Month: February 2007

new frontiers in advertising business models

Microsoft’s Steve Ballmer, recently honored as Bureaucrat of the Month, has identified advertising-funded business models as Microsoft’s top concern:

Today, the big phenomenon that we can embrace – the big fat thing for us to think about, embrace, endorse, compete with – is what does ad-funding mean? Whether it is for search, or whether it is for business-services, or whether it’s for other online services, what does that funding mean as a competitive business model and do we embrace it as is? Do we modify it? Do we just compete with it, with more of a transaction or subscription model? But how we deal with that is a Job One issue.

Advertising spending as a share of GDP has been relatively constant across large changes in media. This past constancy provides useful background for thinking about innovations in advertising business models.

Google targets textual ads to moment-specific user desires indicated by user search queries. Demographic and interest segmentation and targeting has long been a central concern in the advertising business. Targeting advertising based on search queries effectively segments individual persons. Ads depend on what you want right now.

Less noticed has been innovation in another direction of advertising. Brand advertising typically has depended on expensive, mass-media ad campaigns. Online marketing campaigns, in contrast, depend on more diffuse patterns of example and influence. New sorts of online advertising relationships, such as pay per post, sponsorship of bloggers, or endorsements by bloggers, require working out norms of integrity, respect for personal relationships, and fair disclosure. But the challenge of working out online advertising norms shouldn’t be exaggerated. Logo-branded clothing typical requires users to pay extra to advertise fashions in their daily interactions with others. That’s not even controversial. Ethical online brand advertising is likely to be a major advertising growth area.

Consider, for example, Life of a Farm blog. As Jonathon Trenn notes, the blog offers the authentic voice of Joel Combs, a small farmer, describing details of his life. Joel uses a Mahindra tractor. Mahindra Tractors clearly sponsors the blog, which is hosted on a Mahindra domain and includes a Mahindra logo on the right. Mahindra Tractors’ connection with Joel through this blog speaks to how they understand who they are as a company and contributes to the meaning of their brand. At the same time, each post seems to include at least one link to Mahindra Tractors. Those links don’t detract at all from the personal quality of the posts. But it seems to me that the brand value of the Life of a Farm blog is not in its explicit links, but in bringing Mahindra’s brand into the real life of a particular person.

This is the sort of guy who uses a Mahindra tractor:

Unfortunately my Chevy truck is on the fritz. The stupid thing will just die on you for no reason. It may go a mile or 30 miles then usually starts right back. I suspect it is the PMD (Pump Mounted Driver) on the injector pump. $389 new, wow that hurts! I’m seriously considering changing brands when I get it fixed. I have always been a GM guy, but I don’t think I will ever own another GM diesel truck. That kind of puts me in a bind though because I absolutely worship Trans Ams and I can’t see driving a Ford or Dodge truck and a completely opposite brand car. I’m sure Mustangs are fun to drive like TAs, but I like the T-tops and 6 speed tranny in the TA. Not to mention that thing still runs great at 187,000 miles.

This guy also loves a Mahindra tractor. That’s an impressive endorsement of Mahindra Tractors.

reality sports: the 2006 Galbi Brothers’ 800-Meter Challenge

Forget about the Tour de France, the World Cup, and the Super Bowl. More extreme than extreme sports are reality sports. Check out, right here, exclusive coverage of the 2006 Galbi Brothers’ 800-Meter Challenge. Will the Duke Varsity Letterman once again lose? Will the Lanterne Rouge Star once again lead the field? You’ve gotta watch to find out!

For more exciting sports action, check out last year’s epic race.

Carnival of the Bureaucrats #7

Steve Ballmer, Microsoft’s Chief Executive Officer, is an inspiration to bureaucrats world-wide. The recipient last year of a 25-year service pin from Microsoft, Ballmer has been in the middle of immensely important developments. With Microsoft’s software, a large chain of managers can rapidly exchange edits to a document describing the feature set of an animated paper clip. Every day Microsoft’s software helps bureaucrats to process a much larger volume of documents than they would otherwise be able to handle.

Ballmer exemplifies the passion for an organization that distinguishes outstanding professional bureaucrats. What matters is not just who you are or what you do, because you know that you’re good and that you’re important. But what you really love is more than yourself. In the words of this month’s Bureaucrat of the Month, “I have four words for you: I LOVE THIS COMPANY!”

[if you don’t see the video, try here]

Jon Swift asks, “Who Needs Books?” Books are handy for propping open a door, giving your kid a bit more height at the kitchen table, and supplying emergency bath tissue needs. Neatly standing at attention on a bookshelf, books provide intellectually impressive room decoration (book titles also provide learned decoration for blog posts). Unfortunately, many government reports aren’t bound and issued as books. Government reports should be treasured nonetheless. More harmless satire? Mr. Swift, think again.

Corey discusses “The Problem With Anarchy (Short Version).” Corey observes:

People do not care about one another enough to live in a society where there is no government to be there for them. As depressing as that may be, it is true.

Cheer up! Government bureaucrats care about you. That’s why you’re in this carnival.

Leon Gettler observes, “The Federal Emergency Management Agency (FEMA) seems to have lost tens of millions of dollars through improper and fraudulent payments, according to a report from the Government Accountability Office.” The Government Accountability Office is a government agency. Once again government bureaucrats are saving taxpayers millions of dollars.

Jack Yoest at Reasoned Audacity describes an astonishing educational initiative:

So instead of running away from the problem, my wife and I [the Amoses] decided to do something about it directly. My son brought home three boys, who needed the kind of support that our family could provide, and what we did was adopt them. And over an 11 year period we adopted 87 children into our home. We sent 73 kids to college, 61 have graduated from college, 14 have advanced degrees. I spent about $600,000 of my own money on this effort, another $400,000-some from Xerox, over a million dollars we’ve pumped into the D.C. public schools, prior to anything they’re doing with charter schools

But local government needed education too. Especially on the Amos no-nonsense business approach to solving problems on kids and schools. When the city children’s agency knocked on his door asking for his license to work with all the children (quietly studying) about his house — Amos shows them his driver’s license. The bureaucrats were not amused, but were eventually persuaded.

“I don’t need a license to raise my kids,” Amos told me as he tells the story. And he is right.

While those with questions about educational licensing should contact another bureau, I personally agree that Amos is right. A family with 87 kids requires a great wealth of love. Moreover, running that size household is an impressive bureaucratic achievement. For the record, Steve Ballmer just barely edged out Kent Amos for this month’s Bureaucrat of the Month.

In the midst of a recent blog kerfuffle about public relations (PR), Shel Holtz declares:

For me, one of the great frustrations of working in the PR profession is the number of people who think they understand it without the benefit of any background in it. Public relations is a field in which scholars devote their lives to researching models and theories. You can earn a doctorate in PR. The field of PR research has exploded to align effort with results. Associations collect volumes of case studies and analyses. The body of literature that comprises the study of PR is vast and rich.

Yet there is no shortage of people who have never studied the business, never read a single textbook, never attended a single workshop, who are ready and willing to tell the profession how to do its job.

Whether they have an advanced degree in public affairs or decades of experience, government bureaucrats regularly encounter exactly this situation.

Gary Becker, in a critique of libertarian paternalism, asserts:

Even best-intentioned government officials should be considered subject to the same bounds on rationality, limits on self-control, myopia in looking forward, and the other cognitive defects that are supposed to affect choices by us ordinary individuals. Can one have the slightest degree of confidence that these officials will promote the interests of individuals better than these individuals do themselves?

Yes. I have a high degree of confidence in hardworking, conscientious government bureaucrats.

Remarking, “Just something I heard two bureaucrats saying and thought of you all!” the Gnome reports:

Today, in the lift of a large council building he heard the following alarming news… “The bollard situation has now become critical – there are some people in this council who are working against us.”

A critical bollard situation? What could that be? Too many? Too few? The wrong kind? Is there a government appointed bollard tzar handling this critical issue on our behalf? Can we expect a bollard hotline to be set up, similar to the much lamented cone hotline initiative by the failing Major government of 1997?

Good questions. Citizen involvement contributes to good government. Ask not what government bureaucrats will do for you, but how you can help government bureaucrats to do what you want them to do.

That’s all for this month’s Carnival of the Bureaucrats. Submit your blog article to the next edition using the Carnival submission form. Submissions should conform to the Carnival regulations. Past posts and future hosts can be found on the Carnival index page.

reverse caching saves trees

Energy is a significant cost of running data centers. Over a three-year operating period at typical U.S. power costs, a server’s acquisition cost is about equal to its power cost.[1] One documented estimate puts the annual power cost of U.S. data centers at two billion dollars in 2003.[2] IT power costs should be incorporated into a sensible evaluation of IT budgets and considered in energy policy.

Reverse caching can significantly reduce data center energy costs. At the State of the Net Conference this past Wednesday, Dick Sullivan of EMC stated that 70% of data on high-performance drives in data centers hasn’t been touched in the past ninety days. Caching traditionally moves some currently relevant data to relatively fast memory. Reverse caching goes the other way. Moving data unlikely to be used to energy efficient storage (a kinetically idle or unplugged drive, or a dismounted tape) saves significant costs.

At the far end of reverse caching are major issues of digital preservation. Reverse caching puts digital preservation into a framework of shorter-run operation and maintenance issues. That may be a valuable management reform. Digital preservation is probably a larger business opportunity than reverse caching. Reverse caching might help to make digital preservation more prominent in (short-run) management strategy.

Update:

1) I fixed a few mistakes in the earlier version of this post.

2) Chuck’s Blog has a good discussion of data center power usage.

3) Jonathon Koomey, with AMD sponsorship, has recently estimated total server power consumption in the U.S. in 2005 as 45 billion kWh. That represents 1.2% of total U.S. electricity consumption, about the same amount of power that color televisions consume (Koomey (2007), p. i). At an electricity cost of $60 per MWh, that power costs $2.7 billion. Koomey’s server power estimate includes power for cooling and auxiliary equipment associated with servers. It doesn’t include data storage and network equipment power, which Koomey suggests accounts for 20-40% of data center power consumption (see p. 2). Koomey’s server power estimate also does not include power for custom-built servers. Google’s custom-built servers, if included, might increase the total power consumption figure by 1.7% (see p. 3).

Koomey, Jonathan G. (2007), Estimating Total Power Consumption by Servers in the U.S. and the World (pdf), Final Report, Feb. 15.

[1] The Real Story about Dynamic Smart Cooling, Fact 1, citing HP, Christopher Malone, PhD, Christian Belady, P.E., “Metrics to Characterize Data Center & IT Equipment Energy Use”, Digital Power Forum, Richardson, TX (September 2006).

[2] Jeffrey S. Chase, Darrell C. Anderson, Prachi N. Thakar, Amin M. Vahdat, Ronald P. Doyle, “Managing energy and server resources in hosting centers,” ACM Symposium on Operating Systems Principles, Proceedings of the eighteenth ACM symposium on Operating systems principles, Banff, Alberta, Canada, 2001, pp. 103 – 116, (available pdf). Citing Jennifer D. Mitchell-Jackson, Energy Needs in an Internet Economy: A Closer Look at Data Centers, Master’s thesis, Energy and Resources Group, University of California at Berkeley, July 2001. This estimate used a power cost of $100 per MWh. Where power supply costs are higher, the power consumption cost of a server would be proportionally greater.

Adrienne #1!

The pinnacle of life.

[if you don’t see the video, try here]

Originally the video had a better soundtrack that used two short excerpts from copyrighted songs from albums that I purchased several years ago. Since the use of short excerpts of a copyrighted song in a non-commercial video made available on a personal website is highly controversial under copyright law, I deleted my original soundtrack and replaced it with the present one.

Given that I spent significant time to make this video, I would have been willing to spend a small amount of money to get rights for non-commercial use of the song excerpts in a video posted only on my personal blog. One song used words and melody from “Happy Birthday,” which itself is a copyrighted work. Not sure how to sort that one out.

The website of the group that recorded the other song had a FAQ on song use that pointed fans to a licensing site. The licensing regime is very complex. In addition, the licensing site notes, “EMI does not allow their songs or recordings to be used on the Internet in any form.” The licensing body encourages potential customers to send them a written proposal. It explains:

Due to the high volume of requests, the amount of research involved as well as the various levels of approval your request will have to go through, it may take 4 to 5 weeks for you to receive your license, which will be sent regular mail. We are unable to respond directly to each request as they come in. Rest assured, we will process your request as quickly as possible.

Of course they will. That’s why they use regular (snail) mail!

Telephone companies could teach music licensing bodies a lot about customer service.