Niklas Zennström at VON '07: Innovation needs an open 'Net
I'm here at the Video on the Net conference in San Jose, where Niklas Zennström, on one of his first journeys to U.S. soil since the Kazaa settlement, joined Jeff Pulver and Vinod Khosla this morning in a session dubbed "The Internet Industry in Perspective." Zennström primarily discussed the direction Skype is headed, with a bit of Joost PR thrown in at the end for good measure. Pulver raised provocative points about nurturing creativity and atmosphere for innovation, an untapped $25 billion presence industry, and issuing IP addresses along with social security numbers at birth. Khosla mainly discussed the future of entertainment and communication devices and delivery. My rough but detailed notes of the session follow:
Jeff Pulver: discussed the Network2 Petition for Declaratory Ruling that Internet Video is not subject to regulation under Title III or Title VI of the Communications Act (available from his blog), an attempt to persuade the FCC to take a hands off approach to Internet Video. The hope is for a repeat of the Pulver Order (more).
Announced the winner of his Network 2 "make us an ad" contest [great videos, I'll try to scare up links; ah, here we go], winner got $25,000. Jeff emphasized that we need to foster and keep creativity alive in our technological era. Erector sets and model airplanes, he has a hard time getting his 13-year-olds interested in such things and thinks we need to be paying attention to the way our uses of technology can impact our creative processes.
Vinod Khosla: $1 trillion spent on telecom last year. Some things he's are most interested in are mobile, whether working with or trying to disrupt the carriers. Services over IP -- examples: Ring Central (services for small co's, little $$), Sotto (combining office phone and cellular phone). Ad supported calling?What's next in advertising: today we have broadcast, iTunes, or illegal video distribution. Spot runner does user generated advertising, a la Jeff Pulver's contest. SMS is a bigger business than Google, and it hasn't been exploited. We haven't started to see applications built on the SMS message or mobile phone. 80108 = trying to build 1,000 channels for the mobile phone. Much of this is enabled by hardware and hardware inflection points. YouTube mobile. Wireless is limiting us, and maybe the answer is wireless USB rather than a wireless WAN. 100GB on your phone, through wireless USB. Battery life issues.Mobile TV: shows slide of cell phone displaying video, and projecting it onto a wall simultaneously. This is pie in the sky now but Vinod suspects this is happening. Real time speech translation, telemedecine...there's a lot more to come with this thing we call the phone. Remember P2P: we can never predict where the new growth will be. Don't count on 'Net growth stopping any time soon. Even in the depths of the 2001 bust, bets on IP were proving out. Don't bet against the 'Net. Never stop imagining what the world can be.
Niklas Zennström primarily discussed what's going on with Skype: The vision is all about enabling the world's conversations, which are more than voice. It's video, it's sharing your presence, it's text messaging, it's work space, it's sharing what you're doing, how you feel. Skype is a platform to other things, enabling commerce, directories.Skype's growth from 2003: 4.1 million users in q1 04 to 171 users in q4 06. Skype has been downloaded 1/2 billion times. Growth has been driven by product innovation. Several different trends are enabling Internet communications. 44% of the time we're spending online is devoted to communications. Boundaries between IM and email over time will go away, we think that should be much more one experience. Broadband penetration continues to grow, 70% growth projected between '05 and '09. 107% growth in advertsing and "pay per lead" projected between '04 and '08. A fourth enabler is the mobile handset, there are double the number of mobile users vs. PC users. Core service of Skype is free or very cheap calling. Skype unlimited in U.S. and Canada = $29.95/year for unlimited calls within the U.S. and Canada. Customer acquisition costs very low for Skype due it its existing customer base, so costs can be cheap.
New services: Skype Find = enabling any user to find businesses. Relies on a user generated directory of any kind of business. A great service for the users to find businesses they're interested in. Users rate, review, comment, and edit. Wikipedia model. When listing is displayed, you click to make a Skype call, which they think will enable a business model based on advertising. They call this pay per lead, pay per call.
Skype Prime = enabling Skype users to do commerce with each other. Any expert in a specific topic can sell those services and get paid using sister company PayPal. E.g., someone good at XP to Vista upgrades can offer help, charge the end user, and receive Skype credit for this. Sellers get detailed transaction records. Goal is to connect Skype Find to Skype Prime.
Skype Extras = an ecosystem for third party developers. Enables the development of software plugins for Skype. The users can pay developers with Skype credit for these apps. Skype Extras partners get to pick what license will apply to their work, and get paid via PayPal. There have been over 7 million downloads of Extras since December '06.
Send Money = enables Skype users to send money to each other. A lot of people using Skype are people who have friends and family on the other side of the planet. You can send money home, reimburse your friend who picked up the bill, etc. This connects the Skype community with PayPal and creates really interesting synergy. We were excited about his because it takes the communications one step further, into a transaction. To send money, you select a user, right click, and select "Send Money" as opposed to sending a file. The receiver gets a notification like a voice mail -- but nicer than a voice mail, because you get money in your PayPal account and are really, really happy. (Jeff Pulver: "Western Union reborn.")
We think this whole platform called the Internet is just enabling more and more communications and richer ways of communicating. I foresee in the next few years we will have much better quality. What this is all doing is making the world a smaller place. It's enabled by innovation, and by having an open Internet that permits people to innovate all over the world.
Q&A with whole panel: How much do IP rights matter?
Pulver: some people on this panel didn't care about IPR because it let Kazaa happen. Sometimes it's better to ask forgiveness than permission. Let the innovation happen and pick up the pieces later.
Khosla: echos Pulver.
Zennström: I care a lot about IP rights (Now. Joost). We need a balance between protecting innovation and protecting creativity.
Q: Where do you stand on innovation these days? Is anything really new, or are old ideas recycled?
Khosla: I don't view the fact that an idea has been tried before as a reason not to fund it again, but the most successful and visible companies come from new ideas that deliver new capabilities. One of my favorite ideas is iScoot that works with Skype to put your presence on your cell phone. Right after you have presence, you want to control it. The idea of your agent in the network that might decide which calls to block, accept, etc.
Pulver: the concept of presence I do believe is a $25 billion opportunity for someone to nail and get right. Bell Labs gave us great ideas, but extracting them hasn't panned out. I still don't understand why I spend $4,000 in roaming charges when I visit a foreign country, where are the soft clients? And if you are going to spend $6,000 in a country during a visit, you would think the cellular cos would get together with the tourist bureaus and, like casinos, subsidize your return trip. Great potential with agents to let callers know if you're sleeping, having dinner, do they really want to interrupt you anyway? You look at innovation and change and invention, and if you're not convicted to it you're not going to get anyone else to believe it either. I've started companies where no one connected with the product had any experience in that field, because they don't know you can't do it. You don't pay people for the nos, you pay them for the yesses and the whens. You want to be unbound, embrace the innovation and change, stay away from people who bring in the practical reality of the world around you.
Zennström: describes going to investors telling them they wanted to do IP telephony. It was hard, but they were persistent and kept going. Had no experience with telephone systems; when you have a completely different approach, that's when you make the quantum leaps. Pulver: remember the first airplane was made with bicycle parts.
Question for Zennström re extending the Carterfone initiative to mobile, or Cellular Carterfone.
Zennström: We'd like to see mobile networks opening up much more to foster innovation.
Question for Zennström re Skype via WiFi.
Zennström: We see all IP communications are complementary with each other. The price is a little high on the first generation products, but there's good uptake nonetheless. The more open access points you have such as with FON, the healthier the ecosystem. There's still a long way to go. I'm encouraged but it's quite early days.
Pulver: the mobile phone industry has certain things that work right, including roaming even if they charge you too much. When we get to the seamless roaming of unaffiliated hot spots the impossible becomes real.
Q: Will there be a universal Internet device that stays with us?
Khosla: I've always believed that whether it's your phone or your PC, what you really want is a virtual version of it that's always with you and on the 'Net. I suspect there won't be 16 devices but 1 or 2. Things like software phones that follow along with you.
Pulver: if IPv6 ever happens, then everyone has an IP device, then your body becomes a subnet (and of course you can be tracked everywhere). I wouldn't be surprised if 25 years from now when you're born, in the States you have a social security number and an IP address assigned to you.
Zennström:: today you have one device called a smart phone that is multifunction, but the form factor is not the best. Thinks that there will be the same discussion in 10 years because the standalone camera, for example, will always be better than the one in your integrated device.
Q: Is use of text on Skype cannibalizing its voice services?
Zennström: We don't see it as either/or, we see it as a combination: text message, response by chat; voice call, complemented by chat. We don't see any of it as cannibalizing. Internally, we use one of the hidden gems in Skype are persistent multichats, becomes a little bit like a water cooler for persistent groups to meet, then you link them to the internal wiki page where you have project documentation, etc.
Question for Zennström re patents and open source.
Zennström: We are filing many protective patents regarding Skype. It hasn't been our favorite prioritization for engineers to do but it's something you have to do. Re open source, we are opening more and more APIs and are always discussing how we can do more to open up and yet protect the integrity of the network and keep out bots, spam, and spoofing, all the things you have on email that we keep out of Skype.
Question for Zennström re Joost and video on the net, and for Khosla re phones:
Zennström: goes back to earlier discussion about innovation and timing. Realized last year that it was the right time for Joost, the right time to bring the best of TV and the best of the Internet together. There's a need to liberate viewers from time restrictions, and to provide a much broader range of content.
Khosla: re phones and batteries, today we do a lot of things on the cell phone. If your proxy told everything to happen on the network rather than the device, which just becomes a display and interaction device, you solve a lot of battery problems.
Some parting thoughts: I bumped into Mary Hodder right after this session and we both thought it was interesting how Joost took a back seat here. I haven't been to this event before but it has a long history as Voice On The Net. Chris Brogan says they have more than 5,000 attendees, and it's an incredibly interesting (nay, bizarre) mix of folks. Shuffle a bevy of Washington policy/telecom aficionados with Brad Templeton, French Maids, and Skydiving Podchicks, and you're never quite sure what's going to happen next.
[tag: von07]