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Mobile – Facebook And Google Can’t Live With It And They Can’t Live Without It

zuckerberg

Editor’s note: Guest author Keith Teare is General Partner at his incubator Archimedes Labs and CEO of just.me. He was a co-founder of TechCrunch. Follow him on Twitter @kteare.

Facebook’s Week In Wall Street Hell

This week Facebook did a virtually unprecedented thing. In the middle of its IPO roadshow it modified its S1 filing in reaction to questions it had been being asked by analysts. The modification I refer to stated that Facebook wanted to acknowledge a trend; that trend is the declining ARPU (average revenue per user) being seen in its current quarter. This trend is being driven, Facebook said, by the growth in its usage on mobile platforms and its inability to monetize those platforms in the same way, or at the same rate, as its desktop/laptop offerings.

The previous iterations of the S1 had all contained the possibility of this trend. Even the likelihood of it. But the actuality of the trend was noted here for the first time in the S1.

The Street Knows The Truth

This is a company about to sell shares at a multiple of earnings that dwarfs companies with massive revenues, profits and growth rates – like Apple’s. Facebook’s multiple is of a size that is traditionally only justified by high growth rates. And now “the street” has picked up on the fact that the rate of revenue growth is declining as traffic migrates to mobile. It is even feasible, if this rate accelerates that revenues could fall in absolute terms, as they did in Facebook’s most recent quarter. The street is not happy.

This is a historic event. A high growth company entering its IPO whilst its revenue growth decelerates amidst a huge and structural change in the usage patterns of its product is not the norm. Especially when it is the biggest IPO in US history.

Amidst the rhetoric that the IPO is over-subscribed, one wonders if the shares can possibly be worth what people are being asked to pay for them. I am not a stock analyst but I think buyer beware is not an unreasonable conclusion to draw from these events and the fact that more than $5 billion of insider money is selling at the IPO price may mean that there are some smart insiders who know the risks.

It isn’t about Facebook, or the IPO, its about Mobile and the future.

Yet, this weeks events are about more than Facebook’s IPO and the issues are far from new. Here on TechCrunch we have documented the impact of the rise of mobile and the end of Web 2.0 for some time, stressing that Web 2.0 era companies, running SAAS like cloud services, will be threatened by Apples success in driving large numbers of us to primarily use mobile devices, in an app-centric, message-centric world. In Google’s case they are contributing to and suffering from the problem simultaneously through the success of Android.

On August 27th 2011, I wrote “Smart Mobile and the Thin Cloud” in which I said that there is a trend in play that:

“…will transform the entire software ecosystem over the next 5 years. The changes will be so dramatic that the current discussions of a bubble will appear silly. Huge companies will fail and even bigger new companies will be formed”.

The article predicted Facebook will be challenged by the growth of mobile devices and the impact of that on the way users interact with data.

On January 26th this year, in “Google, Look out Behind you” I said:

“Apple has a platform that will soon be numbered in the hundreds of millions. Every device has communications built-in, personalization built-in, media capture built-in. And with iCloud, there is now a place to store the output of each device. How relevant is the Facebook hosted social graph in that world? How relevant is the web ecosystem that Facebook connect has helped penetrate? It seems likely that Facebook will have many of the same challenges as Google as it contemplates the rise of Apple, and the rise of mobile.”

A few days later – on February 4th – in “Facebook – Run from the Bulls” I said:

“Google’s present – and Facebook’s future – involves the painful fact that the very success of mobile platforms in helping human beings be productive, on the go, has a negative impact on the desktop-based advertising programs of the past 10 years. Mobile growth impacts web advertising revenues, except of course for Apple who make money from hardware and software and so benefits from these trends. The reason is simple. We do less ad-centric activities on mobile than we did on the web. And we are less likely to click away on an ad when we are focused on a specific goal on a largely single window device.”

Then, on April 15th in “The Mobile Paradox” I wrote:

“I believe what we are seeing here is the start of a secular trend that represents nothing less than the end of the web 2.0 era where we all consumed services through a browser on a computer. Replacing that era is a new, app-based, message-centric mobile Internet. In this new era the essential unit of advertising (a page based ad, whether text, display or anything else) is simply the wrong monetization vehicle. Something new has to emerge.”

Death or Mobile?

Facebook is not alone in being threatened by these trends. Google has missed its “Cost Per Click” numbers two quarters in a row now – for similar reasons.

The real question is whether Facebook and Google understand the scale of the problems and how to address them.

There are only two possible answers.

  1. Despite all of the above Facebook (and Google) know well what the problems are and will figure them out in time.

Or

  1. Facebook and Google go the way of the Dodo (as predicted in Forbes last week). Just as Web 2.0 killed Yahoo as a growth company –  due to its inability to adapt – so Mobile will kill the Web 2.0 giants

I think 1 is more likely than 2.

Why the belief? Facebook did another thing this week that is highly relevant to this issue. It launched its own app store. Facebook’s app store enables an app developer on either Android or iPhone to use Facebook to trigger users to visit the iPhone app store, or the Google Play app store, and install an app. Facebook becomes possibly the primary way that happens. It may drive millions of app installs across many platforms. These installs are not free, they are pay to play.

I think of the app center as providing Facebook with a new type of advertising format – an ad, with an action (an install), and a price on success.

As Larry Page noted on Google’s earnings call this quarter, mobile demands new types of ad format. He cited “click to call” as an example. Both Facebook and Google will begin to evolve ad units that are a better fit with the user experience on mobile, and ones that reflect the customer goals or the advertiser better. So far, ad formats on mobile have been simply copies of tried and trusted web formats, poorly suited to the new environment.

Option 2 – death of the Web 2.0 giants – only seems to be likely in a scenario where these companies fail to understand that their web pasts count for nothing in this new mobile world. This week, if anything, has served as a huge reminder of that.

Facebook (and Google) will most likely, by building or buying, evolve their monetization strategies to better suite the mobile future. It may take time, it may be painful, they may even fail. But try they will and try they must. Facebook 2.0 will try to kill Facebook 1.0 and Google 2.0 will try to kill Google 1.0. It’s not a good time to be going public, or to be public. But, mobile is the future – they can’t live with it, and they surely can’t live without it.


Mobile – Facebook And Google Can’t Live With It And They Can’t Live Without It

It’s Not About Instagram — It’s About Mobile

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Editor’s note: Guest author Keith Teare is General Partner at his incubator Archimedes Labs and CEO of just.me. He was a co-founder of TechCrunch. Follow him on Twitter @kteare.

It has been more than a week now, but Techmeme today is dominated by Instagram related headlines. Was the Board involved? Did Marc Andreessen know? Did Instagram take the $50m from Sequoia and others before agreeing to be acquired? Was $2bn the right ask? Was $1 billion cheap or is it a bubble?

These are soap opera-like questions. Interesting? For sure if you have insomnia. Deep? Not really.

A week after the acquisition I think we all need to be stepping back and reflecting on the meaning of the deal as it relates to our future. Actually, if we do that, many of the other questions do become easier to answer, and possibly more interesting.

So, here goes.

Facebook got Instagram cheaply.

Instagram was a cheap deal for Facebook. Focusing on the dollar amount is frankly meaningless unless you were an investor or employee in Instagram. The only really important number is that the deal represents 1% of Facebook. The $1 billion number arises based on the assumption that Facebook will IPO at about a $100 billion valuation (which may be conservative).

1% of Facebook is so little to the founders and shareholders of Facebook that the deal could be done and agreed over the weekend with only a minimum of Board involvement.

There is no bubble

There is definitely no bubble here. For Facebook to acquire the mobile DNA represented by Instagram (not unlike the DNA they acquired when Bret Taylor’s FriendFeed was acquired many moons ago) for 1% of the company is a cheap deal.

Mobile is a life or death play for the Internet giants

A cursory glance at the Facebook S1 filing should make clear how important mobile is to the company:

Growth in use of Facebook through our mobile products, where our ability to monetize is unproven, as a substitute for use on personal computers may negatively affect our revenue and financial results.

We had 432 million MAUs who used Facebook mobile products in December 2011. While most of our mobile users also access Facebook through personal computers, we anticipate that the rate of growth in mobile usage will exceed the growth in usage through personal computers for the foreseeable future, in part due to our focus on developing mobile products to encourage mobile usage of Facebook. We have historically not shown ads to users accessing Facebook through mobile apps or our mobile website. In February 2012, we announced plans to include sponsored stories in users’ mobile News Feeds. However, we do not currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven. Accordingly, if users increasingly access Facebook mobile products as a substitute for access through personal computers, and if we are unable to successfully implement monetization strategies for our mobile users, or if we incur excessive expenses in this effort, our financial performance and ability to grow revenue would be negatively affected.

So, the true meaning of the acquisition for Facebook was that it represents an inexpensive bet on helping the company face up to its challenges on mobile.

Mobile innovation will disrupt and build enormous value

Now, having said that, $1 billion is a lot of money. And the size of the deal represents proof, if proof was needed, that mobile software innovation will drive real value in the years ahead. Instagram represents the iconic deal at the beginning of a new era of mobile computing, characterized by consumers using devices to capture and share their lives with each other, and having no need of desktops or laptops to do so.

Instagram is the Netscape or YouTube of the new era

Every era has its iconic deals that signify the start of the era. In Web 1.0 it was the Netscape IPO; In Web 2.0 it was the acquisition of YouTube. In the mobile era it is the acquisition of Instagram. This is the first, and will not be the largest, deal of this new era. Already there is talk of Square being valued at $4 billion. Others of this size are surely coming.

Web 2.0 is over

The key takeaway from the last week is that Web 2.0 is now firmly in our rear-view mirror. Consumer adoption of powerful mobile computing devices and their adoption of the services that the mobile era brings means that innovation and value will now largely be found in mobile software and services, and mobile’s disruption of real-world businesses as well as of web 1.0 and 2.0.

The numbers are clear and compelling

The numbers support this thesis. Kleiner Perkins Caufield & Byers’ Mary Meeker, a regular analyst of the growth of the mobile internet, has documented it recently, showing both internet traffic and device sales beginning to eclipse the volumes for desktops and laptiops. But, and this is huge, we are only at the beginning of this era. The number of smart phones is still tiny compared to feature phones. We only just reached the point where monthly sales of smart phones eclipsed feature phones in the US. Over the next few years billions of smart phones will ship and be used by consumers to manage and record their lives. Enterprises will discard dated architectures to empower employees to use mobile for most tasks. Governments will use mobile to deliver services to citizens. The world is not going to stand still.

Mobile or death.

In all of this existing businesses will either be reinvented or die. Even relatively recent Web 2.0 services will fall into disuse as this trend grows, And re-invention will certainly require mergers and acquisitions. New behemoths will be born that will not want to be acquired – the Yahoo, Google, Facebook sized companies of this era.

All talk of bubbles is both mistaken and perplexing when you examine the real trends that are unfolding, unleashed by the innovation at Apple, and others. Fasten your seat belts. We are about to take off.


It’s Not About Instagram — It’s About Mobile

The Mobile Paradox

mobile-addiction

Editor’s note: Guest author Keith Teare is General Partner at his incubator Archimedes Labs and CEO of just.me. He was a co-founder of TechCrunch. Follow him on Twitter @kteare.

Google’s stock declined by over 4% yesterday. Many have put this down to the company’s decision to create a non-voting class of stock as part of a control-retention exercise as the founders sell shares. But more is going on here.

In the same week as Facebook acquired Instagram for $1 billion as part of its efforts to be more relevant on the growing mobile Platform, Google, for the second quarter in succession, suffered a decline in “Cost Per Click” rates that is in large part attributable to the shift in traffic from the desktop/laptop to the mobile platform.

wrote about this last quarter. I also posted on my personal blog in between quarters.

I believe what we are seeing here is the start of a secular trend that represents nothing less than the end of the web 2.0 era where we all consumed services through a browser on a computer. Replacing that era is a new, app-based, message-centric mobile Internet. In this new era the essential unit of advertising (a page based ad, whether text, display or anything else) is simply the wrong monetization vehicle. Something new has to emerge.

It is worth examining the earnings call in detail because these points were clearly articulated on the call by all Google executives.

Patrick Pichette, Senior Vice President and Chief Financial Officer at Google, speaking on the company’s quarterly conference call this week, said the following:

“Aggregate cost-per-click growth was down 12% and down 6% quarter-over-quarter.”

The statement represented the only negative on the call which had generally reported a very strong financial quarter.

Pichette was compelled to explain:

“So given the recent trends in CPCs and clicks, allow me to spend a bit of time today addressing this. The most important thing for you to understand is that our business is healthy. We believe that shifts in CPC and paid clicks taken independently really do not reflect the fundamental health of our business.”

What? This was a huge quarter and the CFO is almost pleading with the listening analysts to believe that Google has a healthy business. A cynic would quickly draw the conclusion that there is smoke here, and so – most likely a fire.

So Pichette explained more:

“Now allow me some details on this. In general, we attribute these trends to a combination of really 5 core factors. Those include FX, and then there’s 3 mix effects. For example, the mobile versus tablet versus desktop shifts, emerging markets versus developed markets shifts and even the basics of google.com versus our network. And then finally, ads quality changes which is also a huge factor.”

“Many in the financial community have tried to isolate or often I hear pick one of these among these factors as the primary driver for CPC or click trends. Some even say it’s about — all about mobile. Others suggest that it indicates weakness in demand for Google advertising. Well, on the latter point, I want to be very clear that that’s not the case.”

On the latter point indeed. What about the former point? Let’s repeat it: “. Some even say it’s about — all about mobile.” 

Count me in the camp of the “some”. I don’t say this in any negative or gloating spirit. But isn’t it obvious? As Android, iPhone and other mobile platforms grow we are moving away from the page based Internet. The new Internet is app centric and often message-centric. The number of users engaged in this app-centric and message-centric Internet is both huge and their use is growing. People used Instagram for images, not Flickr or Picasa. They use Foursquare for checkins not Facebook. And they do so in large numbers and they do it a lot.

In this world, page-based ads, interstitials, pop-ups; pop-under; pop-over; and most of the other web era advertising units make absolutely no sense. And this is irrespective of whether they are text ads or display ads. Sure some will attract clicks, but for the most part they are ignored or worse still hated. And advertises will not see the ROI in being in the mobile world using those methods.

Being a web-era company, heavily invested in a web-centric content and application ecosystem is becoming a liability. Facebook is challenged by this shift – hence Instagram; Google is also challenged by it. Yahoo has effectively been killed by it.

Listening analysts on the call didn’t miss the opportunity to focus on this point. At about the 35 minute mark on the call Mark Mahaney from CitiGroup asked:

“And then just real quickly on the mobile CPC issue. Can you just comment again on over time, over what period of time you would expect mobile and desktop CPCs to merge or do you think that’s a realistic expectation? What would cause that to happen or not?”

Pichette answered:

“Think of it as so much upside for us because essentially mobile is exploding in query growth and the formats themselves are just adapting already a lot and from a relatively crude base to so much more in the future. So that you’re absolutely right that right now, they don’t monetize as well because we’re kind of in what search used to be in 2002, 2003, 2004. So as these formats kind of continue to get better and better, we’d expect much better performance on them.”

Larry Page, possibly perturbed by that answer, intervened:

“This is Larry. I’ll add something, Mark. I think the mobile CPCs — I mean, people always spend their most effort on the major — whatever the major source of traffic or revenue is, and those are growing really quickly, albeit currently, obviously, there’s more on desktop. … The fact that you spend most of your money locally, I think that over time that may actually reverse and the CPCs action may get better. But I think we’re very bullish about that. We’re making a lot of investments in that area, in things like Offers and so on and Wallet. And we’re very, very excited about the potential there, and also Click-to-Call and other things that we do.”

The final question on the call at about 58 minutes was asked by Anthony Di Clemente from Barclay’s:

Just one question for Nikesh or whomever wants to answer it. It seems like even though as you’re shifting to mobile, you have this presumably double-digit pricing step down for CPCs. But in the Display world, certainly, that pricing difference could be even more dramatic. In some cases, by half or 2/3. Prices getting cut on that shift to mobile. And so you guys at Google have the unique ability to compare and contrast the difference in price between like Search and Display and how the two are monetizing relative to desktop. And so any color on that comparison would be appreciated because I think there are folks out there that have a view that actually Search, core Search, monetizes better on that shift to mobile than Display does, and I would love to just understand that better.”

Nikesh Arora, Senior Vice President and Chief Business Officer responded:

“Yes, I mean, I guess — let me try to just explain to it from the advertiser perspective. So what we’re striving towards is advertisers are interested in ROI. Advertisers actually are not interested in whether they’re on the mobile product, the Display product, the Search product on the Web or the Search product on mobile. So what we are fast converging towards is we’re basically sitting down and understanding ROI targets of our advertisers. And then we have immense amounts of inventory at our behest, whether it’s mobile inventory, on Display or Search or desktop inventory or even inventory to our network. And what we are trying to work towards is being able to dynamically allocate across these various products, what allows them to get the maximum ROI.  … In the long-term, we think mobile will monetize better. And we usually don’t see the difference happening on Display and Search as you alluded to. Larry, you want to add something?”

I will leave it to the reader to draw your own conclusions here. But one thing is for sure. Something big and dramatic is happening. Expect a lot more movement in the mobile space as the desktop giants get a better sense of the issues. And as for that Facebook acquisition of Instagram, it may not impact the real threat that mobile represents to Facebook – the threat of falling monetization due to the impracticality of delivering ads derived from the web era to a mobile audience.

[image via 3 Gazet]


The Mobile Paradox

Mobile Address Book—Much Heat, Little Light

fire & light

Editor’s note: Guest author Keith Teare is General Partner at his incubator Archimedes Labs and CEO of newly funded just.me. He was a co-founder of TechCrunch. Just.me is a stealth company in the mobile space and as such Keith’s opinions on this issue are likely to reflect his product focus.

The controversy that began last week with mobile startup Path being exposed for downloading users address books from their mobile device exploded over the weekend.

Fighting the good fight

Nick Bilton at the New York Times opined on the matter and declared Path to have been let off way too lightly due to the Silicon Valley echo chamber and its lack of concern for privacy. Path investors, and my good friends, Mike Arrington and MG Siegler weighed in, to resist Nick’s points, and now Kara Swisher and others have responded.

Oh boy…. Lots of  heat, but where oh where is the light? Well, it is beginning to be demanded.

Om Malik, who I love, has a has a post this morning asking developers who have apps that use the mobile address book to “do the right thing”.

Chris Dixon, angel investor, also has a post  and asks himself aloud:

 I don’t know what the product design motivations are for uploading contacts, but I assume there are legitimate ones.

So, what constitutes “the right thing”?

The address book was stolen by web 2.0, and remains captive today.

As I remarked in my TechCrunch post last week, the address book has evolved over the past 10 years from something that sat alone on your desktop or laptop, usually inside Outlook. Firstly into something shared (Plaxo), then into something mined for intelligence (Xobni) . And since Web 2.0 the address book has become something that is implicitly owned and managed by a service provider – usually Facebook or Google – on the user’s behalf. Of course it is mined too. The big unspoken fact is that Facebook is the biggest perpetrator of address book hijacking. Google + seems to be in the same bucket. Path simply copied their architecture, but because the address book came from the phone the act of “taking” was explicit whereas in Facebook, Google and other web 2.0 services it is implicit – part of the service.

Mobile – Taking back ownership of your friends/contact list.

For the first time the growth of smart phones, and the mobile architecture, makes it possible for the address book to once again be under the control of the user.

The incident with Path last week is mainly unfortunate in that it gave the impression that the mobile software ecosystem will be exactly like the web 2.0 ecosystem – one that requires users address book data to be stored or hosted on a service in order to be usable in various social scenarios. In this sense those who gave Dave Morin (who I have no reason to believe is anything other than a smart well intentioned guy) an easy ride, did nobody any favors.

This weekend Scottish blogger Matt Gemmell showed exactly why what Path was doing is unnecessary and even lazy, leaving aside its ethics. He described a method of building social software on the mobile platform, without compromising on user-facing features. His method (and in truth it is a well-known method) never (yes NEVER) takes the users address book from the phone and only uses partial, encrypted and anonymized data from the address book in order to provide social features like friend finding or matching .

After explaining the use of hashing and anonymous matching algorithms he says:

Everyone is happy. Your social friend-finding features are intact, and every bit as convenient as before. But, none of your friends’ email addresses are ever uploaded (in a readable, usable form) to some company’s server. Privacy is preserved along with convenience. It’s a mathematical miracle.

Peer to Peer through the cloud.

What Matt  is describing here is something I think of as peer to peer networking through the cloud. It isn’t true peer to peer because there is an intermediary. But the intermediary simply does the minimum necessary in order to glue the peers together. This architecture is a very good fit for the mobile ecosystem because it puts maximum control in the hands of each user on the device, without ever needing an all knowing vendor in the middle.

This architecture allows us to benefit from the growth of social features in a mobile context, without jeopardizing that by creating fear amongst users that their private data is being removed – either with or without their consent. The truly human needs being met by the smart phone – to communicate, to share, to discover people and so on – can be realized free of fear.

As Om Malik remarks in his piece today:

Today’s apps are inherently more social and thus by extension more human. The relationships on this social web are going from increasingly virtual to more real. In a sense, these apps have started to reflect our daily lives. As many have said before, we are the social web and the social web is us.

The smart phone can be a massive benefit to us humans if we can develop software for users first. That will require us to focus on different things than we focused on in the web 2.0 era. The events of the past two weeks make it pretty obvious that we need to start with a whole architecture.


Mobile Address Book—Much Heat, Little Light

Addressgate: After The Path Fallout, Whose Address Book Is It Anyway?

Addressgate

Editor’s note: Guest author Keith Teare is General Partner at his incubator Archimedes Labs and CEO of newly funded just.me. He was a co-founder of TechCrunch. Just.me is a stealth company in the mobile space and as such Keith’s opinions on this issue are likely to reflect his product focus.

Addressgate seems like an appropriate name for what is dominating Silicon Valley headlines: Path’s mobile app uploading all of your contacts. Today Michael Arrington suggested that Path delete the data gathered and start over, and now Path CEO and founder Dave Morin has decided to do just that, and apologized.

The past 24 hours of discussion has mainly been characterized by shock, horror or forgiveness. Although all well-intentioned none of these get to the heart of a very significant issue that will only get more important as the mobile and cloud architecture of consumer apps replaces the desktop and cloud combination that has characterized the past 10 years of web services. Beneath the drama there are some big issues. Here I want to try and surface them.

Background to address book issues

It helps to understand what is happening at a macro level in order to grasp why Path was hammered while Google Plus and Facebook largely get a free pass when it comes to the question – “who owns the address book?”

The past 10 years of web apps and services created a set of assumptions about where one’s address book should sit. In the early days of Web 2.0, when Plaxo built an early cloud-based synchronization platform, it was full of controversy. In January 2006 our own Michael Arrington, writing on Crunchnotes, entitled his piece “The Plaxo Virus”, and asked:

“Plaxo, can you please find a way to run your business but never, ever email me again?.”

Subsequent TechCrunch pieces were notably reluctant to endorse the service to say the least.

This was the dawn of cloud-based address book management.

The rise of Web 2.0 and the normalization of the cloud based address book.

Since then Yahoo, Google, Microsoft, Facebook and others have normalized the notion that the right place for your contact list, or “friends,” is in the cloud. Indeed, given the cloud-centric architecture of web 2.0, that is the only place they can be. Almost all of the functionality of these services derives from being able to host the address book and to make comparisons between the address book of person ‘A’ and other people.

Facebook even goes so far as to restrict an individual’s access to the records in the address book. It considers that details like a friend’s phone number or email address are private to the friend, and thus blocks the ability of the address book owner to download the address book from Facebook to their mobile phone or other device. A user has to log into Facebook and look up those details on its web service if he or she wants to check on an email address or phone number. In this scenario Facebook is not hosting your address book, it owns it and merely gives you permission to look it up.

From Web Services to Mobile Apps

Now that we are moving out of the era of web services and into a mobile era, decentralization of one’s address book becomes the norm. Your phone contacts become the center of gravity for your relationships. In this world, mobile-first applications have to make a decision about how to think about the address book.

Now we are mobile, where should the address book sit?

Answer 1: In the Cloud

They can, as Path has done, choose to still host the address book and perform algorithmic queries on it in order to provide a set of services—like friend suggestions—based off of it.

It is worth noting that this decision does not require the download of a person’s address book. That was simply Path’s method of doing it. There are many other ways the goal could have been accomplished. Indeed Path’s decision to host the address book seems old-fashioned and harks back to a pre-mobile era, but it is also normal in that context.

The only real crime, if one was committed, was failure to alert the user.

In a mobile context this becomes an issue because it is taking something from the user. In the web era the user was putting this data onto a service via an explicit upload process.

Answer 2: On the Phone

A second way of thinking about the mobile address book is that its inherently distributed characteristic is a good thing, and the services that utilize it should sit on the device and be under the control of the user. In this distributed model it is still possible to provide services like friend suggestions, but without needing to host the data from the address book in the cloud. The data could remain on the device and accessed through the cloud by other devices instead. That way, nothing is stored in the cloud, it just passes messages back and forth. Clearly this architecture is more mobile centric, more under the control of the user, and not vulnerable to service providers mismanaging a person’s contact lists. In theory such an architecture reverses the web 2.0 power relationship between a merchant and a user but does not reduce the functionality that a user can expect.

This set of issues reinforces once again that privacy is a product issue, not merely a policy issue. Products that empower the user to act on their address book without taking the content of it and hosting it will likely find favor in a decentralized mobile world as it emerges. Those who want to persist with hosting the address book will need to ask for explicit permission again, or face the “Plaxo is a virus” style of reaction.


Addressgate: After The Path Fallout, Whose Address Book Is It Anyway?