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Towards the end of last month, I had the pleasure of doing a pre-conference interview with long-term friend Martin Geddes. Back at the very first eComm he expressed (archive video here) the opinion that it was actually lack of business model innovation which was holding communications innovation back as a whole, more than anything else.

Now that Martin has been in his BT role since the very end of last year, I wanted to catch up and see if he has changed his opinion or whether he has in fact further developed it. It turned out to be the latter.


The run time is 59 minutes.

I do have to say if we sound odd and if the interview is not quite as focused as say others we've done together (please see here, and here and if your in love with Martin this transcript also), it's because we were both sick at the time!

The full transcript is also below.

Lee: Okay Martin, you are turning into the "business model" man. Let's begin with a preliminary - if you don't mind me labeling you that, you're Head of Strategy at BT Design. I would like you, first of all for the sake of the readers, as well as listeners, to tell us what a business model is.

Martin: For instance, I'll tell you what a business model is. Let's take an example from outside of telecom. You can compare Southwest Airlines, Ryan Air with other airlines, like British Airways or American Airlines. What is fundamentally different about these companies are not the procedures the pilots follow, or the natures of the airplane, or the kind of thing they offer which is basically travel. It's the business models they use to approach their markets. In telecom, we also see new upstarts with new business models. What we've seen over the last couple of years, and a study by IBM reinforces this, is if you're going to invest money in improving your business, the highest returns are not in investing in new processes or new products but are actually in inventing new business models around the existing propositions.

Lee: Could you elaborate on what business model innovation is? I mean, you've alluded to it. Are you able to expand on what we mean by business model innovation?

Martin: What actually is a business model? I think a very good framework to work with is the business model canvass that a guy named Alex Osterwalder has popularized. It's a very simple diagram. You can draw out the parts of any company's business model. At the heart of it is a value proposition, something they're doing for the user that they're willing to change behavior or part with money to engage with. Then, to either side of that value proposition, you've got a revenue model and you've got a cost model. They come together to give you their profit and loss. On the revenue side, you've got a bunch of segments attaching. You've got distribution channels to reach those segments, and you've got different types of relationships for those customers. In telco, it could be prepay versus post-pay. If you're a supermarket, you might have customers with loyalty cards versus customers who are anonymous to you. On the cost side, you have a bunch of things; you have, assets, not just things you do. Contrast those in the telecom world and network is a thing you have and billing is a thing you do. You have a bunch of partners who help you perform those activities.

In creating a business model, you've got a revenue model which is how you price things. You can disrupt the price products, and a cost model which is how you allocate the costs for the things that you have and do. The traditional way of looking at business is thinking about "How can I build a better product, build a better value proposition to the user?" You try to pour all your money into that. If you look at the airline example again of EasyJet or Ryan Air, or Southwest Airlines, their proposition is just being cheap. They've elevated those other boxes around the user. For example, cutting out all the travel agents in the distribution channels to reach their segments is an example of a business model innovation and going direct to the user, using the web. I think in our world, particularly telephony and voice telecoms, we're going to see the very old, successful, and highly established voice minutes business model being continuously challenged by new ways of working. What we've seen over the last 10 years with new technology and VoIP largely being used to optimize the existing business model, we'll actually start to see much more fundamental and disruptive change.

Lee: You bring us to the exciting part and then you stopped. I'm not too sure if I should ask; would you conclude firstly the current business model for telephony is minutes, or is there more to that business model than just minutes?

Martin: If we take that framework I mentioned earlier, and start thinking about all the different component parts of that framework, the model we have for today's telecom business model is a very simple segmentation enterprise consumer, prepaid/post-paid. The product doesn't vary much, or be adapted much to different segments or needs. It's very much a one-size-fits-all type of product. You might contrast that with Unified Comms products that are attacking the enterprise market, that comes in many flavors. The nature of the relationship with the customer is very shallow. We send you a bill but we know very little about you and how you communicate, how you prefer to communicate. The supply side, as well, is very long established, the network equipment providers basically defining the product and its capabilities through organizations like the GSM Association, 3GPP, designed by committee of what the product does. The evolution of that product, like rich communication suites, the GSM Association is still following the same meta pattern of how we satisfy the user needs.

The current business model is more than just minutes. It's that whole ecosystem for how all those parts hang together. It's important not to diss that ecosystem too strongly as a fan of change because it's been extraordinarily successful to have lasted, essentially in its core structure unchanged, from the very beginning of telephony, even dating back into the telegraph, all through to today. There must be something very strong at the core of it. However, until the last couple of years, telephony has never been an easily programmable feature that could be included and incorporated into software products. There is a fundamental shift in the enabling technology that's going on that will have a ripple effect into business models that we see.

Lee: A number of issues have come up now. When you speak about the 3GPP and GSMA and we have a committee to decide on user needs, do you feel that is likely to continue, or at least continue to the extent that has existed; user needs being decided by - I want to call it political committee?

Martin: I think you have to separate out two or three things that those organizations do or achieve in its activities. I think one is providing consistency of meaning to these communications tools or products. We know what a free phone number does. We know that it tends to begin with "800" somewhere. If I send you a text message, I have a very clear idea as to what's going to happen at your end, what the experience is like. Providing a common social semantics to the services; there's some value in that. It won't disappear quickly, but you're finding that increasingly, people can easily find other services like Facebook and they can easily understand what giving someone a poke, or sending a message onto the Facebook wall means. That purpose is a challenge.

The other part is providing interconnectedness. The telco products that make lots of money today, voice and SMS, are interconnected ones. That interconnectedness is something that continues to be a challenge in the Internet sphere. Basic interconnectedness of say instant messaging networks has been a long-standing problem. From the user's perspective, they want to have something that just works and they don't want to have to worry about "Is the problem I'm having sending this message one that comes from my network provider, or the application provider, or the device provider, or some other plug-in provider, or AppStore member." They just want the stuff that works. Another way of looking at it is the users are lazy and we're all users. Providing the bits of glue, whether they're in the NSS stack or the BSS stack that helps all this stuff hang together, remains a valued and valid thing for these organizations to do. They're not dinosaurs who have passed era; I think their purpose will mutate and they'll be less and less involved in the user experience, the presentation layer stuff; however, there still will be a role for these organizations in defining the glue that holds together all the stuff that the application layers do on top.

Lee: That's an interesting perspective. Again, we'll need to wait two, three, five years to see.

Martin: Look what's happening with Apple, where they have a very vertically integrated end-to-end control business model, which gives a highly consistent user experience for their users. It's proving to be very successful. The problem of course is there is only one Apple, and if you don't like the iPhone, then if you really want to have a phone with a keyboard, you can't participate in the Apple ecosystem. How does that interconnectedness and the ability to have many more possibilities of drawing together AppStore, phones, different services, links into the existing voicemail, telephony, whatever, if it's not to have lots of combinations of those things that work together and have a lot more innovation? Then that's what these organizations are good at doing, helping define those interfaces.

Lee: That's an optimistic view that you've cast out. I just want to make sure I definitely got out of you, but did you fully elaborate the best you could on what's driving the change in the business model for telephony?

Martin: I think there are a number of things that drive it. One is technology. Previously, telephony required understanding relatively obscure telecom protocols like SS7, which were, as you know Lee, you had to go on an expensive training course to learn. It's not something you just go down and get the nearest O'Reilly book on how to build a telecoms network. Increasingly, telephony and telecom's capabilities get wrappered up in very standard IT protocols and become easily consumable web services, for example.

The other big changes I see, one of which is that the users have clearly moved on. The user behavior is increasingly embedded into social applications and that threatens the contact book and the dialer of every handset as a means of controlling the user and the business model. As telephony gets embedded into other applications, then those applications have increasing control over which bearer will the call go over and which business model will support that call.

I also think that's kind of the consumer behavior moving on to social applications. The other part is the enterprise user; we're still sort of living in the tyranny of email and the silo'd, separate communications apps. I think Unified Comms, in some ways, is still exacerbating the problem, rather than relieving it. I still don't have a communication system that helps to manage my productivity and my time. Who should I be talking to and of all the people who would like to talk to me, where is the Unified Comms that lets people register they would like to talk to me, say something they would like to talk to me about, and let me schedule that or automatically schedule that in my calendar for me, and help to organize my life? Where can I tag those conversations, archive them, integrate them with my to-do list and projects, my email? It isn't there. The idea of the PBX and the separate thing called telephony that's different from Unified Comm and social networking is they're all going to be managed together in something new.

That will also drive business model change, so I think maybe the last aspect driving business model change is the sheer inefficiency of interaction between consumer users and enterprises is that so many calls I have to contact centers keep asking me over, and over again "Please dictate your name, your address, your mobile phone number, your email address." There is basic information that is so easily automated away with new tools and protocols. It's hard to carry that data over SS7. You'd have to adapt the existing systems. It's increasingly easy to do it over other protocols and tools. I think that those things taken together will drive the new business models and it will take a while for them to embed themselves. Business model change doesn't generally happen fast, but those who manage to dominate the high ground of new business models early on tend to be very hard to displace, so it's like once Windows got established om the PC, it's dominate for twenty or thirty years.

Lee: There are a number of points I would love to jump in on, but I would like to jump back a little for now. You had said and correct me if I'm wrong, that VoIP, Voice over IP only enhances the old business model. Did I pick you up correctly when you said that, because it's very much how it sounded to me; that VoIP is not a revolution. It was as you put it; only enhancing that old minute model in some fashion, optimizing it is a way you seemed to put it across.

Martin: Yes, now Voice over IP is being used as a way of converging networks, reducing costs, and employing slightly more commodity IT networks. Because of the pricing elasticity, as we drop in price of telephone calls, the number of calls has gone up and the minutes have gone up. It's helped to drive increased value in these network.s However, if you look at the applications that are out there, they're still either trying to collect termination fees or origination fees and even Skype's business model is based on interconnect with the PSTN, which is its business model.

What it doesn't address and the crisis that the users increasingly have is how can I better use my time for the communication that I actually want to do, particularly in the context of interaction with companies or interaction with work colleagues? If you're in a consumer-to- consumer space, then let's just chat and gossip away. There isn't necessarily a revolution in the business model around that, but I think the more consumer-to-business space there definitely is one, and yes, having cheap minutes or free minutes is a good start, but the cost of the call center agent per minute is the problem now, not the cost of the telephone call. How do we use those call center agents to do things that are valuable and that only humans can do, which isn't dictating names and addresses?

Lee: And do you feel or should I use the word think, that - I won't give my opinion here - that there is a demand for what's being called high definition voice? Do you feel high definition voice is going to inject new cash into the system in any way? Is it a revolution? Is it bringing new money into the system, or likely to bring in fresh money?

Martin: I think the answer is yes, not a huge amount, but I think there's only two things that users are clearly willing to pay for as a value added service. One of which is the improved sense of the other person being there with you, which HD voice brings. People have always been prepared to pay for that enhanced richness in media. There is a great paper by an economist at the FCC, called Douglas Galbi called "Presence in Communication". It's a story of the history of communication from the parchment onwards. There is a clear theme; the sense of the other person being there with you over time and space is something that's fundamental in the human need and desire. HD voice does that for you.

You experience the first ever Skype call where the audio's really good; it's like a goodness, it's like a real positive surprise that telephony is capable of that. The other thing I think people are willing to pay for is crossing over different media, so it's voicemail to email, or I have Ribbit for mobile on my work mobile, so I get my voicemails as little text SMS summaries. That integration of different media and bridging their different strengths is something that people are willing to pay for.

In the mass market, there are lots of other niche features that people find extremely compelling; if you're a real estate agent or a dentist or something that's vertical, so that you need a program for telephony API and platform. In terms of mass market, I think the only two big mass market things out there that will make money are HD voice and what I call cross medium integration.

Lee: That mass market - this might sound like an outlandish question, do you feel that the mass market is likely to continue being a mass market in the long, long term, or will it all become niches?

Martin: The value of interconnectedness will always be high. Having some kind of lowest common denominator of how we communicate is likely to persist for a very long time, and the patterns of interaction that the existing mobile and landline network have is likely to persist for a very long time. We've seen little changes that people almost hardly notice, so like on fixed line there's a dial tone and mobile there's not, and that results in very subtly different, slightly different behavior. There is no busy tone on a mobile phone.

Lee: What I wanted to get at is the mass market was always what you end up before, in telecoms, in order to make money.

Martin: It will fragment, it would be this slightly paradoxical way of each of these little fragments needs its own communication needs satisfied, and they still need to communicate with all the other people. I think there will be some - maybe ten years out from now, I can imagine there being half a dozen global communications platforms that aggregate together existing - interconnect with existing landline, mobile, and Skype and Facebook and a whole bunch of other SIP termination points and your talking picture frame and your TV, and, and.... So, there'll be these new platforms that are the mass networks, but they aren't necessarily branded and sold directly to the customer and they don't necessarily correspond either to today's telcos, which have the physical structure underneath.

Yes, the user experience will fragment. Yes, we'll be communicating from a huge range of devices and applications. Yes, there will be some extremely successful new ones that, maybe in the context, are "mass market," so just like iPods today are dominant in the mp3 player segment, there will be things that are dominant in their segment and will be regarded as mass market and will have voice capability embedded in them. But, there will be no one, dominant communications media platform. I think the thing in the middle is these aggregators and how they help make it easy to integrate all kinds of end points and product protocols into any application device; that's where the business is.

Lee: I didn't want to jump there just yet, but I like the way that the case you're slowly building up here, I think you're going to end up saying that Ribbit's in the perfect position to sit there in the middle of where there's this value exchange.

Martin: Clearly, I wouldn't have joined BT if I didn't think Ribbit was a good idea. Yes, I think the greatest value will come from being able to offer what one might call the best network, but that network isn't the cell towers and the fiber; it's the ability to connect to, interact with, and transact with the greatest possible number of endpoints, at low cost, and great ease of integration. It's a different way of competing compared to the past, where the network was a physical asset. Increasingly, the network is a virtual asset and sort of relationships you have. Think back to our original discussion about business models, it's about all those suppliers and partners and how you will be able to integrate with those that's now the differentiator, not owning some piece of physical infrastructure asset.

Lee: I'm glad I wasn't wrong and it wasn't my imagination; If you don't mind me just jumping back a little again, we spoke about the mass market and we spoke about possible things you can do to cause incremental value changes, possibly, like HD communications or media conversion like voice to text, like Ribbit does. But surely, the greatest value going forward is in the long tail of communications, i.e. away from the mass market. You'd mentioned estate agents [realtors], so surely the money is in the long tail. It's in servicing niches. It's in building applications, communication applications, which are tailored to specifics, be it teenagers in love or people who sell cars or doctors. Don't you agree that the money, long term, is in the long tail?

Martin: Yes and each of those applications will generate a whole bunch of systems integration revenues and revenues [0:29:14?] vertical, and still people using those applications need to communicate with everyone else. Real estate agents need to communicate with people buying houses, and people buying houses aren't going to go out and buy a special application to help them communicate during their house buying period or program. The opportunity that's out there is for the person who offers to "the network," to offer the features and capabilities that integrate with the realtor application, that makes that application save time for realtors, which can be simple stuff like if a realtor wants to leave a message for one of his customers, he doesn't really want to have a long social chat with that customer, or that customer might be roaming abroad and he doesn't want to call that customer while it's 3:00 in the morning. Why can't they just record a voice message, in fact, why can't they even just deposit a pre-recorded voice message that maybe synthetically injects the right text, spoken or voice, into the message to the user can pick it up on a voice medium and respond, assuming voice is the way to communicate for that? I think that it's the middlemen in the platform that going to enable all these applications we build that will be the powerful players in this, the Windows of voice.

Just like Windows made it much less relevant as to which PC you need to have bought, they've abstracted away all different kinds of hardware; these communications platforms will abstract away all different underlying networks, protocols, and differences in the end points, and that you intelligently interact with them appropriately. Whether I'm sending you and SMS or a Facebook poke, or an instant message, or whatever, it will help you manage those communications and the relevant business processes.

Lee: Okay, so do you see the mass market being as relevant going forward, or less relevant, and do you see more of a rise of fulfilling niches? What I'm trying to push at is the old telephony was very vanilla. It served everybody the same. It didn't depend what you were trying to do with it, and as you said at the beginning, it made the money from minutes. Would you like to say anything on the widgetization of telephony?

Martin: I think there will be new mass markets, but they'll be within the categories into which voice and telephony and other communications are embedded. Whether it's gaming consoles, or medical imaging machines, or whatever it might be, healthcare monitoring, [0:32:32?] they'll be successful and there'll be dominant players within those categories, which will be "mass markets." The number of underlying platforms that power these, I think, will be relatively small.

Today, there are huge numbers of suppliers that can sell you interconnect with minute-based voice. But once you start to go beyond that and start thinking of a multi-application, multi-modal communications world, where you want to interact with customers via SMS, email, instant messaging, Facebook, ten different social networking applications, and the emerging end points like IPTV, set top boxes, and embedded applications in cars, for example; once you start to get that huge range of end points, then that will drive just a few major players to control the platforms. In a sense, it's the invisible engine in the middle, the software platform -

Lee: But it's interesting that you're saying the software platform because when you talk about these services, traditionally that would have been telecom equipment and vendors, your Siemens, your Logica, Alcatel and so on. They would design, approximately by committee, standards in order to sit in the middle to build multimedia conferencing units etc. The way you're talking, this all has become software platforms?

Martin: Yes, they'll still operate across the stack, Cisco, WebEX and Cisco telepresence at the top of the stack, and they're still doing stuff down at the bottom end of the protocol range as well. There's nothing stopping all the players from participating at all levels, but I think the greatest rewards will be the specialization of the one thing really well.

The patterns of how these companies and the industry associations work will shift. It won't be - without trying to open up the range of possibilities for innovators rather than necessarily closing them down, rather than defining this is what an IP video telephony system should do and here's what a busy signal should mean and this is what happens when you try and call someone. Make this IP video thing look like telephony but with a video, then instead it's about how do you just enable the basic building blocks that say, "Hey, maybe I just want to be able to see what's going on in my hallway twenty-four hours a day when I'm away on holiday, see my dog who's in the kennels" for a pet owner who goes away on holiday for two weeks, and how that application works might be very different to ring a dog. [laughs] A dog can't press the answer button, so the applications need to work in a very different way and be transported in a different way and priced in a different way.

Probably use connectivity rather than video being seen as this super important, real time thing that has to be the highest quality possible in the network, actually dog monitoring might be the opposite. Discovering, scavaging capacity that was left on this network at the lowest possible price, probably free, and if I lose contact with my dog for two minutes, it really doesn't matter. Allowing these new ranges of possibilities, technically and economically, that's a challenge.

Lee: It's interesting; it sounds like Ribbit could enable the future of pet watching.

Martin: Frog watching, of course being an amphibious company. [laughter]

Lee: I just want to have you stress and earlier point if possible. The unified communications, some people will interpret what you said in some fashion as meaning "unified" and so to resolve any ambiguity, can you stress in your own words how the direction of unified communications is different to that which you've been speaking?

Martin: I see Unified comms as trying to bring together previously disparate communication medium experiences into one "seamless" experience. It hasn't taken off as fast as it originally expected. You have to ask yourself why? It could be that there's value in keeping these different things separate, just like you have a personal mobile phone and a business mobile phone at weekends, and only one of those is with me. I don't have to worry about setting up a web page to say, "I'm working today. I'm not working today." I just pick up the right phone. It's really easy.

It's really about creating combinatorial experiences that are appropriate to that moment, that context, that application rather than being an application called "Unified Comms.", I'm now in my word processor, and I'm now in my unified comms application, and I'm now in my browser. These are all separate things. Actually, it's how does that particular web page where I'm trying to visit my mortgage earlier today, why can't I have the widget in that mortgage page that says, "Contact customer care." That widget doesn't know anything about me today, and in the future it could be that widget is one that knows this is my mobile phone. This is my landline phone. I'm at home, you can call my landline, or actually I'm on Skype at the moment, you can call me on Skype. I'm abroad and I'd rather have free Skype calling in my hotel room than $2 a minute calling on my mobile phone. I think the personalization aspect and the ability to integrate communications is maybe more of a compelling story than the ability to "unify" them in to a single user experience.

Lee: Thanks for that clarification. Now, when you spoke earlier about UC, you had said it cannot be separated from productivity and time. If telephony cannot be separated from productivity and time and as you said, a lot of UC clients can unenhanced - what's the word for unenhance? I've got a mental block here - unenhanced; I like that word. Let's keep it there - unenhanced your productivity and time, let's take things a step forward. Ultimately when you're talking about productivity and time, productivity is more of a business term. But we also want productivity in our home lives. The distinction between home life and business life is anyways blurring, as more people work at home etc. What you're ultimately speaking about, when you say productivity, is fulfilling wants, needs, and desires.

So really, what you're saying is that telephony cannot be separated from fulfilling wants, needs, and desires? Would I be correct in going that far; fulfillment of human intentions, so the future of telecoms, therefore, is fulfilling intentions, human intentions, not dog intentions?

Martin: So I'll tell you where my thought process comes from. I use my personal life, and people know, I have a plug-in called GTDInbox, which helps me use the "getting things done" methodology inside Gmail. I can just tag Gmail with the context it relates to in a project and whether it's something that I should do someday, whether I need to do it next action, until it's completed. I can just click on different contacts and different projects to see what I'm supposed to be doing.

It makes it easy to integrate these two worlds. If someone sends me a voicemail message, I can't today tag that. I can't do anything with it. It's not a digital object that I can manipulate in any way, whatsoever. I'm just utterly captured by the telco's voicemail system and it throws itaway after twenty-one days. It's like the exact opposite of Gmail. If I need to get back and actually there was something really useful, a reference number in that voicemail that got sent eight months ago, tough. It's gone. It's an empty productivity tool.

There is no way of me integrating my voicemail messages into my personal work flow. What I do see it being; of course the role of unified comm's is being an interface into my world of personal productivity. It isn't a communications application, unified comms, it's a work space in which I can work and I can integrate the digital objects like text files I'm working on and blog posts, and bits of additional media, and communicate and share them. What I see missing over, and over again is that work flow, that personal work flow element. Yes, there's lots of stuff about sharing media, but almost every time I've tried to use any of these tools, they don't easily adapt to my way of managing my work flow. They try to embed somebody else's idea of doing it. I see mostly unified comm's apps as being too tightly coupled. I've tried to use the sharing stuff inside, like the Microsoft Office Suite, and it's good. It's great if you buy into the complete Microsoft vision, but I've got Google mail and GTD Inbox. Please work with my way of doing things and that, today, doesn't happen.

Lee: I learned something new about you today, Martin. I didn't know you were so deeply into the cult of David Allen and reading daily. Again, nice to learn something new [laughs].

It does pose a question that there will be an interesting play between the things we use to communicate in operating systems, because today an Apple Mac comes with iCalendar and contacts and often, it's frustrating that your communications don't tie into that very well. If you get an email on the Mac, yes, it can auto populate certain things in iCal by stripping out dates and times, but the integration is less than elementary.

The future is quite interesting in terms of how the OS will develop as well. I know you've got a cold and I can hear you sounding tired. I feel racked with guilt so let's just string this more towards British Telecom and their platform Ribbit. You had earlier said that more and more third parties, i.e. non-telcom operators will disintermediate the operator by "stealing" the dialer, by stealing the contact book, i.e. the way people are using Facebook, i.e. potentially people can use telephony within Facebook. That old solid interface that telcos have, the telephone dialer and also the phone contact book, will be taken out of their control. Once that interface is taken out of the control of an operator, then as you said earlier, people can decide or applications can decide which bearers to use. I assume if we turn this up again, asking you about how BT's reacting, I assume they want to stop the dialer and contact book being taken out of their control?

Martin: Different parts of each telco have different sets of interest essentially. There is a retail answer, and the wholesale answer is yes at the retail side it's very profitable to control the user. It takes a Verizon with their FIOS offering, they lay a fiber to your home. They control the access. They give you a set top box you can plug in the set top box. And as a consequence they can charge you $7 a month to be able to access your home media and your PC on your set top box. The control of the fiber extends all the way back into the home. They can ding you for watching your own stuff in kit that you've bought, which is a great business model if you can manage it.

Who wouldn't want to extend those revenue streams on behalf of the shareholders? At the same time, there's this other world going up of fragmented communications and the consumers are increasingly being tilted toward using third party applications. The history from the IT industry is it's the platform makers who become the dominant players in this ecosystem. BT has clearly bought into a very highly developed and successful platform with Ribbit and it's acquired over 10,000 developers in a very short period of time, and lets you build communications applications without having to worry about the weird nuances of how thirty different people have interpreted the SIP protocol.

Lee: I'd asked about dialers and contact books. Maybe it was better to back up even a little further and say hey, what might the future business model look like before I ask about BT and Ribbit? Can you shed any light on future business models and then go on to talking about BT and Ribbit, and then we'll go on to talking about BT and Ribbit, and then we'll wrap up for the sake of you needing your next Lemsip.

Martin: I think there's a Googilization of voice going on and it's gotten very literal with things like Google Voice where the flip is from trying to charge the end user for relatively simple software applications to instead monetizing the relationship with the user via some third-party. Google do it because they want to advertise to you, so the business process there is marketing.

The business processes that still retain most of the inefficiency are customer care, billing and payments, and identity-based services. That's where the telco is strong, so I think the business model of the future will increasingly see enterprises being charged for accessing what the telco knows about you and what they can do to help interact with you more efficiently and effectively.

Whether it's the telco that actually sells that capability straight to the enterprise, I think there will be middlemen who make sure that enterprise doesn't have to have a relationships with thirty different telcos to cover off their user base. There is yet to be a "Windows" of telephony that acts as that platform, that embeds that rich communication capability, manages those relationships with all the telcos and the customers and deals with all the privacy and regulatory issues that span different jurisdictions that the enterprise doesn't want to have to think about. I think we'll see this Googlization process of going from a single-sided market towards the multi-sided market. The opportunity for the telcos is to build on is the termination fee regime that it is today. Today, they already have a couple of forms of this market structure. One is termination fees. You get to charge the inbound caller, not the end user customer that you already have. Another example is free phone [toll free], it flips the model on its head, you get to charge the other side of the communication. Those are probably the templates for the future, rather than trying to charge the user directly, to having enhanced voicemail or privacy or other features.

Lee: That's very interesting, the two templates that you gave there. I think it would be hard to disagree with that, and it reminds me of the next month's event; one of the Platinum sponsors, VoiceSage. When you said "interact more efficiently than users" I think you know enough about VoiceSage to comment whether or not that's the type of business you also mean.

Martin: Yes, so VoiceSage offer the Software as a Service (SaaS) application to, for example, make it very easy to send out automated reminders to all their customers who haven't paid their bill this month, i.e. please send us some money. The limitation that VoiceSage or any other application provider is presented with is interface the telco's expose today. You can send a bulk SMS, you can send a phone call, but if you want to do anything different beyond that, even if the underlying networks and system supports it, tough; those capabilities aren't exposed. It's simple stuff like I want to contact these users but not if they're roaming. I can't do it. I want to expire this voicemail message because the users just finished paying their bill on the website. I can't do it. What happens as a result is the user calls in the call center and says, "You sent me this voicemail saying pay my bill but I've already paid my bill." Well, the voicemail message was sent to you yesterday. But you've already wasted $10 on the phone telling the customer that, whereas you really want to just expire the voicemail.

Lee: Exactly, so VoiceSage fits into that picture very nicely and if British Telecom go where you're suggesting BT go, then British Telecom is likely to support other businesses like VoiceSage in doing what they do.

Martin: Yeah, that's where I think the future revenues are; the next network is a software-defined network, interconnected with huge numbers of endpoints and makes it easy for businesses to interact with their customers, or other businesses.

Lee: Interesting stuff and I'm ill. My throat's getting sore, and you're ill. I know you're energy is lagging; I can hear it. What we'll do is finish off with the easy question [laughs], which is how is British Telecom responding to the changed landscape, to templates that you spoke of etc., and how does their acquisition of Ribbit some time ago, as a platform for developers, fit into that in response of British Telecom in the long term?

Martin: I can't share BT's trade secrets, but it's obvious that Ribbit aims to democratize access to telecom's protocols in communication to the mass space of IT developers rather than the small base of telecom developers. I joined BT because BT has a unique combination of capabilities as well as the motivation to deploy them. Global services give BT possibly the strongest of relationships with enterprises. A strong wholesale division gives you relationships with other telcos. Existent retail base lets you boot strap new businesses by starting off with your own end customers so the experiments with how to use new enablers like interactive SMS to engage our customers more efficiently and effectively. An integrated IT and network division in BT Innovate and Design to actually be able to execute on building these solutions, rather than being stuck in separate silos and IT and networks and not talking to each other.

Lee: It's going to be very interesting taking your projections, beliefs if I may call them that, or knowledge, and hopefully for some of them, Ribbit and general sentiment at British Telecom and seeing how it goes over the coming years. I'm sure that over time we're going to hopefully see a lot of the leading innovation in terms of business model coming from British Telecom and I'm sure we'll expect your leading thought on those topics. Once again, for the third time running, you're keynoting at the Emerging Communications conference, which takes place the end of next month, for the first time in Europe. I really appreciate you keynoting. Can you just say the topic that you're keynoting on, and we'll finish off there.

Martin: Many of the same things as this conversation today, but in a more succinct form. Going beyond minutes what is the business model, and describing it as moments because the critical moment is when you try and bring two people together. How do you set up that communications channel to bring the right people together, at the right time, in the right way, and solve some business process problems for somebody who's willing to pay for it and put new money into the communications world? I'll be reviewing what the opportunity might look like, who the players might be, what kind of business models we might see, what their goals are and how I see maybe this world unfolding over the next five to ten years, which may be a very different kind of communications landscape than the one we've seen in the last ten or fifteen years.

Lee: Okay Martin, I will let you get back to your Kleenex, your Lemsip, and I'll go drink tea with honey. Once again, I really feel that the time, an hour or so we spent chatting together, was very beneficial to get an insight into where you see the entire industry going. Once again, I want to thank you from the eComm community for coming and supporting such an event and meeting with people.

Martin: Thank you Lee. I look forward to being there next month.

Lee: Thank you.

I'm happy to announce that the Skype have signed on as the event Headline Sponsor. Kudos to Skype.

The official press release just went out in Business Wire (America) and Real Wire (Europe). I'd like to highlight a few parts below:

Announcing its role, Sten Tamviki, Skype's Chief Evangelist & GM for Estonia, said: "As headline sponsor of this month's Emerging Communications conference, Skype is pleased to support the independent and innovative community that eComm represents. Skype disrupted a traditional industry to enable the world's conversations and is proud to be part of a thriving community of innovators."

Lee S. Dryburgh, organizer and co-chair of eComm, added: "Back in 2003, Skype sent shock waves through the telecommunications industry by heralding a new software-only, edge-centric approach. Six years later, Skype is still launching innovations that will vastly increase the value of its platform and further disrupt the industry. I'm totally thrilled that Skype recognizes the value of the communications innovation community by taking the eComm headline sponsorship position...Again, we're so very pleased to see the most disruptive communications technology companies take a leadership role in bringing eComm to Europe for the first time"

An amazing three-days are ahead. Each show is very different and I very much look forward to the unique flavour of this one.

I'd like to take this opportunity to remind people to attend as the event is less than two weeks away and the late pricing will kick in very soon.

Lee S Dryburgh (Founder)

PS Feel free to connect with me on Facebook here. Follow me on Twitter @leedryburgh. You can also email me directly at

PSS We're now looking for sponsors for night events - essentially companies willing to pick up a restaurant tab. If interested please email

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'; ?> Last Monday I had the opportunity to have a conference call with repeat Platinum sponsor Global IP Solutions (GIPS). I spoke with both Jan Linden (VP of Engineering) and Joyce Kim (Chief Marketing Officer). What transpired from the call was a clear vision of the value proposition offered by GIPS and some insight in the H.264 SVC technology.


The run time is 30 minutes.

The full transcript is below:

Lee: Hey, happy Monday, how are you doing Joyce and Jan?

Joyce: Pretty good.

Jan: Pretty good.

Lee: Okay, that's fantastic. We're going to jump in here and we're going to speak about what Global IP Solutions has been doing, but before we begin; GIPS, as you're more commonly known, has been a sponsor of the eComm event previously. For the event this month GIPS is a Platinum sponsor. First of all, I would like to get a handle on some of the reasons why GIPS decided to sponsor again?

Joyce: Certainly, surely I think there are a lot of conferences out there, but eComm is one of the more unique conferences that has a lot more substantive content. I think we find that the audience is a great mix of strategic thinkers, innovators, and entrepreneurs in the relevant space. We find it very refreshing from most of the usual conferences to where it's pretty level sales pitch. I think we've found eComm is definitely more long-term strategies and new innovations which obviously, we want to be at the forefront of.

Lee: I appreciate the kind words. In talking of the forefront of communications, GIPS has been really generating quite a lot of noise around what's getting called HD Voice and wideband codecs. I've even heard talk of the standardization of a new codec. I would like to know where GIPS fits into all of this.

Jan: That's a good question. One of the things I would like to start with is more to clarify what is a codec and what isn't a codec. I think there is a lot of confusion for people who are not really digging into the dirt there.

A codec is obviously an important part, but it's not everything that makes the HD Voice experience. If you look at the analogy of a car, you have a lot of different things like tires, body, steering wheel, etc. and the codec - let's say that's the tires. It's one very important part that makes the whole thing run smoothly, but without all the other pieces, you don't get the full experience.

That said, we're very much focused on HD Voice, and the things we do, in addition to codecs, is things like jitter buffer and packet loss concealment. Those are things to address what happens on the network. We also address things that handles on the device, like sound card. For video, it's cameras, microphone adjustments, speaker adjustments; all those things are necessary for the great experience.

Maybe, the most obvious thing for the end user is taking care of issues like echo, background noise, and the level of the signal, the automatic gain control. Those parts address what happens at the end points of the users. All these parts are important to deliver this full HD Voice experience. That's what we focus on. Codecs, we do that, and we'll get back to that I hope, if I get a chance, but also for us it's really important to look at the whole picture where you get the total HD voice experience by addressing all the other issues.

Lee: Okay, I just want to technically clarify; you spoke about packet loss concealment, jitter buffering, and so on. I thought I knew something about codecs, certainly, and had assumed that smart codecs like the one that GIPS used to use to power Skype, the iSAC codec. I thought it had packet loss concealment and jitter buffer handling and so on, built in.

Jan: It's not normally part of the codecs. Any codec, be it proprietary or a standard codec, doesn't include a jitter buffer. Jitter buffer, as you say, is extremely important for the performance over a packet network. Packet loss concealment is to some extent included, in terms that many codecs have something to handle packet loss, but it doesn't have the logics to apply it in the right time, and when to do it, basically, so the codec is very pure, just compress the signal or decompress the signal, but doesn't do any of these things that effectively handle the issues in the network.

Lee: Okay, so if I used to take say, an HD codec that maybe is in the public domain, the SILK codec, would I get jitter buffer and packet loss concealment etc with that codec?

Jan: No, all the standard codecs, the same with SILK, it does not include the jitter buffer. It will have parts of the packet loss concealment in the codec, but not all the pieces that you need to put it together. Again, of course, on top of that, the other things I mentioned you need in terms of echo cancelation, noise suppression, gain control, and put the whole thing together into a high quality solution.

Lee: When it comes to putting these things together, you spoke about handling devices like sound cards, microphones, cameras, and so on. Then you're saying that some of the packet loss concealment and jitter buffer technology is outside the codec anyway. Is it not possible for companies to assemble these themselves, without using GIPS?

Jan: Oh absolutely, and people do. It's just a matter that to do this really well, you need a certain expertise and you need a long experience of doing this. That's what we bring to the table, so we can do it at the highest possible quality, and you get the benefits of time to market. Our customers don't have to deal with this. They can get it done immediately. If you do it internally, it takes a long time, and most people will actually not succeed well enough to get to a quality level that's close to what we can offer.

Lee: Can I hassle you there and say we don't get to quality level you can offer. I think what I've gained from speaking to you in the past is GIPS is really a research and development company and the R&D to integrate the things that you speak of costs a lot of money. What GIPS is doing is basically allowing companies to minimize their overhead in R&D and I guess there is some kind of business model where companies pay a royalty fee to you but you're one centralized R&D in assembling these for devices, networks, or whoever. Is this correct?

Jan: That's a great summary of how it works. People come to us basically, and by integrating our software, they integrate our expertise into their engineering team. They get all of that, but they don't have to pay for all of it because we do it for many. They can get the same benefits more quickly, without having to invest as much money. So, in the end, it's a cheaper way to achieve the results than to try to do it yourself.

Joyce: It's also future proofing, in that sense, where we focus our specific R&D in those areas, where as new technologies and innovations come forth, we can provide that as sort of an extension of that specific R&D capability.

Lee: Can you give an example of new innovation? Again, I have a habit of hassling a little bit to get where the meat is. What kind of new innovations have come along, that you will then develop for and pass on to GIPS customers?

Joyce: Certainly, we're talking about audio or voice right now, but video would be a great area where innovations are coming about, that we can provide as they continue to develop. We'll talk about video capabilities and video codecs, such as the H.264 SVC standard. That is something that is up-and-coming, not fully taken off in the market, yet, but all our customers will have the advantage of having that expertise incorporated into their products, should they wish to do so.

Lee: You mentioned devices, so I know at the last event you spoke about building for the iPhone [Slides | Video]. Which devices do you cover, generally speaking?

Jan: Well, we pretty much cover anything from DSP-based solutions all the way up to PC solutions. We may be mostly known for the PC cell phone type of applications, video phone on the PC, but we also do a lot on embedded devices like the iPhone we mentioned; we have several customers offering VoIP over the iPhone, or Windows Mobile, or Symbian devices. We are looking at doing something for Android very soon here; that's one of the most current development projects that's ongoing. It pretty much spans the whole spectrum of devices. Our focus is to build something that's that adaptive, that you can put on any type of platform and you can get the same quality, same integration for our customers; they don't have to work with different types of integrations for different platforms.

Lee: When it comes to SILK, which was announced at the last eComm event in San Francisco, we've got an HD codec there. A lot of people, including myself I must admit, were confused as to what that means for GIPS. Since I thought GIPS is the "codec company," which had previously powered Skype, I wanted to know does this mean that it affects GIPS in some fashion? Can you pass some kind of comment on SILK? I know people will be asking.

Jan: I think it's a very relevant question. I think what we've already talked about here might explain part of that. We do so much more than a codec, and in fact, SILK is a very attractive codec for our customers to use, in conjunction with the rest of what we do. Again, we look at SILK as the wheels or the tires of the car and we provide the rest of it to put the whole car together. That means that SILK, standard codecs like G72.1 AMR [G.721] wideband, you name it; they all fit into our solution.

Lee: And GIPS also offered their own codecs, as well, I understand.

Jan: That's correct, and in particular, the iSAC codec, we're very well known for that and it's been deployed in hundreds of millions of end points.

Lee: That's the GIPS wideband codec, right?

Jan: That's our proprietary codec, which a lot of our customers use, but a lot of our customers also use standard codecs for interoperability, or can use SILK for wherever that's appropriate.

Lee: The iSAC codec is a wideband codec. Is there an evolution of iSAC towards, say, ultra wideband for example?

Jan: Going back to we don't stop our development and this is what you get when you work with GIPS. You get something that continuously evolves and gets better and better. When it comes to the ultra wideband or super wideband, whatever you may call it, that has until recently not been a big thing. Now when it is, we of course offer that as well. So iSAC now has a super wideband mode. We'll add other features over time, like series support, etc, anything that makes sense in terms of addressing the needs of the market.

Lee: Okay, so what you're doing is knocking down time to market for companies and you're also knocking down the cost of providing voice - audio, I should say, to be more general, and video solutions for devices, software, and so forth. It's about time to market, it's about saving money. This is the focus of GIPS?

Jan: In a couple of sentences, that's a very good summary of what we do, yes.

Lee: Okay, so that R&D, because I must admit for me, when I looked around the website I wasn't 100% clear. That's why it's really good to do this interview. Especially since GIPS is a sponsor, I really like to know what it is that GIPS is doing and get in a nutshell the sort of value. So it's research and development. If GIPS is an R&D company, then can you give me some idea of what's new? What's in the pipeline?

Joyce: Sure, I think we mentioned it a little bit, where we've been dealing with audio and voice over IP for quite a while. What's relatively newer for us is on the desktop video conferencing side. I think as you know, in the industry, real time video, tele-presence, video conferencing itself is really becoming more mainstream as more, and more collaboration applications are coming to mind.

Interestingly enough, we're just actually in the midst of completing a survey of over 1,000 business professionals. We did this across the U.S. and Asia. As you may know, Asia certainly has a different mindset when it comes to using real time video due to the networks and so forth. But a couple of interesting points that came out, for example, is that you'd be surprised to find that about 60% of users actually have used video conferencing or video chat capabilities relatively frequently.

We're seeing that consumer level technology, maybe that's Skype or Yahoo Messenger, Google, they're pushing this capability to the business level. What we find interesting is that video was seen as a lot more useful in communicating internally at companies, so a lot of employees at different sites, for example, would be using these types of Internet-based capabilities. I think that's going to drive the technology into what's widely going to be known as unified communications, and really seeing that being adopted at the desktop level.

That's part of the reason why we've invested our R&D into, for example, the H.264 technology. That's a standard video technology that will provide the interoperability among multiple solutions out there. Part of that comes with a new innovation called SVC, scalable video codec.

If you think about video conferencing today, you're going to have multiple participants, so let's say there are four different participants. You can have two out of the four, very high bandwidth, office environment. One might be in a home, DSL, fairly robust bandwidth environment. Another person might come in from a mobile line. If that's the case today, a lot of the technologies will relegate pretty much everybody on that video conference to the mobile quality. For efficiency's sake, that's how it's done today.

With a technology like SVC, you really can deliver the optimal quality for each participant, so the two that are in the office with very high bandwidth capabilities are going to get the HD level quality that they can get, while the mobile user will get the mobile level quality they can only receive. These kinds of technologies are really pushing the quality in almost a lifelike experience, along with the HD Voice, to the forefront with a lot of users.

Lee: I wonder if you're able to tell me a little bit more technically about SVC? I know that good people tell me it will be "everywhere" within the next few years, but I wonder if you can tell me, to some kind of technical level, how it achieves the optimal quality?

Jan: Sure, basically instead of compressing the video signal into just one stream that you have to take as it is, it creates different layers. It starts with the base layer; the basic lowest quality is supports. Then it adds enhancement layers on top of that. The idea is you can then, depending on each of the user's bandwidth constraints, screen size, etc, you can peel off the layers to the appropriate amount of data you need. Then you only have to transmit that data to that person, instead of sending either the smallest that works for everybody or sending too much to someone. It makes it very flexible because it's so easy to just decide what layers you want, and you can do that in a very low processing way so it doesn't cost a lot of processing either.

It's not hard to build something with layers. The trick is to do it in a way that it doesn't mean that the bitrate for the highest person goes up tremendously because the layers introduce overhead. That's the beauty of the SVC standard, that they've achieved a way of doing that in terms of low overhead and very high efficiency.

It also comes with some other improvements. Because you have layers here, you can find ways to protect the stream against packet loss better. One of the biggest issues we have with video is you lose packets, and then you lose your history, and you get a freeze of the picture or you get a lot of pixilation. By protecting the base layer, you know you'll get a decent quality all the time, and then you can let the enhancement layers get through if they get there. If they don't, you still do pretty well. That's some of the basic and most important features of SVC.

Lee: So SVC, H.264 as we see, you'll agree is going to become exceptionally popular over the coming years.

Jan: Oh yes, I mean; we hear it everywhere. All of our customers are talking about it. They see the benefits of it.

Joyce: And it's a technology that makes sense for the market. At some point, yeah, maybe it will be irrelevant if there is enough bandwidth everywhere, but certainly, you're going to have scenarios where the differences will occur, as more and more people do video conferencing.

Lee: Has it been tested over Air interfaces, for example, the extreme bandwidth constraint of mobile Air interfaces?

Jan: Absolutely, that's the idea, that you can go down to pretty much any scenario, and we do a lot of testing over those kinds of networks. Today it's mostly audio, but it's starting to happen on the video side as well.

Lee: When it comes to the mobile devices, are you planning on taking this H.264 SVC technology to devices?

Jan: Yes, absolutely, I think it's one of the key areas. Again, back to that; those are very constrained scenarios and that's where it's very important to be able to support this without having to dumb down the communication for everybody else that's on the same video conference.

Lee: Is that available today, or in the pipeline?

Jan: It's in the pipeline; parts of it are already available but the full support is coming very soon.

Lee: Now, everybody knows GIPS in terms of IP-based audio delivery. Going by what you're saying so far, GIPS is pushing harder into the real time video, it seems, and is there some kind of synergy between the two because sometimes it seems it's better that the audio can speak to the video side somehow, instead of using separate solutions for each.

Jan: Absolutely, as you know, a video conference without audio is pretty much useless. But, an audio conference without video is still a good way to communicate. The best is if you can have both, synchronized, and work really well. When we talk about synchronization, one of the key things is that the voice and video are synchronized so you get what's called lip synchronization.

With our experience and capabilities of handling the audio, we can make that happen much better than if you just focus on the video side of it. That, and the bandwidth management, you have this bandwidth available. You have to constantly adapt to what's available and to decide how much you're going to use. One important part of that is to figure out how much should I use on voice, how much should I use on video, to get the best possible user experience. Our experience of doing all this audio stuff means that we know what is the impact of reducing the bitrate on the audio so you find the right mix and tradeoff there.

Lee: Okay, it makes sense to me. Again, maybe because I was a developer for so long, I think a part of me would want to hack together some solutions without coming to GIPS. Have you come across any people who became customers, for example, who have tried to bring these components together for themselves, and if you have, why did they end up coming to GIPS?

Joyce: I think you're absolutely right, there are certainly lots of capable engineering folks out there who probably can take a bunch of these pieces and integrate them together. I think what we've seen, without naming specific customers, and we actually do have quite a few that do have that experience, believe they can do it, and usually within about a 6 to 9 month timeframe, will discover that optimizing that specifically for the level of quality they want is harder than they had envisioned.

What happens is there are all these other pieces. Remember, for the applications that we enable, we're a piece of that. Having to not focus in that area actually creates a much better product overall because they can look at the various user interfaces and other protocols that need to play a part in creating these types of applications. We definitely have a number of customers who actually have tried to put the pieces together, achieved some level, but the quality that GIPS can provide is certainly not there.

Lee: Okay, so it's the fact that you're centralizing the R&D, being in the game a long time, and it's spreading the risk for everybody, etc.

Joyce: Correct, and Lee remember, we have been doing this - I think our man hours is something in the order of 200 man years, or something. You get a lot of benefit for kind of taking the advantages of this, if you will, outsource capability.

Lee: I must admit, I've known about GIPS for years and we were all very excited with the iSAC codec. It's really good to hear where GIPS is doing, getting that clear to core message. I really appreciate that. Turning to the conference which takes place soon, can you just give me some kind of idea what

Jan: will be covering there?

Jan: I'm going to focus on the H.264 SVC and the benefits, and how to use that. It's going to be a pretty single-minded talk if you will. It's going to be really focused on SVC, the benefits, and how we look at how that can benefit the video conferencing market here.

Lee: Is that a technical talk on looking at what SVC is?

Joyce: It will be a mix. I think

Jan: will touch upon the importance of high quality video, which obviously as we've just talked about, SVC can deliver on the overall communication experience and then dive into the technology behind it, which obviously is the SVC.

Jan: Really, try to explain this is actually going to work, why this is what you want to do, and how you do it in terms of some quick remarks on what we've found out at this point in how you do this in the best way possible.

Lee: You're scaring me. It's not going to be a GIPS pitch, is it?

Joyce: No SVC is certainly not solely -

Jan: I mean, it's a standard.

Lee: It's going to be an independent talk about SVC, right?

Jan: Yeah, we have learned stuff; we might actually be the only ones that know some of these things, and we'll share that information.

Lee: Okay, so it's insight. I'm glad you're not scaring me. You're sharing your insight of the SVC technology, not some kind of sales pitch of why we need high quality video. I've been hearing that for the last ten years, but you're actually going to share your engineering insight, as you did last conference when you spoke about the challenges of Voice over IP on the iPhone [Slides | Video]. So, it's going to be a similar type of talk as in saying the challenges you've found or sharing insight into SVC itself, from a technical level.

Jan: Sure, that's our goal, to show our insight and our knowledge about it.

Lee: I really appreciate the fact that GIPS as a company supported the last event, came along and shared insight into challenges of audio on the iPhone and you're supporting the debut of the European event, and are really showing yourselves as a leader in communications innovation, and you're kindly now offering to share insight to the public on SVC.

I think I would like to wrap up there. I think we've got the message clear on GIPS as a company and value offering, and what you're bringing to the conference. Once again, I want to say we all appreciate the sponsorship, because sponsors pay for 2/3 of the event. The communications innovation community couldn't have two events running in a year, one in Europe and one in the U.S., if it wasn't for sponsors like GIPS. Again, I want to say for myself and the eComm community, I very much appreciate the sponsorship. I appreciate you spending your time to give me insights into the company. I wish you good luck with taking over the market when it comes to audio and video.

Joyce: Thanks Lee.

Jan: Thanks Lee.

Production in Full Swing

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I'd like everyone to know that production is now in full swing. Major efforts are going in to ensure the correct production level for such a critical event. I'll spare the details to save time, but I will share a couple of pics to give a taster towards the production effort now underway...



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As part of the run up to the debut European event next month, I'll be conducting a number of pre-conference interviews. The first of these took place on the 14th September 2009 with Gerd Leonard of


The run time is 44 minutes.

Full transcript:

Lee: Okay, well I'm just back in Ljubljana, once again, enjoying the slow life here, and the fast Internet, fiber into the home that makes life very easy. I enjoy chatting to yourself because you are the futurist.

Gerd: [laughs] Well there's more than just one, you know. I have carved out a niche by focusing on media but there are many great futurists around the world where I take input from.

Lee: Okay, so we can't call you "The Futurist"?

Gerd: No, better not. [laughs]

Lee: You're able to tell us from your crystal ball, the future of telecom and media. I'm sure that's a valuable resource that you have, having that unique crystal ball.

Gerd: Well, it is not entirely a crystal ball. For me, it's always funny when I talk to clients because for me this is the present. For them it's the future because they have to operate things. From my point of view, I see the future as here already, but you have to have a little bit of imagination to actually project it into your business.

Lee: I like that way of putting it. Instead of going through a formal interview, and so forth, let's just cast out topics which have been bouncing around and just see how our chat goes. You must have seen plenty; there is this political push in the U.K. for three strikes, and you're cut off by your ISP or slowed down if you've been caught by your ISP for downloading "illegal" files. Have you got any comments to make there in this sudden ISP liability for content, which seems very crazy?

Gerd: I think there are a lot of more or less unfortunate things coming together on this. Basically, the content industry starting with music is rightfully worried about distribution becoming free. This is a global phenomenon. The more broadband we have the better devices, the more the push towards sharing and trading stuff without payment is clearly there. On the other hand, the content industry has, to a very large degree, refused to license the content in so many new ways that are being asked for, starting with imeem and YouTube, and MySpace originally. The refusal to license has essentially created a vacuum to where everyone rightly then also says if we can't actually do it legally, we have two choices which is to quit or to do it without permission. Then you have companies like imeem and MySpace and YouTube initially doing it without permission. That in return has created a need for the content industry to lobby the governments and industry organizations around the world to get the ISP to pick up the responsibility, which of course, is a rather ludicrous thought, given you could easily expand that to PDFs and JPEGs and what have you. That thought of deep package inspection for the sake of shoring up a specific business model is obviously not going to happen in Europe.

Lee: You said it's not going to happen.

Gerd: No, the discussion has been raging in France for two years, with President Sarkozy pushing it very hard. It was voted down by the French Council of The Court, I think that's what it's called; the Supreme Council. They have said this is basically not legal so the government pushed for it; the Parliament voted for it in France, and then the Supreme Council said you can't actually do this. It violates the constitution. The European Commission has voted on it three times, already, saying there is absolutely no way they're going to support this kind of activity to improve things in the content industries.

Lee: Okay, so you don't think this three strikes debate that's been going on in the U.K. will actually lead to anything?

Gerd: No, I think that anybody who believes that technology exists, that you can solve this problem, is mistaken on this. It's basically not a technology problem. It's a structural and licensing problem. It's basically a business problem. Whenever you try to solve a business problem with technology, like we have with DVD region coding, and those kinds of things, you end up really going against the consumer and sacrificing things that otherwise the consumer will hate you for.

Lee: So you feel that this motion, this three strikes push to have your ISP do policing is actually pulling value out of the system instead of adding value to the system as a whole?

Gerd: It's a fig leaf discussion. It's as simple as that. The discussion about solving this problem with technology is nothing but a fig leaf because it will never work. In a democracy, it's not actually technically feasible. If you imagine this, then I get disconnected from the web for downloading and I go to my neighbor and use his Wi-Fi. He also gets disconnected. Where do we go? We go to the Internet café and we'll do the same thing. It goes on from there and sooner or later, somebody will ask for his JPEGs to be prevented, and Murdock is going to ask for people who copy and paste from the Financial Times or The Wall Street Journal to also be disconnected. It's a whole chain reaction of issues. That is just not going to happen in Europe. That could happen in China and it is happening in China, but not in Europe.

Lee: So you don't see policing of every file format?

Gerd: The key question really is this; does any of this make any money for anyone? Does kicking people off the web because they have downloaded without permission make any money for anyone? The whole idea behind this is to say, "Well, we've got legal offerings that you should be using rather than downloading for free." If the legal offerings are so technology stupid, like using DRM, or they are so far priced out that kids can't afford it, like iTunes, then where are you going to point them to? In other words, if there is no commercial possibility to be legal, why am I being forced into those channels that I don't want to use? That is against every possible logic, if there ever was one.

Lee: Okay, I'm glad that you have optimism that it's not likely to go ahead, especially when you see large political backing. Often, these things are pushed through and incur high costs on the industry have very poor results in the end - but they still get pushed through and have high costs and make consumers' lives awkward. I'm glad that you're optimistic.

Gerd: Keep in mind that this proposal does not have any substantial political backing. This is all lobbying, mostly the IFPI, the Federation of Phonographic Industries. This is a very unpopular topic for voters. Nobody who is going to push this on the ISP level to get at my Internet connection is going to get any votes from anyone. Think about it this way; the IFPI can spend hundreds of millions of dollars on this lobbying about this, but in the end, will the Parliament and the government proceed in this direction if they ever want to get a vote again? It's not going to happen.

Lee: One thing interesting that you mentioned was the DRM. iTunes has most of the market share for music download.

Gerd: The problem with iTunes, is that people get punished for interest. The more music I like, the more I want to investigate, the more I'm going to pay. That would be fine if that was within limits, but kids that download a couple of hundred tracks because they've just heard this band or so; that just isn't financially feasible. Therefore, iTunes has sold 7.5 billion songs in four or five years. That sounds great but how much money is that in four years, and is it going to scale to $100 billion? It's not so basically iTunes is a great model for selling iPods, but not for selling music.

Lee: I hate to jump in with such an awkward question. It really is a difficult one but I have to jump in the very deep end and ask what is the model for selling music if you're telling us it's not iTunes?

Gerd: I personally am a great fan of all things Apple makes. I buy from iTunes and so on, but in the end, the model of selling music or content in the long run, but music to begin with, is to bundle it into access. Rather than me saying I'm making the effort to click on the track and buy it, I have a subscription or a bundle where I can do any of this. In reality, that bundle is already Internet access. That is already the same, except that it's not legal. The bundle is sold without permission, you could say. What needs to happen is as soon as I go online, whether it's on the mobile, or the DSL or whatever, permission for the use of music is included.

Lee: This is what you were pushing the last conference, the spring conference in San Francisco last March. The debut European conference, which you are kindly speaking at next month, you're speaking about telemedia futures and you're speaking about the need for telecom companies to move up the food chain into content. Telecom companies have been talking about becoming media companies for the past ten years, and doing some silly deals with sports coverage to get clips to the mobile phone and so on. All have been hugely unsuccessful. Many people say telecom companies should become the dumb pipe. They're transport only. Maybe not be a dumb pipe as such, but a distribution network, a way of moving things A to B with certain parameters and characteristics; the very last thing they ought to do is move up to content. That is not their business. When I look at your talk description for next month, you seem to be pushing the other way. Are you able to expand what you mean by moving up the food chain into content?

Gerd: Basically, if you're looking at the overall trend in this turf, it's that data is becoming a service now. In other words, I don't just pay for the 1's and 0's, I pay for the service of how it's handled. I have service offerings on top if it and then the service is now becoming content. Basically, when I want service, it relates right to what I want with content. You can't separate all these things any longer. When I talk about telecoms moving into media or content, I'm not talking about them producing music or becoming record labels, but essentially creating a platform for the use of the data, which is their original business, the voice of course as well; as well as the service, which is all kinds of offerings, and the entertainment and content experience. They have all of the things you would need to do this; they have the billing, the technology, the users, and the scale. They have so far not wanted to do this until maybe a year or two ago because they don't want liability. They don't want to be involved in something that is as hairy as rights issues. What you see now happening, especially in Asia, is that telecoms are saying, "Wait a minute. Our data output, or charges have to get cheaper because of the numbers of users and competition. People are making free phone calls over Skype and whatever other apps, even on the iPhone." They're going to have declining revenues in voice, and declining revenues in data. What is the solution for that? The next thing is to move up the next thing after data, and that's service and content. For that reason alone, they have to get engaged, which means not to pay whatever it takes, as has been done so far with music for example, but to create a new logic. That logic can't be to replicate the idea of a unit sell, a $1.00 a song or so, from iTunes to the mobile portal. That does not work for 98% of the population. The solution is to bundle the content, the basic access and then up sell. That can only be achieved in the long run, I believe, with a public license for that content. You have numerous efforts around the world of creating what I call a private license, like Virgin Media and Universal, like Orange in France and the record labels, and so on. Most of that doesn't work because it's too expensive and it has technology problems. Therefore, if you think about this, think ultimately; we have roughly two billion users on mobile and regular Internets. All of these users have providers. What if two billion people were able to have legal access to music and pay $1 a week, and if that payment was bundled, i.e. hidden with advertising, with subsidies like the cell phone hardware and so on; that would be a fantastic solution to everyone. I think telecoms are thinking, "Well, if we can make this happen, we don't just solve a huge problem which is content liability; we also create a next generation platform for the generation of new businesses, including virtual venues, virtual goods, and premium products." It's not really rocket science to think that far; that's why I was alluding earlier to imagination.

Lee: So you're seeing - I don't have to call it consolidation between telecom and media companies, there's certainly a clash between the two.

Gerd: The only that we can solve the problem of content on the web is by collaboration between the owners, the telecoms, the ISPs, the branding on the agencies and advertising companies, the people who make the equipment, the CE device makers and mobile phone makers. I would say rather than Nokia doing Comes With Music on their handset, they should do Comes With Music on the network. That would make so much sense because the money that they spend on this, if they shared the efforts to create a uniform standardized experience where Nokia could have a preferred position; that would be much better than doing it on the handset.

Lee: Why would Nokia even come into play if it's the network? The network obviously has many handset types. What role would Nokia specifically have as a handset manufacturer?

Gerd: Nokia would, in essence, become the preferred platform or preferred subsidy provider that allows them to do all kinds of things. In this system, the user is very unlikely to spend the money themselves. For example, if you look at Spotify, the latest craze in music; who is going to spend £10 a month on subscribing to music flat out? That is a very small number.

Lee: You don't think people are willing to pay a subscription fee, a low subscription fee for people to have flat rate music?

Gerd: I think some of them would be; by and large, not - especially because the price point has to be $.10 in India. The issue really is how to bundle the money as well as the service. In other words, going back to what I was saying earlier, $1 a week or €1 a week, if that can be paid by third parties, including advertisers and companies like Nokia, which essentially would then be a large advertiser or stakeholder, that would make all the sense. It moves the burden of access from the consumer.

Lee: Now Nokia pays some subsidy, others - Verizon, whoever pays some subsidy for the $1 or €1 a week. How do they get their money back? You say advertising. I can't quite imagine this yet.

Gerd: If you're looking at what's called the next generation advertising; I'm not talking about CPMs or buttons, or those kinds of primitive things, but branded applications. For example, the application you used to then get the content, like potentially Spotify, it could have Nokia in there in all different places, not just with a logo or something but with actual involvement with the channel, to where you are able to watch even Nokia branded content right next to the other content. Or, where Nokia could be seen as a presenter very much like Acura is presenting tech conferences or was it Lexus. You gain the benefit of essentially, next level of advertising, where your brand is all over the place and nicely integrated, but also completely customized, including location based awareness, which would be coming in on mobile devices. The amount of direct exposure you're getting to clients, there is currently 1.2 billion people using Nokia phones around the world. If they were able to get to all of those people in a targeted way using music, how much money is that going to be worth to them? Imagine that kind of branding that goes on, on mobile applications, like the OVI Store that they've just launched, and Apple iTunes and the Android Store. If they can have a preferred position in the sense that they are present because they're buying a piece of that system and making it work, that's exactly what they're trying to do now but they're doing it on their own handset, which in the long run is not economic.

Lee: I really like the description that you gave there. Even though we've only been on this call a short time, you've roughly mapped out the new ecology that you would like to see.

Gerd: It's not that hard. Thanks for the compliment, but this is already in place. For example, Google in China has a legal model for free music. If you go to which is Google in China, streaming and downloading of all the music is free, and legal.

Lee: I wasn't aware of that.

Gerd: Yeah, it exists. Google has said, "Okay, we're going to share revenues with the labels. We're going to share revenues with the labels." I don't know what their revenue is, I think it's 70/30; I'm not sure. "We're going to share money. We're going to pay upfront a little bit. We're going to lubricate the ecosystem." It could be the headline for this interview. We have to lubricate this new ecosystem. If there is nobody in there who has any interest in lubricating it, it won't happen. To me, the ISPs and operators are the ones that could easily lubricate, if the content owners gave permission. The money is there. Can you raise a dollar or a euro a week for a wireless or Internet subscriber? You can. There are enough brands and subsidies, and enough ways of making this work for a dollar or a euro a week.

Lee: The telco provider could also be a broker between the content and an advertiser in order to brand the experience for one month with some washing up powder or some other service. They could work as an intermediary to help create stickiness, attraction, and involvement with a brand using the music as the attraction, like Google uses search.

Gerd: Totally, I think they become the platform for all of this. Imagine what would happen; this has been called the two sided model in many places, already, the two-sided telecom model. If they don't do this, Google will take over most of the connectivity around the world.

Lee: So Google moves down the food chain because the've failed to move up the food chain.

Gerd: They're going to do both; there's no doubt about it. They have to. Every single person around the world that gets to go online floats the boat of Google. Google puts satellite into space with a company called O3B, the other three billion. Putting online most of Southeast Asia, Africa, Brazil, India, and China for free, more or less for free as of next year. Google is going to provide connectivity, all of the cool companies that make equipment will have app stores. Which will sit outside of what the operator is doing. What are they going to end up with if they don't do this, if they don't move up into this telemedia system to where they are actually engaged. The total lack of engagement of telcos and ISPs have been really discouraging the whole solution of this.

Lee: That was very interesting what you said about Google moving down the food chain and offering free access. In order to jump into the crux of what you do, and I hate being so succinct, if you go and advise a telco on what to do briefly, a few sentences, what is your bullet point to them? What is your bullet point when you're first in the door, giving consultancy to a telecom company?

Gerd: Most of my work is think tanks. This is usually done in one afternoon or one day. The first thing is to look at what is happening. How do you make money in the connected world? That's the mind that we're getting vastly connected to very quickly, everywhere in the world. How do we make money there? There are a couple of major trends. One is the interconnecting of people, social media. That is becoming the number one thing on the web. I think Facebook has 5% of the global traffic now. What people are doing is they're connecting to each other. The Internet isn't about commerce. It's not primarily, and it's certainly not about data or information. It's about people, connecting people.

Lee: I would view it as being about communications.

Gerd: That's really the same word for it, in a way, but it's about people. What do they do? They consume content and they convene around content. They gather around content. Basically, starting with that you could ask what is the next big thing on the web. It's total abundance of a lot of things, abundance of content, 60 million songs, any movie you want - illegally, but it's all there. We have total abundance. Can you make money with abundance? Probably not as easy as with what I call the "new scarcities." The stuff that is really scarce now is curation, filtering, play listing, recommendation, sorting, connecting, and all the stuff that is more human in a way.

Lee: It's all things that save time and attention.

Gerd: Right, so Chris Anderson gives his book away for free, the free audio download is 8 hours. Guess what he sells? He sells the cut down version that saves people time, for £10, which is cut down to 3 hours. I save 5 hours of time and I pay £10. Isn't that the logic of what we're doing on the web?

Lee: You pay money to save time.

Gerd: Well, pay money to get a benefit of some sort, but just the music itself isn't going to be enough sellable benefit because it is just distribution. That goes for pretty much all medias sooner or later. What needs to happen is that for telecom to get into this is to first say people are connecting, convening around content; if I inject content in this system, will there be many opportunities for me to add value? The answer is yes. Once content is legal, then I can start sorting it, start making lists, start up selling to all kinds of other things related to the content. I become a very powerful and valuable platform and I don't have to create any of it because that shouldn't be the job of the telecom, to make TV shows or music. That is a very straightforward approach to this issue, when we get engaged we solve this problem for everyone. Our value goes up tremendously.

Lee: It will be very interesting what unfolds over the next two to three to five years. In order to move things along a bit, we have been chatting quite a long time; it's very enjoyable though. You seem to have been expressing interest in operating systems. If you're a media futurist, why have you had such an interest in operating systems between "open" and "closed"?

Gerd: Basically, I look at it more from a paradigm point of view. The entire "world operating system," we are switching from the old operating system of essentially domination and control, not just politically but also in terms of technology. Telecom walled gardens, copy protection, DVD region coding, intellectual property, WIPO and all that stuff; we're switching from that paradigm of control. We're being forced to switch to an open paradigm, the values are trust, they are merit, they are creativity, they are all those things that are much harder to pinpoint than on the other hand. What is the meaning behind Nokia donating Symbian into open source, into the open source community? What is the meaning behind GlaxoSmithKline and its client publishing a billion hours worth of cancer research to the public? These things are happening around the world and technology is only mirroring this. The more openness you have - Firefox now has 23% market share, 75% of the world's web browsers [servers] run on open source system. You see all these companies moving painfully but surely in the direction of saying, "Well, if we're more open we get more participation. When we get more participation, we can do better in terms of competition, which ultimately means we make more money."

Lee: This the whole co-creation of value.

Gerd: Yeah, so this is not a small feat. Most people are really worried about open systems because the lack of control means you have to get used to a different operating mode. Most of the time, it also means you're probably a smaller company. You need less structure there.

Lee: So, one company we see leading the way when it comes to media is Apple. As you will be well aware, Apple hasn't been merited with huge banners of openness, rather the opposite; they're being called the "new closed" so I'm trying to reconcile them being very successful in the new media space, i.e. iTunes and the App Store, and at the same time we're hearing they're the new closed. Google, we hear noises that they intentionally - I don't know if it's true at all. From what I read I can't be clear on it, but there could be disputes over running Google Voice over Apple devices.

Gerd: Of course, first of all there is no recipe. The Guardian or National Public Radio or the BBC being completely open works great for them. Would it work to be completely open for Samsung or HP? I don't know. I think there is no recipe here. I usually go for what I call the "controlled open" approach. Where does it benefit to be open and where does it benefit to exercise some sort of control? That is always a very unique mix. In the case of Apple, this is a one big exception; an extremely successful company and it's completely closed. Steve is the benevolent dictator, or the other guys there as well.

Lee: It's just hard to reconcile these new models with Apple's ongoing success.

Gerd: Absolutely, however, how many companies are able to do this? If you look at the landscape of companies, how many companies can do what Apple has done? Even if you tried hard, the bottom line is it's probably easier to go the open way unless you have a very unique way of existence. Many people have tried to become like Apple or to be like Apple; it's not working.

Lee: Are you able to share your view of what you would call "Content 2.0"? What is Content 2.0 to you?

Gerd: I think the Internet is becoming a globally connected society, which basically means when we market or sell content, it cannot be only about the distribution of it. In other words, the monetizing cannot be done just by counting on distribution and on the rights of doing so or not doing so. Content 2.0 is my sort of mime for saying we create content. In the future, how do we sell it, market it, and distribute it, and how does it generate benefits? I'll give you an example from the newspaper industry, which is currently under great pain. A lot of jobs have been lost around the world, people shutting down, and so on. In the newspaper industry, it's sort of an average of between 70-80% of the expenses of a newspaper or print magazine is not in the content. It's in the machine, the ink, the paper, the trucks, and the buildings. If you could say, "What if we stopped printing," and those expenses diminish, if we can shrink the company to a place where we can safely keep the 20% of the budget for the content creation, if we were able to do that and at the same time grow new businesses around that digital content, to where Kevin Kelly calls the "new generatives," the new ways of creating money - for example, by aggregation, by commentary, by curation, if we can do that and if we can bundle content as software like mobile phone apps, that would show the path to a profitable future. Of course, never mind, there will be newspapers that will forever keep printing because there are other reasons to do so, not just financial. That sort of reflects on the general mission of the content industry, which is to say how do we keep content creation alive and then create new models around the distribution?

Lee: Okay, so one thing I have to ask because, again, you mention the future is, the crowd, and the cloud. If you have the crowd do you necessarily need an intermediary like a "newspaper, like a record company? The crowd is better at deciding what is a hit and what is this and what is that. It's this whole curation point; you kind of wonder if curation will become completely decentralized. I guess that's the billion dollar question.

Gerd: I don't think so. I think that the curation that the masses are doing, as you can see with Wikipedia or Amazon Reviews, or what have you, there is value to that. It's not the only value that can be obtained. I would much rather listen to Pat Mathini's new jazz guitar playlist than to look on for people who like Pat Mathini. Am I going to pay for that? I think I would much rather pay for that than to pay $1 a song on iTunes. I think the professional part of doing this is equal to the consumer source part, and they'll be completely converging. What The New York Times, for example, is doing, or NPR, National Public Radio in the U.S. is to devise a strategy to converge the two and create very unique value in that process of converging.

Lee: I have to agree with you, but we may be leading the curve to some degree in lifestyles. If I look behind me just now, I've got 300 DVDs I've not watched, because I subscribed to Amazon DVDs a long time ago and I've just never had a chance to watch any of them. The DVD player is not connected. I still keep getting DVDs by mail every month. I just am bombarded by content. I've got more music than I could listen to in the next two years. I've got a zillion, it feels like, articles noted that I would like to read.

Gerd: Here's the simple logic in this context. People complain about kids downloading music but the fact is; research has shown that people "consume" about 40 new songs a month, if you let them. That's 40.

Lee: Run that past me again?

Gerd: The average person in music consumes about 40 new songs a month. That's the volume of consumption if you let them, if they have a choice of picking stuff. There, the question isn't so much am I going to get paid for the distribution of those 40 songs, or do they download 40 million and then never listen to it. Who cares? The bottom line is I'm going to get paid for the whole thing around the 40 songs; the buddies that also listen to it, the collection, the curation of the process, and for up selling from those 40 songs to a concert recording or a virtual venue, or what have you. That is where the money is. The money isn't in selling those 40 songs. There is some money in selling the 40 songs, but that's not the end game. If I'm going to say pay me a quid for 40 songs, that's a totally flawed calculation on the Internet.

Lee: I hear you and actually, while we're talking, I just went to Google and searched for something that my friend Martin Geddes said back in 2005, which I highly agreed with and you're echoing it. I put some keywords in Google to find it. This is Martin Geddes speaking about telephony, "Here's the deal. In the old world, the economic activity started when the phone call began," i.e. meaning charging for the media, the voice. "In the new world, that's when the economic activity ends. The money is in presence, social networking, filtering, privacy management, and so on. It's a complete inversion of the economics of telephony." In other words, he's saying it's all the signaling around a call which is where the money will be, rather than the media itself. It's nice to see that four years later or almost four years later, we're making the same noise still, but for what I would call the entire industry not just communications, but media also. It's an aggregation. It's in filtering. It's enabling social networking and so forth is where the juice lies to make money.

Gerd: Absolutely, if I just summarize two things there that came to me as you were talking. We need two things. At first, we need permission by the rights owners to get involved on a network wide, open platform license. We have to stop that one step calculation of if I want a song I have to talk to 50 people in 50 different places. They had something in open license and it has to be collective, either voluntary or compulsory, starting with music.

Lee: I like the notion of compulsory.

Gerd: Collective is fine if this was effectively the same as cable TV or radio or the copy machine for that matter. The second thing we need is for the telcos to get out of their data world and say, "We're going to lubricate this because that's how we're going to make a huge difference in our P&L in three or five years. We're going to put the money into creating a system that actually works for all involved parties." That is exactly what Google is doing. Google Books, the satellites, Google China Music, Google is lubricating the content ecosystem because they know that this rising tide will send their boats flying off into the sky.

Lee: Great, and I am really happy that we got in contact last year and you've been pushing, not just pushing, but highlighting what is taking place. You did so at the last conference and you'll be speaking again next month. I think you're doing a 20 minute keynote. Do you want to finish this off, since we've been on this call for some time, by giving some idea of how you see the future of advertising? We've covered content, policies, where money is, but do you really think that advertising is going to "pay" for everything? What is the future role of advertising?

Gerd: I think Fred Wilson from Union Square Ventures said that the age of one-way communication from an unwanted or uncertified brand is over. That is what advertising used to be. You get one-way stuff dumped on you from somebody where you don't like them or don't know who they are and you don't care. The business of advertising as disruption, interruption, or a nuisance that is unavoidable is over. On the web, we're not going to take anything like this. We're completely going to punish people that do this to us. For example email, any PR company that emails me with their pitch goes into the black list. I dump them. I punish them. Any PR company that follows me on Twitter and gets involved in a conversation and looks at what I read and what I like, and then sends me a meaningful link; they go on the white list.

Lee: They're positive in terms of Groundswell.

Gerd: They participate. Anything with interruption or disrespect for the user is going to be swept away. That is, right there, most of television advertising. That's just a question of timing. Advertisers are usually two to three years behind that curve. Basically, we're going to absolutely switch that model to where advertising is engagement and interactivity. The trillion dollar budget of advertising and marketing that is pretty much spent per year, I think at least 1/3 of that will move into the landscape of figuring out where are you, what do you like, where have you been, and what do you allow me to show you.

Lee: I would love to talk longer because I would love to tie what you have been pushing in that final statement with what Sense Networks are doing. I have to ask you; did you remember the talk from Sense Networks?

Gerd: A little bit, yes, but I'm familiar with what they do.

Lee: They're going to be speaking next month, as well. We're not just going to have Tony, but we'll have the CEO as well, of Sense Networks in Amsterdam. When you combine what they're doing and if you remember that all telcos have obviously got signaling networks, then it's an absolutely fantastic combination. I really feel I would love to end there. You're saying that kind of final point you were making and combining it with the likes of what Sense are doing, I think are really paving the way in an extremely exciting direction. Since the last conference, they've received funding, which is a good sign. I think we'll finish off there, and I appreciate the afternoon coffee chat with you. As usual, we spoke for a long time, but I felt as usual that it was uplifting. Thank you very much Gerd and I hope you have a very successful week. I appreciate you sharing your insights.

Gerd: Okay, we'll talk soon. Thanks.

Lee: Thanks, bye.

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