Tuesday, June 30, 2009

Early Indications June 2009: Love, Online

Love and work are the cornerstones of our humanness.
-Sigmund Freud

How have the technological changes of the recent past affected these two facets of our existence? As economies around the globe attempt to generate "good" jobs in the face of steep declines in such traditional sectors as news and media, automotive, and even law, the nature of work is at once a policy, economic, and existential question. As for love, we have seen misplaced romantic e-mail damage the careers of public figures including CEOs and a governor. Finland may show us the wave of the future: in 2006 the prime minister met a woman through an online dating service then broke up with her via SMS a few months later, stating economically, Että se ("that's it").

Let's take the love question first; we'll tackle work next month. I was struck by the number of anecdotal cases among my acquaintances involving structured dating services such as match.com or eHarmony. A little research shows how big these services have become, not counting the vast amount of flirting within the big social networks: paid online dating sites were essentially a billion dollar industry in 2008, according to Forrester, putting it ahead of pornography and making the industry slightly more than half as big as digital music and gaming.

Countries around the world are getting involved: in Japan, dating sites must register with the police, and over 1600 such companies did so. Between January and September 2008, eHarmony and Match combined to spend $140,000,000 on advertising. According to New Media Age, UK traffic to online dating sites grew 13% between September 2008 and February 2009: total visitors number about 5m, reaching 13% of the total UK online population. Harris Interactive estimates an average of 236 eHarmony users get married - every day. Match.com, part of InterActiveCorp, was recognized in 2004 as the largest site in the world and reported 1.35 million paying members as of May 2008.

Online matchmaking has many variations. One can search for potential spouses, for religiously or culturally similar partners, for friends, for same-sex prospects, for uncommitted physicality, or, at Toronto's Ashley Madison, be guaranteed an affair - or your money back. The various market segments each have multiple providers, varying by geography, matching method, and revenue model. Based only on online comments from users rather than any personal experience, claims of differentiation between different sites' matching accuracy and inventory may be inflated: many people use multiple sites and find the same people matching their profile.

Late last month, the American Press Institute convened a meeting of newspaper executives to discuss the state of their industry. They placed substantial blame on Google for being the "atom bomb" to the news industry. Left unlisted were the papers' many losses in the bigger content picture. The report did not acknowledge how many readers are defecting from the bundle model in favor of specialty providers: ESPN et al for sports, the likes of Edmunds for car-buying, Yahoo Finance and many other money sites for stock quotes, Realtor.com to house-hunt, eBay for used cars and household goods, Craigslist for apartments, etc. Personal ads are clearly a part of this erosion: Match, eHarmony, and the rest did not cannibalize all of that $957 million from newspapers, but clearly papers have lost some of their mojo in that department.

As for magazines, college alumni periodicals' listings appear to be shrinking. The New York Review of Books has long featured personal ads that were almost a parody of themselves. I found that, through the magic of the Internet, people can still browse for such appealing specimens as:

LOS ANGELES: bright, playful professional/academic MWM, 50s, tall, fit, good-looking, warmhearted, engaging, open, and present. In emotionally untenable marriage. Seeking woman, 40–58, with good heart, curious mind, sensual, open to exploring possibilities with like-minded good soul.

Some independent newspapers maintain a strong singles presence, as witness the Chicago Reader or The Onion. Mainstream papers, meanwhile, take a variety of approaches. Boston.com (the Globe's online operation) franchises singles from Yahoo. The LA Times points readers to eHarmony. Many papers, including the New York Times and Dallas Morning News, have no personal ads.

Just within my casual contacts, two adults have married based on their use of the services. One is an innkeeper in a small coastal town, while the other is a medical professional in a relatively remote market. In both bases, geography-based dating is problematic both in terms of sparse "inventory" and in terms of privacy given these individuals' relatively public day jobs. As a divorced charter boat captain told me of his use of Match, "It's great for people like me: in small towns like these, everyone knows everyone else's business. And while you can date the tourists, it's a bit tough starting a new relationship every week when the rentals turn over." The decoupling of physical location from the search process is a very big deal for market "thickness," not to mention the overall sense of romance and adventure in the process.

Secondly, the use of algorithmic matching tools is enhancing the matching process: eHarmony's "scientific" survey instrument includes 400 questions, far more than I ever answered on any unsuccessful first date (or the successful one, for that matter). As we will see, however, the comprehensiveness of the surveys has many implications.

Not surprisingly, the online dating phenomenon has generated sometimes hilarious commentary in the form of vast numbers of blog entries and a few books. Such titles as MatchDotBomb: A Midlife Journey through Internet Dating, Millions of Women Are Waiting to Meet You: A Memoir, and numerous how-to volumes (including a Dummies guide) testify to the pervasiveness of this cultural phenomenon.

The unintended consequences are fascinating to watch.

-Is it ethical for pay sites to count non-paying (former) participants in a match panel?

-How sustainable are the various business and operational models? Might one technology, celebrity endorsement, or other factor prove decisive in a particular market?

-What happens to my profile after I quit the service, either because it worked or because it failed? What rights do I have to my profile on either free or paid services a) after a month, b) after a year, or c) after the company goes bankrupt or gets acquired?

-What are the de facto (when people meet in person) and de jure (in court) standards for truthfulness? eHarmony, for example, insists that applicants be single: legally separated individuals are excluded, and could be banned if they lie to get on. We have a family friend who's a tall woman using some Internet dating resources, and her stories of men's various versions of their height and weight are funny and troubling. "Truth in advertising" has many nuances in this domain.

-What exactly are people paying for? What are the guarantees, warranties, or lack thereof?

-How can and will various systems be gamed? Some services have been accused, without proof, of employing "ringers" (professional first-daters) to exaggerate the quality of available singles.

-What will my profile be used for? Cross-selling opportunities, for example, are numerous and more than a little spooky.

-While the nightmare blind date has become a cultural stereotype, the prospect of meeting truly dangerous people online is more than a little scary, as the Boston Craigslist crimes suggest. It's also possible for bad first encounters to facilitate stalking. I have a colleague whose "thanks for coffee" and the implied "have a nice life" after a meeting drove the candidate to look her up using available search methods. He later turned up on her doorstep unannounced.

The role of such civic institutions as churches, service clubs, and bowling leagues in the wake of suburbanization, television, and more women in the workplace has changed slowly but significantly over the past 50 years. The matchmaking process has changed as well, and the state of online dating businesses will bear watching. In addition, the place of Facebook in 20-somethings' lives is undoubtedly generating its own set of changes to courtship.

As my former boss once said, "digits never die." The prospect of a lengthy profile, and potentially e-mail communications within a dating site, being brought into a congressional confirmation hearing or other process 10 or 20 years from now might give some of those millions of users a pause before they declare yet another preference or "fact" about their life.

Monday, June 01, 2009

May 2009 Early Indications: Clouded Over

The proliferation of so-called cloud computing platforms has been rapid. Because there is so much material available that defines the phenomenon, we'll move here to an examination of some of the unexpected consequences and complicated implications of moving some or all of a computing environment to offsite, third-party environments.

To get the problematic and inevitable definitional question out of the way, here is one from Information Week's John Foley: "Cloud computing is on-demand access to virtualized IT resources that are housed outside of your own data center, shared by others, simple to use, paid for via subscription, and accessed over the Web."

There are of course other contending definitions, but Foley's is mercifully brief. Even so, it begs the questions of private clouds, how small a cloud can be before it starts being something else, and how individual uses of clouds (I don't own a data center but hit on most of the other conditions) vary from and overlap corporate ones. It does get us started in more or less the right direction.

First, here are some resources to get up to speed:

The Economist special report from last October

Accenture Cloud homepage

Amazon Elastic Compute Cloud

Google App Engine

HP Cloud Assure

IBM Cloud Computing

Microsoft Azure platform

Rather than handicap the vendors, or the vendors' definitions, I'd like to focus a bit farther out. In a series of conversations with our corporate and university advisors, a number of questions have surfaced. In particular, I'm building on remarks by Mssrs. Smith and Parkinson at our member meeting earlier this month.

1) What is a vendor's profit path? What can be differentiated and thus generate margins? Compared to the conventional model of data centers, which is often measured in $10,000 or $100,000 units, cloud computing usage at Amazon is measured in dimes.

2) How will incumbents respond? If I have an established business selling hardware as capital expenditure, and a competing model shifts MIPS to an operating-expense model, presumably I don't stand still. Oracle's plans for Sun will be relevant here.

3) How does cloud lock-in vary from existing software (a la classical Microsoft) or hardware (the vintage IBM model) variants?

4) As with so much of the world's infrastructure, what is the incentive to invest in "pipes" when the value-add lies elsewhere, or nowhere?

5) If for legal or other reasons I need performance, security, and/or reliability guarantees, how do I get them if I cannot see or physically access my assets?

6) There are no free lunches. Every one of the Web's elite destinations has suffered from major outages at some point. Just weeks ago, Google suffered a technical breakdown about which the company released few particulars, but it managed to slow down service to millions (or more) of users for several hours on May 14. Gmail also failed at scale in February. In light of that history, what does a fault-tolerant cloud environment look like, require, and cost? (For an amazing graphic of the "Great GoogleLapse," see here)

7) Can there be "one throat to choke" in a virtual environment? Just as outsourcers are arbitraging labor rates by shifting contracted work to other shores, so too will cloud vendors assemble services from multiple entities to create bundled offerings. What will be the unexpected consequences for customers?

8) How does optimization work in a cloud? The vendor may be managing to power consumption, say, while customer A wants stable (not necessarily fast, but predictable) transaction times for a shopping cart scenario. Customer B needs fast compute capability despite bag and frequent reads and writes to disk. How can all three parties go home happy at the end of the day?

9) How can virtual, hybrid environments be tested before major real-world events: a quarterly close, a consumer promotion, a currency meltdown? While there will be some greenfield successes, a big question relates to how well clouds can integrate with existing data centers and other assets. (What constitutes unit testing in a cloud?)

10) What can I as a customer ask for by way of customization? Who can and will provide it, and at what costs in money and performance? The price points reflect commodity economics, but sooner or later most of us stumble upon needs that surpass plain vanilla.

11) Long ago, factory layouts (and locations) changed as power shifted from waterwheels that drove a central shaft around which looms were arranged, to individual electric motors for each machine. White collar offices after the rise of the PC no longer feature typing pools. What will be the organizational innovations that cloud computing makes possible? Focusing on power savings in the data center is a useful first step, but the technology will have many other implications for the ways people come together to achieve goals.

12) The PC architecture flourished in part because of its interoperability: I could choose a big Maxtor hard drive or a faster Seagate, a Dell LCD or Sony CRT display, and my hardware maker could buy the cheapest CD drives, RAM, and power cords on a given day. USB made the platform more flexible yet. Once I choose a cloud provider, how must I choose my ISP, my system management vendor, my billing system? In short, what are the dependencies introduced by a cloud instance?

13) Companies don't switch casually from CA Unicenter to BMC Patrol, HP Openview, or IBM Tivoli, much less a promising startup, because the complexity issues are enormous. Will my Tivoli/Openview/whatever console be able to instrument both my owned hardware and my virtual assets, or do I rely only on the cloud vendor -- who will have good reasons for not exposing too much operational information? The various answers here will have implications for lock-in, for innovation, for risk management.

14) Cloud computing is a coherent-sounding phrase, but computing in turn has many facets. Think about the different time scales relating to

-network latency
-the laws of physics regarding hard drive access
-the laws of physics regarding hard drive failure
-various data structures (think of MapReduce versus SQL)
-load-balancing, failover, and other necessary housekeeping
-core vs. edge workload allocation.

At the end of the day, orchestrating all of those sets of events, each with their own timescapes, in a virtual world is a really, really tough technical and managerial problem. Getting the systems to work doesn't even scratch the questions of profitability, liability, audit and related requirements, etc.

The question is not, will cloud computing happen, but rather, how will this tendency unfold, and how will organizations, regulators, and other actors respond? Until the rhetoric and more important the base of experience moves beyond the current state of pilots and vaporware, the range of potential outcomes is too vast to bet on with any serious money.