--- Upon commencing on Wednesday, October 3,
2007 at 9:25 a.m.
MR. OXLEY: As part of the participative Web, we are
being participative. We have Kieren off
to the right there who is doing some live blogging. So as you are involved, speakers, with your
questions, you may see Kieren's hand go up because he is representing quite a
large force: the OECD blogosphere. As
well, we are live streaming this and we are recording it in the back end, and
there is simultaneous translation in the back.
I
want you to remember this is the participative Web. Everybody should participate. How do we balance the remarkable opportunity
with the possibility in governance as it grows?
So
without further ado, I think it's a great time.
And a wonderful person to kick off this conversation for the first
session, "The Future of the Participative Web: Convergence and
Diversity", I want to introduce John Lettice.
Come
on up, John, and bring your panel up.
--- Applause
MR.
OXLEY: John is a pioneer in this area
and this is rather exciting for me because I get a chance to introduce somebody
who is a pioneer.
John,
it's wonderful to meet you.
The
founder, co-founder and editorial director of The Register.
MR.
LETTICE: Good morning, ladies and
gentlemen. I'm John Lettice of The
Register, as you have just heard.
In
my opinion, we've got a balanced and varied panel to present to you today.
We've
got Jonathan Taplin of the
We'll
just kick off with Jonathan.
MR.
TAPLIN: Thanks very much.
I'm
going to try and give you a sense of what the infrastructure needs will be for
this new Web.
Obviously
one of the places that I come from is the sense that we are living in a
converged IP world and it's going to be very video intensive. I was on Second Life last week and people
were putting up little pieces of video inside Second Life to show that they had
done its mash-ups and stuff like that.
So everywhere you look it's going to be intensive.
I
come from a point of view where voice data and video are all converged in a
seamless operation across all three transport media; that everything will be
broadband everywhere. That will mean an
increased need for very flexibility of deploying services.
Microsoft
takes eight years to deploy a new version of Windows and Google puts something
out in beta in three months and sees what the customers like and what they
don't like and doesn't worry if it's not baked perfectly. The feedback will help them learn that.
So
this rapid content and authoring and enablement is really critical, and service
providers have got to get on the board of this and stop worrying about
five-nines, having everything perfect before it gets put into the field.
Most
importantly I think we are going to live in a world of increased
personalization, and that means that I'm interested in the Los Angeles Lakers
basketball game, videos, and I'm not interested in the New York Nicks. So I want the full game on demand on my
TV. I want a 20-minute highlight reel on
my broadband PC, and I want the slam dunks, two minutes of that, on my mobile
phone.
So
that means I'm going to move from a device-centric world to a
subscriber-centric world. The providers
are going to need to give me content on all three of these platforms whenever
I want it and I want to have access to that content. And that means I move from a
location-dependent world to a location-independent world, all right?
Now,
in terms of the way most people access the web we have to still remember that
this is a mobile world. And the number
of mobile phones, that is the dark blue, compared to the number of people who
are on PC’s or accessing internet cafes or have broadband is really rather
remarkable. And so let’s remember that
many people, especially in Asia and
Now,
what is Web 2.0? I’m trying to give you
some kind of crazy highlights of this.
But really what it is is a set of services and a set of interfaces that
are completely interactive, that it’s blogs, wiki’s, voiceover IP, podcasting,
filtering, social networks, collaborations, social bookmarking and that there’s
a set of tools, SOAP, ROS and all these pieces are allowing you to move content
back and forth. But most of all it is a
two-way world. And that’s the critical
thing to think about.
Now,
some countries and these are obviously OECD statistics, some countries are way
ahead of other countries. And as you can
see, the average download speed in
The
bottom chart is the adoption of fibre directly to the home in
Now,
the most important thing is to see what’s happening with the consumer in terms
of adopting these Web 2.0 services. So,
the top chart on the far left is YouTube page views in the last year, the next
chart, “Massive Multi-player Game Subscriptions”. The next chart on the bottom left is the
number of blogs in the world. And the
chart on the bottom right is the growth of social networks compared to Yahoo
and Google.
You
can see a kind of similar curve on all of these things. In other words the great growth in what’s
happening on the web is all in this Web 2.0 world. It’s all in things which are two-way, which
are interactive and are massively needing of large pipes in order to make them
successful.
Finally,
I want you to think about video on the web.
This is the statistics from last -- well, the month of August. So, the total number of videos viewed was 9
billion, 76 million -- 24 billion minutes.
YouTube alone had 2.3 billion views, individual videos viewed. Yahoo, MySpace are in the, you know, 300 to
200 million videos viewed and this is for one month. Now, this is growing about 2 to 3 percent a month.
I’ll
just give you a little statistic. Last
month in the
Now,
an average large cable TV audience in
Now,
I will only leave you with one last thought.
Ultimately one of the questions that this whole body of countries is
going to have to think about is how providers who own content are going to get
paid in an internet age. And I think one
of the things we have to look at is the example of the music business.
In
the music business people -- as some of you know, I started out working for Bob
Dylan many years ago -– the people who are songwriters get paid very well
because in the restaurant we sat at last night they were playing music and they
pay a license, just a flat use fee every month for the privilege to play
music. And so songwriters get paid.
The
people who are drummers in like the band, the great Canadian group that I
worked for that backed Bob Dylan are quite poor today. The songwriters are very rich. Whereas the music business is going down as a
record business, the publishing business is going up.
One
of the things I suggest we have to think about is a fee that gets assessed for
copyrighted material at the ISP level of $3.00 a month, say, for every
broadband subscriber, and that’s charged at China Netcom and it’s charged at
Bell Canada. And it’s put into a pool
and somebody figures out how to divvy it up.
It’s
worked brilliantly in the music business.
And unless we figure this out, content owners are not going to be able
to figure out a way to get paid for content.
So,
that’s a quick view of the overview of the infrastructure. And I’ll turn it back to John.
--- Applause
MR.
OXLEY: I thought I’d just try this. Yeah, that’s working -- saves me hopping up
and down every time.
Next
on we have Cyrus Beagley from McKinsey.
MR.
BEAGLEY: Thank you very much. I’ll try and keep my remarks brief.
What
I was asked to do was to -- I’ve been asked to basically provide a bit of a
financial perspective on the participative web and including venture capital
activities and so on and so forth.
So,
to do this what I thought I would do is do basically two things. One is let me start by providing a quick
description of the level of business activity around Web 2.0 and also provide a
perspective as to how the situation today is quite different from the situation
in ’99-2000, the last internet boom.
And
then let me just highlight what I think are some of the few important questions
or uncertainties out there in terms of the Web 2.0 from a business and
financial perspective and hopefully that will be helpful in forming some of our
discussion today.
So,
let’s start off with just a quick description of the level of business activity
around Web 2.0 which frankly has increased very significantly over the last few
years. And there are several indicators
of this increased activity.
The
first one is venture capital activity.
If you turn to the first slide you’ll see that over the past three years
the level of venture capital funding of Web 2.0 businesses has increased
dramatically. It’s reached nearly $900
million in 2006, nearly double the amount of funding and double the number of
deals from a year prior.
If
you look in 2007, it looks like the activity is somewhat sort of slowing down
or the growth is flattening and anecdotal evidence suggests that actually some
of the investments have slowed down even further over the last few months.
A
second metric I think for increased activity is the level of MNA activity. And frankly to date the number of exits from
these venture capital investments have actually been relatively few. However, there are some signs of increased
activity. Everybody will know, for example,
the two major acquisitions that have happened in this space: the acquisition of MySpace and the
acquisition of YouTube.
But
beyond these acquisitions there have been several other significant
transactions in recent months. For
example, in May of this year, CBS purchased Last.fm, a social and music
recommendations site and just last month Disney acquired Club Penguin, a
virtual world focused on kids for about $350 million and there are regular
announcements in the press. So, some
increased activity there as well.
But beyond these VC and MNA activities, I think the
participative web is really having a very broad affect on established
businesses as
well. Among the mediant and
entertainment companies that I serve at, McKinsey, for example, I think it's
fair to say that participative media has really become a top-of-mind strategic
issue for nearly all the players in the industry.
If
you look at the following slide, this will give you a sense of the importance
of this participative media phenomenon.
This looks at the top 100 brands online.
You can see that the share of community sites, like MySpace, uTube and
Facebook, now represents about a third of total page use online.
And
so you can imagine that for a media company this is a pretty significant change
and a pretty major issue that you need to deal with.
While
Web 2.0 may not raise the same level of threat and opportunity for non-media
businesses, the participative web is also an important issue for the majority
of established businesses.
According
to a recent McKinsey survey of nearly 3,000 global business executives, 75
percent of companies say they will maintain or increase their investments in
Web 2.0 over the next three years.
If
you look at the next slide, this lists some of the areas that these executives
said they would be investing in in the future.
The interesting thing is that they are not necessarily relying on the
best known trends or Web 2.0, such as blogs, for example, instead they are
placing the greatest importance on technologies that enable automation,
networking, both internally and with their customers, and collective
intelligence tools.
So
given this level of heightened activity, one question that regularly comes up
is, you know, is there a risk of over-investment? Are we returning to another Internet bubble?
I
think the quick answer is, you know, it's hard to make any blanket statements
and there are a number of reasons why the situation today is actually quite
different from what it was in 1999-2000.
For
one, the existence of advertising networks, like Google AdSense, for example,
have enabled many of these emerging online offerings to more quickly monetize
their audience and traffic than they could have in the past.
Venture
capital metrics are also relatively conservative. VentureOne indicates, for example, that the
median pre-money valuation for Web 2.0 companies in 2006 was about $6 million,
which is about a third of average pre-money valuation reported for venture-backed
companies in the
Finally,
as mentioned earlier, the number of exits has actually been relatively limited
to date. In particular, in stark
contrast to what happened in 1999-2000, the number of IPOs has been very
limited. So the phenomenon has largely
been contained to the venture capital world, with limited spillover into the
public sphere.
This
gives a little bit of a perspective of the level of activity and how things are
different today compared to a few years ago.
What I wanted to just do, I will leave you with just a series of
questions around the business model dynamics of the participative web.
Let
me highlight four main questions, and I'm sure we will discuss them in more
detail during the Q and A session.
I
think the first major question is to what extent Web 2.0 properties will manage
to successfully grow their advertising revenues.
As
I mentioned earlier, ad networks are enabling the monetizing of these
properties much faster, but the level of monetization remains very low still
and many of the large participative web companies are still only generating
relatively modest revenues. So I think
that's one question.
All
in all, given the work that we have done, I think we are relatively optimistic
that these companies will actually generate significant advertising revenues in
the next few years. We basically project
about $5 billion in advertising revenues by 2012 in the
I
think a second major question, from our perspective, is how well consumer-facing
Web 2.0 sites will be monetized beyond advertising.
Our
sense is there's tremendous additional value to be unlocked in other areas of
marketing, for example product development.
The profiles and conversations on these sites offer potentially
unprecedented wealth of information for marketers.
If
you imagine, for example, you are developing a sports shoe or you are a sports
shoe manufacturer, if you could find a way of leveraging the conversations on
these sites to decide a little bit better and get better information about
consumer needs and consumer desires to decide which shoe you actually want to
launch, you could save hundreds of millions of dollars in product development
and marketing costs.
The
general sense there is that marketers today are still very much experimenting
in this field and that participative media sites are only at the early stages
of building offerings that can enable them to actually capture that value.
I
think a third question, and I'm sure Jonathan talked about it a little bit, and
I'm sure Michael will talk about it, as well, is the question of protecting the
rights of traditional content creators. I'm sure we will discuss that in a little bit
more depth later.
And
then, finally, the last question I will leave you with is really from a product
offerings' perspective, which is, you know, what's next?
To
date, most of the Web 2.0 activity has really involved PC-based online
offerings. I think one of the questions
is: what is the next platform?
To
Jonathan's point, there's been a lot of activity recently in the mobile
space. On another hand, companies like
SecondLife are creating completely new participatory media experiences online.
A
recent MIT technology review article, for example, discussed the potential of
services like SecondLife to merge with more traditional online offerings, like
mapping or local search, which may not be what SecondLife wants to do, but
there, again, it's not hard to imagine the potential for a whole new wave of
innovation and new product and service offerings.
So
those are just four questions. I'm sure
there are many others, but, hopefully, this is helpful in sort of kicking off
this conversation.
Thank
you very much.
--- Applause
THE
CHAIRPERSON: Our third panellist is Gin
Yoon, from SecondLife.
MR.
YOON: I have to apologize in
advance. I seem to have developed a
tremendous cough on the plane, so if that disrupts my talk here, bear with me,
please.
So
for those of you who don't know about SecondLife, a quick description is that
it is a 3-D virtual world, it is an online computed space where people can
interact. There are a number of
different kinds of these virtual worlds in the industry now. Many of them are quite game-like. Ours, we feel, is more communications and
creation oriented.
I
think that we have tried to make a differentiation in having highly detailed,
user-created content. Everything you see
in this screen shot, for example, was made by users of SecondLife.
Our
company, Linden Lab, well, we hardly have to do anything at all, really. We just make the land you see there, the
sky. Everything else was made by the
users: the chairs, the podium, there's
some rockets there in the background.
People create whatever they like, for whatever kind of experience they
like.
Both
Michael and Susanne talked about the last decade or so in the evolution of the
Internet and that's very much how we see our mission: to understand the last 10 years so that we
can understand what's going on in the next 10 years.
This
Web 2.0 stuff that people talk about today, I'm really not sure what all of it
means, to tell you the truth, but what we do see is a number of trends, in
terms of persistent interaction, always being online, multiple media streams.
People
have gone from email, message boards, instant messaging, Voice over IP,
blogs. Those things don't replace each
other, they all layer on top of each other, so that people are constantly in
communication in a number of different ways at the same time. Of course, more recently, we have seen the
emphasis on participatory media, which we think of as user-created content.
The
area that, I guess, as graphics technologists we have emphasized is the
immersiveness of the interaction. Maybe
it's not easy to see how immersive the web experience has become over the last
decade or so, but if you recall back to early websites that were just purely
text-based and you think about today, how you are seeing not just text, but, of
course, video and graphics, voice over the Internet, it's become this immersive
environment, which, we believe, just scratches the surface.
When
we think about what's going to happen over the next 10 years, we ask
ourselves: is it going to be less
immersive than it is today? It seems
pretty unlikely. It seems like it's
going to get more and more immersive.
And
when you talk about these sort of science fiction fantasies of the Matrix or
the Metaverse, they really don't seem that fantastic. If you think about it hard enough, if you are
not afraid to think about it hard enough, it seems inevitable.
So
we figured we might as well try to do everything at once, since there is an
opportunity here to create a platform that is immersive, graphically immersive,
persistent, multiplexed, user-created.
As long as you are going to try to start a company in this extremely
confusing Web 2.0...
There is an opportunity here to
create a platform that is immersive, graphically immersive, persistent,
multiplexed, user-created.
As
long as you’re going to try to start a company in this extremely confusing web
2.0 environment, you might as well try to do everything at once, and connect it
to everything.
SecondLife
is not an enclosed world, it is really inter-connected with the web. People stream video, people text in and out,
e-mail in and out, have voice communications.
It’s something that we think is part of what’s going on on the Internet,
rather than a separate experience.
A
lot of people ask what kind of strange folks actually use SecondLife. It is definitely, I think, still an early
adopter experience. People talk about
the ten million or so registered users in SecondLife. The million and a half or so who have logged
on in the last sixty days and they talk about these as big numbers.
Well,
if, again, you think about this in the context of where this kind of
communication is going, and you think about the billion Internet users today,
it’s just scratching the surface. But
even in the early users, the demographic is much different than people
expect. It’s actually quite similar to
Internet usage today, an average of thirty-two, significantly higher female
usage than people expect, and our product is actually much more used in Europe
than it is in North America, and we’re just starting to see Asian and Latin
American users coming on-line, too.
This,
despite the fact that we’ve really done very little to market to any areas
outside of North America, but it seems that we can’t keep people from trying to
go into this participatory experience.
One
aspect that people like to examine and talk about, and study quite a lot, I
just thought I’d touch upon here, is our virtual economy.
We
have a feature of SecondLife called the
Again,
it seems like an odd little cottage industry but today it’s a cottage industry
that’s generating approximately a million dollars, a million US dollars per day
in economic activity in SecondLife, and at this rate of growth that we’re
seeing now we think it’s quite an interesting economic phenomenon to watch.
Thanks
very much.
--- Applause
MR.
LETTICE: Our final speaker is Michael
Gill of Fairfax Business Media.
MR.
GILL: Thank you. Thanks, John.
I’m
very conscious as the print guy here that I shouldn’t sound like Yossarian in
“Catch 22", so I’m going to start with something which I think is a
proposition which perhaps attempts to look, at least from the perspective that
I experience most days, where things might be headed.
As
a concept, I think the way I’m looking at it is that we’re presently in a very
early stage, as the other speakers have indicated, and we talk about 2.0 or
whatever, but it seems to me that, putting the technology aside, there’s an
issue about, or a fact about the way that people behave that seems to me to be
obvious right now in that we have a ubiquitous experience on the web which
tends naturally to bring consolidation to a lot of markets to aggregate things
and to typically, from the user point of view, to create anonymous experiences
and a commoditized value. Certainly in places where information was the key, if
you like, the monopoly value in some transactional behaviours or which
dominated the nature of the transaction, those of us who, for example, have
classified’s in newspapers, or who were retail stockbrokers are finding life
very difficult.
The
situation even where monopolies existed for the supply of any sort of commodity
could, obviously, have changed.
But
it seems to me, the obvious thing about it is that it an anonymous and a
ubiquitous and a commoditized experience and that’s the early stage of where we
are, because all these markets inevitably fragment as human behaviour
fragments.
It
seems to me, in the web environment is a bad identity, and people, you know, if
you think of your own experiences, the value is often most created to you, or
most identified to a person when you’re familiar with the identity of the
transaction. You don’t trust
transactions that don’t have an identity. People buy things on th web that they
know. They don’t buy things on the web
that they don’t know.
I
think if you look at where the
confusions are, and we’re all confused at the moment, particularly in media,
about where value is created, marketers are looking increasingly at places
where the fragmentation has value, and I think one way to think about the
future is that we will have a ubiquitous, anonymous web world where there’s --
you know, everyone is doing things in common for free. And we’ll have a whole lot of different
behaviours and experiences where value is created through individuals. I mean, it is already true on the web that
many, many organizations have highly valuable businesses where the information
is the value and it is transacted on the web.
I
think it is a falsehood to say, for example in the newspaper business, that the
only people who are making money have got free websites; that’s not the
case. And, in many other instances there
is plenty of value being created. But I
guess the point I’m getting to is that there’s a lot of businesses who have
very substantial applications built behind firewalls who are spreading those
applications already to many, many customers, but when the Bandwidth is there,
they will expand those transactions very dramatically. And I think we’ve yet to see what will
happen.
We’ve
already seen, for example, the number of business models that have been
challenged by what’s happened already: the classified advertising market in
newspapers, the retail stockbroker I mentioned, the telephone company -- there
are a great many of them and it’s obviously happening to many, many providers
at local levels. But, I think the
immaturity of that is, you can say, when you think about the sort of debate
that goes on around the Wall Street
Journal, for example, where we’ve got a fantastic organization of huge
value offering information to market where the alternative supplier is probably
one which has moved their whole business from newspapers to subscription-based
services, and that’s the Canadian company Thompson.
I
look also at what our audiences are saying about what they want from web, and
it seems to me it’s much more like a sort of Facebook type experience where they can qualify their
relationship with people, than it is about a mouse-base experience. And that’s not value either of them. I just would say that particularly in a
business type audience they do want to have a qualified experience. They do want to be able to trust the
face-to-face because they really don’t see any other, I think, opportunity to
create value by mutual experience if they can’t qualify it.
I
think there is no doubt that everything our audiences are telling us is they
want interaction. They really want to
have all the opportunities that we can bring to bear where we can provide them
with a qualified information environment and their capacity to do what they
want with it, both for themselves and with other people.
I
guess the challenge that we can see going forward is that those of us in, say,
the media business, and particularly in the news business, who might have been
kidding ourselves about the value we create for people, whether or not, you
know, I guess in the end the value of the news that we present is unique, or
whether in fact it is a commodity and we have been extracting value from the
community in a way that’s not sustainable.
Those businesses are the ones that are vulnerable to the ubiquitous and
free environment, I think, of the web.
I
think there will be, and it may not be the incumbents, but there will be very
significant new businesses that take advantage of what the sort of control, and
qualification and quality opportunities that audiences want from particularly
news organizations in the new environment.
But I don’t think that today the technology is in place, nor is, I
guess, the models are in place that make those things obvious.
Thank
you.
--- Applause
MR.
LETTUCE: Okay. We’ve kept presentations brief with a view to
getting some interaction going, and we’ve got a healthy period left where we
can do question and answer.
If
people would care to make themselves known and -- are there roving mic’s, or
anything?
UNIDENTIFIED
SPEAKER: There’s stands --
UNIDENTIFIED
SPEAKER: Just at the back there you will
see on the right-hand side and the lefthand side there’s microphones up, so if
you have any questions, please make your way to the microphones on the
side. And we’ll get started.
MR. OXLEY: It
would be helpful if you could state your name and organization and if there is
a particular speaker you wish to direct the question at,
please say. And also bear with me, I am
rather short sighted so people at the back pop up and down please.
MR. LETTICE: Maybe I will take the first question.
MR. OXLEY: Yes, sure.
MR. LETTICE: The conversation actually linked in really
well with Michael’s conversation and Susanne’s as well. So the world is getting bigger from a
government perspective, smaller from an individual perspective, there is a lot
of technology being invested into connector types of technology and the
monetary world is starting to come up and from a second life perspective as
newer opportunities.
And we have seen
where the future is going now. And I
loved your perspective about the matrix could almost be there, because the
possibilities are endless right now. Yet
being a government in this world, looking at these endless possibilities, what
are some key things and I would just ask the panel to cross there, do you see
as challenges when you are trying to look at governing in this fast-paced
environment? Like you mentioned, Jonathan,
Google throws something up there in a short period of time and I don’t know
what it is, but I have policies and backing that link from patent to copyright
to intellectual property. So what
challenges do you see?
MR. TAPLIN: I see two challenges. One of which is
becoming a real issue in the Unites States right now, which is what we call
network neutrality. In some countries,
unfortunately the
Last week a women’s
rights organization called NARAL asked Verizon for a short code in order to
communicate with members who would actually ask for information on women’s
right to choose to be able to talk to their congressman. And they were refused by Verizon to have
access to the SMS system because they said it was political.
It seems to me, if
we are going to live in a telecom duopoly then the old notion of common carrier
that used to carry across the Unites States’ system is going to have to be, in
some way, put into this system in the sense that providers cannot deny access
to the web or to the mobile services for political reasons. That is the first question.
The second question
is, the one that I raised, is the notion from many big content owners that
digital rights management will somehow secure their content forever and that
their content will exist in this perfect digital cocoon that cannot be broken
so they will get paid for their content is, I think, a fantasy.
And so, therefore,
what I am hoping is that some kind of collective licensing agreement can be
done so that the owners of content and the artists that created it will get
paid. Because to believe that there is
some wonderful scheme that a hacker in
MR. YOON: I think that one of the great things about
the environment, the digital environment we are seeing today, is all of the
rapid iteration that is going on in creation and business models. And I think that the speed of change in these
things is something that a quite often makes people a little bit disconcerted,
individual consumers, large businesses, governmental bodies considering
regulation, all of us look at this speed of change and get sometimes a little
bit frightened by it.
But I think that it
is a great opportunity that we see here in the rapid iteration of business
models. And of course, being from the
So I guess what I
think that this participative media has given us all is the opportunity to
observe little laboratories of experience and we should look at the results
first before we make assumptions about what needs to be controlled.
MR. BEAGLEY: Yes, I think there is potentially two major themes; one is organization. So what kind of rules need to be put in place, you know, to Jonathan’s point, to enable the protection of the rights of say content owners and the degree to which you do that and the different s