IP protection becomes. Also, production processes for virtual goods in Second Life are still primitive, therefore it is difficult to have trade secrets.

tags: niche construction, 4q diagram, problem, greatest, virtual, economy, market, growth,

Sorry, Mr. Graham Bell.

Finally, VOIP has found its place in the world by way of GoogleVoice:

Google Voice, the new version of the GrandCentral technology Google acquired in July 2007, has the potential to make the search giant a middleman in an important part of people's lives, telephone communications. With the service, people can pick a new phone number from Google Voice; when others call it, Google can ring all the actual phones a person uses and handle voice mail.

If this promise materilizes - and I believe it will - home phones as we know them are dead. Today, they are already half-dead because the younger generation clearly prefers mobiles. But now, the good old land line will have no excuse for existence whatsoever. Over time, conferences, virtual audio/video conferences, and other means of media-based communications will be come a part of everyday business and leisure activities. GoogleVoice in combination with Android is going to be a very strong contender for #1 position in telecom applications space.

For EA and its industry brethren, USC is looking more and more like it will be an invaluable source of talent and ideas. That's because the university is in the process of forming what it calls the USC Games Institute, an "umbrella of activity" surrounding the research, development and design of video games that is set to encompass the various programs of study currently being held at the university's engineering school, its School of Cinematic Arts, its Annenberg School for Communication, its Institute for Creative Technologies and its Roski School of Fine Arts.

http://news.com.com/At+USC%2C+developing+game+coders/2100-1043_3-6183014.html?tag=nefd.lede

Virtual world is increasingly becoming real.

PC World - Three Minutes With: Second Life Exec

PC World - Three Minutes With: Second Life Exec: "But they're not using traditional advertising means. The ones that do it effectively are providing a capability, service or product in Second Life to residents that they'll use while in Second Life. The actual proposition of creating a message or value around your brand takes quite a different form when you have a place to exhibit and make it real in the virtual world of Second Life."

Interesting problem - what and how to advertise in a virtual world.

Research by security firm Symantec suggests that the raw value of a WoW account is now higher than a credit card and its associated verification data.

One card can be sold for up to $6 (£3) suggests Symantec, but a WoW account will be worth at least $10. An account that has several high level characters associated with it could be worth far more as the gold and rare items can be sold for real cash.
http://news.bbc.co.uk/2/hi/technology/6526851.stm

The value of virtual goods is increasing.

The winner of a business plan contest in Second Life is a company that's likely to help others come up with business plans for Second Life.

The honors, announced Monday, went to Minnesota-based Market Truths, which devised a market research and analysis system to help real-world companies figure out what works and what doesn't in the burgeoning virtual world.