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Rahul has a good write up about the Facebook developer garage last night. First of all I’d like to thank the hosts- both the local Seattle guys and the Facebook team that flew up for the event. They sent a bunch of people which is a pretty big statement about how seriously they are taking this platform stuff.

A couple of my own observations about the recent Facebook stuff, especially in relation to their platform aspirations-

The big draw here is that Facebook is becoming the magic way that you sprinkle “viral” on anything. Up to now just about every startup I have worked with has spent lots of time trying to figure out how to build some viral mechanisms into their products. No one wants to go spend millions on saturation advertising campaigns (not that those necessarily work so well anymore anyway) so the premise of building some cool small feature and having exponential userbase growth to millions of users in just a week or two sounds great.

Of course building those features and managing the community and social aspects of pulling it off can be very hard (ok, building the feature is easy, its the other part that is hard). By use Facebook’s existing community and viral mechanisms, in theory it should be much easier to latch into their 33M and growing userbase with your app. You still need to build a compelling app and think through why people want to share it, but probably half the work is already done for you (including some of the hard part).

At the same time, Facebook does have a few problems to deal with. First of all the definition of “compelling app” has been a bit loose initially. There are a number of very simple apps that have had great success getting millions of users to sign up with them in a short time, but its hard to see how those are going to stand the test of time and generate any meaningful revenue. On the other hand iLike is probably the definition right now of what it means to be a compelling app, bringing a bunch of rich information to the picture and tapping into some deep needs that are especially social.

Peyman pointed out to me that one of the big things they are missing is revenue share. My initial reply was that with 2000 developers signing up in 2-3 months, who needs to bother with revenue share? The size of the potential audience is large enough that people will gladly build apps without getting revenue directly from Facebook.

But what this is missing is the issue of alignment of interests. Right now listening to some of the people building Facebook apps, it sounds like most of them are just trying to grab Facebook users and channel them into their own things. There was lots of frustration with Facebook limiting amount of notification, but its pretty clear to me why they do that- right now people would spam the heck out of the users if they could. In any case, a rev-share scheme would align developer’s interests with those of Facebook. It worked pretty well for Google AdSense, and although it is not directly the same thing, they could make this work for them.

Early on the host asked who was working on this stuff for their day job. It was striking to me that almost no one raised their hands. Maybe those who are working on this full-time either didn’t have time to show up for this event or were just keeping their hands down. This is not to slight the potential of some of those nights and weekend projects to hit it big, but it also shows how early all this stuff is.

Finally it feels like Facebook is dealing with some real identity / culture issues. They grew up as a college oriented network, but unlike MySpace have focused on keeping things clean and less obnoxious. Yet, many of the developers there said that the audience seems like mostly high-school students, and many of the apps are cutesy in a way that is likely to turn off audiences older than 25. They have a real opportunity right now to catch a broader audience of the country, but at the same time there is a big danger of a backlash if the older audience doesn’t feel like spending time on Facebook means being overrun by high-school kids and content that is tuned for them.

John Cook did a very good write up of the meat of the panel discussion last night.

One of the comments on his post points out that all the journalists said pretty much that the best way to get coverage was to provide one journalist a scoop. From my experience that is close, but its not the whole story.

The key isn’t a scoop, its a unique story. Journalists don’t exist to just write the same thing over and over repeating your message to the word (that’s what bloggers do.. oops). If its a truly huge story (”Microsoft announces next version of Windows”) everyone will print it, just in the off chance that their segment of the audience missed it everywhere else. But for most of us, its only going to work if the journalist feels that they have some special take on it.

So when you work with each journalist, think about what interesting thing you would like them to say. Keep in mind that in the book world, stories have conflict, and while not everything that gets printed in the press has conflict, it sure does make it more interesting. Guy Kawasaki published a list of the nine best story lines for marketing from Lois Kelly. This is a pretty good list, although it doesn’t rank them by how easy of a story they are to spin- David vs. Goliath is one of the most obvious ones and it works for almost any company and is a pretty easy one to believe. Its a good way to get coverage, but its not necessarily the best way to keep the focus on you and the wonderful thing your company does for its customers. Still, its a good one to think about since it tends to come out even if you don’t plan on it.

Of course this all varies quite a bit by the publication. TechCruch tends to favor writing straight profiles of companies. Wired tends to focus on what Kelly calls the “Avalanche About To Roll” of technological/societal change stories (although they do have a good measure of the other types thrown in too). Other publications will focus more on the business aspects.

I thought I’d share a few random thoughts about the Naked Truth event today in Seattle. First of all it was really cool that this event was pulled together with such a heavy-hitting panel of journalists. A big thank you! to the Redfin and Madrona Venture Group folks for pulling this together and sponsoring it. It was a beautiful evening for an outside event and it was a great excuse to get together with a bunch of entrepreneurial folks to chat. I’d also like to mention that I was impressed to see so much of the local VC community show up. It makes a difference when they are present and part of the discussion at events like this.

I felt a little bit disappointed with the panel discussion but in retrospect its probably more about my expectations than the panel itself. With a title like “Naked Truth” and panelists like Michael Arrington of Techcrunch, Fred Vogelsten of Wired (who was involved in the recent “naked” issue), and John Cook who writes for the Seattle PI business section and (to me) more importantly writes the John Cook Ventureblog, I was expecting to dig a bit more into how the Internet as a communication medium has changed the relationship between the press and the industry. It felt like the panel mostly covered some great PR basics (and reading the announcement again thats all that was promised). All of it was really good stuff and it was great to hear this stuff from real journalists.

Of course the great thing about “the Internet as a communication medium which has changed the relationship between the press and the industry” is that we can continue the conversation beyond the event itself and I can post my thoughts at more length on here.

One question from the audience was something along the lines of “should you try to get your story told in the WSJ or just aim for the local press”. On one level the answer to that is fairly easy. If your story is newsworthy enough to make the WSJ, you would be a fool not to get that coverage. They have huge reach, and the credibility of being mentioned in the WSJ can be critical. That is pretty powerful.

Yet, let me make a counter argument. If you go to the “Naked Truth” page, there is an interesting distinction between the 5 reporters. 4 of the 5 have their names linked to their blogs (ok, Fred’s is a bit stale and Tricia shares a blog with 4 other reporters as far as I can tell). But Rebecca Buckman’s link is to her name on Technorati. Follow it and you find lots of mentions of her (and for right now of this event) but nothing BY her.

Now, the WSJ isn’t completely an old-media dinosaur. They have a huge web-site and can proudly say that they are one of the few in the world that have managed to run a profitable content-subscription business on the web (it is rumored that the NY Times is about to give up on their Times Select subscription). But the subscription site puts all their stuff behind a closed door. How often will anyone ever link to it? It has power on its own since it comes with the strength built up over decades of the WSJ, but it doesn’t exist as part of the web.

Compare that to John Cook’s blog. Frankly, for a long time the business sections in local newspapers (IE- not the NY Times or WSJ) have been in a rough spot. Most business professionals read one (or both) of the two “national” papers, and it seemed like too often local business coverage was trending towards the equivalent of “human interest” pieces. Not that there is anything wrong about those, just they aren’t going to be considered important.

I found out about John Cook, not from his newspaper writing, but from his blog. Blogs of course have that interesting characteristics that they all link to each other, and I started seeing links to John’s blog and pretty soon I subscribed to it. Because of the lightweight mechanism and frequent updates I’m sure he gets to cover a bunch more than he would be able to write in the newspaper. For me, I get this much better picture of the scope of venture activity in the Seattle area. It puts him and the whole PI business section on the map, and that’s the map that covers the whole Internet, not just Seattle.

I don’t mean to overstate the case and suggest that mention by John is more valuable for a company than a mention in the WSJ. Just that its not so clear cut anymore- the same thing that has put the power to publish in the hands of non-journalists also is a powerful tool for the pros. And its worth saying that I think there continues to be an important role for professional journalists- I’m not at all in the camp that seems to be saying that somehow a bunch of random people typing away can do just as well as someone with real training and experience at finding out the real story.

I’d also point out that there is a business dilemma here. Professional journalists deserve to be paid for their work. Especially given blog readers which don’t show your sites ads, its much harder to get paid for writing on a non-subscription blog. I’m a proponent of the right to charge for software that has value and this content should be regarded in a similar way. Yet the right to charge for software isn’t always the same as the practical ability to charge for software. As an entrepreneur you are faced with the unpleasant reality that pretty much any consumer facing web-site is going to have to be mostly free and you need to figure out how to monetize it some other way. The usual technique is to follow the lead of the 1st National Change Bank.

The other topic that was mentioned, but I would love to explore more is ethics. Arrington did mention this a bit, both in poking at the WSJ’s potential massive conflicts if they get bought by Murdoch as expected and also being straight up about his goal of making a buck for himself. It feels like one of those situations where both the traditional journalists and the new-style ones are struggling with what is appropriate in this new medium. Bloggers run with different rules than the traditional journalists have, but I’d have to assume that the professionals feel some pressure to adapt to compete for that hot story. At the same time they feel the pressure of the corporate consolidation of their industry and the pressures that inevitably flow to the editors.

Finally I’d like to mention a foundational question that doesn’t get asked enough. Why does a start-up want to talk to the press? Getting lots of PR seems like a given for most people (”there is no such thing as bad press”) but without thinking about your motivation a bit it is hard to focus to get the right kind of coverage that meets your goals.

Press can give you two things- the first is distribution. In the old days distribution was cutting the deal with Egghead so your boxes showed up in every store and some people might buy them. Today getting mentioned to millions of people is more valuable since for many businesses they can reach you from any web-browser if only they have heard of you and have some reason to type the name of your site.

The second thing they give you is credibility. If someone randomly visits one of my sites, the chances are pretty high that they will head somewhere else without even a single click, and are overall fairly low that they will trust me enough to sign up for an account. On the other hand if Wired just wrote a glowing article about some great new service and someone is going to check it out, they are much more likely to check it out carefully and sign up for that account.

Talking to the industry press is more about developing business contacts and financing than attracting customers to your site. Of course, these two points still apply.

My friends over at Jackson Fish shipping their first web app- an online virtual flower shop. Its been especially interesting following the commentary about this. All in all the reviews have been glowing and I think its a great testament to Hillel, Walter and especially Jenny’s design skills that they get consistent praise for the look and feel of the site. The funny thing about design is that its very personal and driven by taste so its pretty rare and special to pull off something that gets such widespread appeal.

At the same time I think a number of people appear a bit confused by how this speaks to the future direction for the Jackson Fish bunch. In the technology circles we tend to either focus on things that are technically impressive, or at the same time we appreciate something that has a great obvious business model capturing millions of users in weeks. This is neither. The notion of building something as a long term company, not to get bought up is so rare lately. Not trying to hit a huge home run every swing but aiming for a bunch of great singles, doubles, and ultimately a bunch of runs.

I’m a bit disappointed with uncov, one of my favorite sites to read lately. They were way too nice in the write-up today. They didn’t even use any obscene-word + meat phrases in the write up??? Of course uncov does get big points for the reference to the underpants-gnomes business plan, one of my favorites.

We watched “The Smartest Guys In The Room” Enron movie tonight on the NetFlix on-demand service. First of all it was a bit ironic watching a movie that covered the BS Blockbuster movies-on-demand (via the Enron “bandwidth trading system”) on Netflix’s real version.

One thought occured to me- the type of schemes that Enron used to do fake accounting to pump up their profits remind me of the kind of schemes that the Hollywood studios use (in reverse) to make sure that films never have a profit and thus they don’t have to pay out percentages to various folks who have a stake in the film. For those that aren’t familiar with it, having a percentage of the profit in a typical film has become a real joke since even films that rake in $100s of millions of dollars world-wide somehow always end up not making a profit. Strange that the studios keep paying for them when they never make any money?

Anyway, post-Enron and in the Sarbanes Oxley accounting environment, I’m amazed that they still get away with this stuff? Most of the studios are big public companies. I thought with all the new rules you weren’t supposed to be able to pull anything like this off anymore? I wonder if the execs and directors of those media companies are personally liable to criminal charges if irregularities are found now and if so you would think they would start changing the system.

The Ponderings of Woodrow writes about the upcoming NetSuite IPO. He points out a couple of interesting down-sides of this offering- Even after the IPO, Larry Ellison will own a majority stake, they have only one data center and no redundancy support for their clients, etc.

I have some experience with NetSuite from the Pure days. Granted this was over a year ago, but NetSuite was a disaster. They sold us a bill of good promising that we could use their service for our ecommerce and that they were providing a flexible platform we could build on. It turned out to be the typical vapor-sale. They had no platform that you could integrate your own apps with in any meaningful way and most of their own infrastructure was immature and not ready for anything but the most narrow scenarios that they had built for. Given the market they are in, hearing things like their lack of any redundancy beyond that one data center is totally consistent with our experiences.

All that I can say is that I’m amazed that a company like that can IPO. Its pretty clear that its only kept afloat on Ellison’s money and name.

Over on the Jackson Fish link blog Hillel comments on this post about how companies increasingly need to compete on their ability to maintain complex hardware systems that “As best I can tell this is only true for an ever-shrinking category of very large software companies. The virtual hosting companies are scaling to larger and larger heights and making even very large deployments more cost-effective to outsource. I don’t know that this trend will stop any time soon.”

Hillel, Walter and I were talking about this over lunch the other day and it feels like a pretty interesting topic, partly because the industry is in such flux over these issues.

Maybe its a cop out, but I’m going to fall back on “it depends”. It depends on the technology you want to deploy, it depends on the business requirements and costs of your situation. Just as some people make a mistake in approaching web-development in a “do everything with some specific approach and a relational database” mindset, a one-size-fits-all approach to hosting is a mistake, at least at the moment (its possible that technical and business progress will change this eventually).

If your business needs only require mostly static web-sites, heck, you will probably be fine with one of the $10/month hosting accounts. On the other hand if you need a very dynamic environment where for one reason or another you potentially need to host multiple things in different virtual machines with the ability to scale things up (storage in addition to CPU), I’m not sure that any of the existing hosting solutions will meet your needs. My experience with them is that they tend to have some degree of inflexibility, either in storage or in adding additional compute resources. If they do let you scale up your needs, are they as cost effective once you are using the whole box instead of a time-slice of it? Can they support load-balance across more than 1 machine when you need more resources than a single box can handle?

Furthermore, its fairly important to look at these things in terms of the business situation. What’s the cost of being down for 8 hours? What’s the cost of having to do a few extra days of development to fit into the constraints of a hosting system? What’s the cost of hiring the ops guy to run your own machines? How much ops support are you really getting from the outsourced host? These factors can go either way- if you have a good hosting provider that matches your technology stack pick, that can be a big help. Or Hillel and some other friends have even pointed out that it often is a good business decision to pick the technology stack based on what you can host efficiently. Realistically development for whichever stack is mostly similar (at least in efficiency- there are plenty of other issues) today, so pick the one you can run well.

Let’s analyze some cost issues. I had a cheap low-end hosting account but have moved most of my services over to a rack-server that I own in a data-center. My server cost me $1600 initially and I pay $60/month at the moment for my co-location service. This server is currently a 2×2ghz Woodcrest system with 2gb RAM and I’m running 3 virtual machines on it for various ventures/web sites. I look at hardware investments are depreciating over pretty much 2 years. By 2 years from now its pretty hard for the hardware to be worth the space in the rack (at least the way I’m paying for it- once you have a bunch of machines the math can work out slightly differently). However I did fairly carefully pick out a system where for an additional $1000-$2000 I can increase my CPU capability by 4-6x, RAM to 6GB pretty easily and I can put in 4TB of disk space. So the depreciation isn’t straight, but I’ll still write-off (in this model) $800 cost to the box this year. So my total monthly cost is $125.

Walter was pointing out that you can get shared space on a virtual server for probably $35/month. This gives you 1/16th of a box that is probably much less powerful than the one I’m running on and fairly limited RAM and storage (I think 256mb and 20GB. I need to double check with him on these stats). I’ve seen others that give similar capabilities for more like $75/month. BUT (a) if you aren’t using the extra capability, it doesn’t matter. My box is probably averaging less than 5% utilization, so there you have it. (b) if the hosted box isn’t fully used by the other people sharing it, you get to burst CPU higher than your 1/16th. So one of the nice things of my overcapacity on my box is the response time of my sites tends to be very good because the machine isn’t busy doing other things. Its one of those interesting things with networking technology that once a machine is loaded requests queue up and they all slow down just like a traffic jam. Both of these situations can benefit from this, although in the shared hosting situation you don’t have control over it- if other people max out their 1/16ths, your machine is under load, tough.

The other difficult factor for analysis is of course the human costs. My solution only costs $125/month (including hardware depreciation). But to get it setup I had to build the machine, go down to the data-center, and install it. I have to manage OS updates (security patches and similar fun), although conversely I get to manage OS updates and don’t need to worry about someone else destabilizing my machine with a new version of something that I’m not expecting. It doesn’t take a lot of hours of work to make the economics look much worse. But just because someone else is doing the hosting doesn’t mean that you won’t get stuck with this- I’ve spent way more hours messing around with the 1and1 servers than with my own- I’m happy to say that since I put my data-center server up last December I’ve never seen it in over 6 months and only very rarely have I had to touch it.

Some other questions to consider if you are relying on someone else for hosting. What’s their backup plan? I’m not saying that mine is great. But if the CPU hosting your service dies, what happens? Are they actually going to be able to get you back online in less than 24 hours? Do they have redundant storage? Do they actually test the backups? Do they have the excess capacity?

The thing is- I’ve never seen one of these hosting outfits that really explains clearly their procedures for all this stuff. Look, you are paying them less than $100/month. Sure they all say they backup. They have redundancy. But to be clear, without a detailed technical document explaining how they manage all that stuff and/or some form of financial arrangement where they compensate me for downtime (which would be unheard of in this price bracket), I just don’t believe it.

Now, the big disclaimer on all the above. This is a space where the technology and business framework is changing rapidly. Its pretty easy to imagine how services like Amazon’s EC2 and other grid compute services will evolve into a space where they can really provide automatic, flexible, scalable pay-per-use computing that can be used to host commercial web-sites and web-services. I’m just saying it smells like its a couple of years away from this stuff being really ready for many commercial applications.

Until that magic service really gets perfected another alternative suggests itself for small companies, although I’ve never seen it work. I could imagine a bunch of the Seattle area startups getting together, investing in a 1/4 rack, 4-6 machines, and a half or quarter time ops person. With virtual machines, a bunch of folks that trust each other, and the right smart design you could pull of something that is both inexpensive, but also really robust, flexible, and safe. Just a thought.

I’m joining the chorus of folks pointing to Marc Andreessen’s new blog. To be honest, if you had asked me a few months ago I would not have predicted to find great stuff coming from him, but I’m genuinely impressed by how insightful most of his posts are. Back in 1998 there was a book published by two business school professors called Competing on Internet Time that was based on lots of interviews with folks at Netscape about their wonderful business and technical innovations. Its unfortunate that this book was published more or less right away because from my perspective most of the insights in this book were complete crap. Many of their best strategies were (from my perspective being right in the middle of the whole Internet war of the late 90s) directly related to their downfall (not that going from $0 to $6B is a failure, but Netscape the company failed at most of their goals of that time frame).

Of course its unfair to judge someone by their perspectives from a decade ago. I’d certainly hope that people would give me a chance to show that I’ve learned a few things over time and Marc’s recent posts hit it out of the park. One of his most recent is on The Moby Dick theory of working with big companies. I can confirm many of his observations. Working inside Microsoft things were often internally much more chaotic than our smaller partners would think and as he observes, we were usually focused on our big competitors (incidentally this is one of the things Netscape did wrong, putting itself onto the big competitor radar sooner than it needed to). We would work with smaller companies attempting to be benign- I can’t think of a time that we ever really thought of a small company as a threat although it would be pretty easily to accidentally stomp on several of them (just through the availability of massive resource to tackle any problem that looked interesting to the big markets). Some times we were especially nice and would even explicitly discuss trying to watch out for the small companies. For example, when launching the technologies that become .NET 3.0 back in early 2003, we knew were were a ways off from shipping (although no one would have guessed it would take until the end of 2006 to ship) and wanted to be careful that we didn’t encourage some small company to jump on board too quickly and potentially be stuck without products they could take to market. Still in the end there is only so much you can do, since you don’t want to express doubt about the products you are launching and as I said no one internally would have thought it was going to take nearly that long to ship. Imagine the fate of the poor company that based their strategy around building on WinFS?

On the other side I can confirm the small-company side having observed how we dealt with our AOL relationship at Pure Networks. Pure cut a deal with AOL early on (before I joined) and that deal was pretty complicated waters for us to navigate, between trying to read the tea leaves of AOL reorgs, trying to understand their motivations, and of course the hurry up and wait phenomena where after months of ignoring us they would suddenly decide they needed something right away and then just as quickly go back into silent running. I do think management did a pretty good job of keeping people focused on not letting the AOL deal take over the direction of the company.

In a reversal of the usual “Boeing or Airbus builds it and the airlines get to pick between the two” model, EasyJet, a European low-cost airline has proposed a new aircraft design. I wonder if this is also a symptom of the reduced competition from only really having two manufacturers. It departs from the traditional of these two organizations in some really important ways and is telling about how the big guys aren’t innovating enough in aircraft design (although the 787 comes close).

EasyJet flies lots of short-hop routes and they presumably know that cruise speed has little impact on gate-to-gate time for most passengers. Fly 50 knots slower and you save a TON of fuel. Also by going with an unducted turbine (its not clear what the difference is between this and a turbine-driven propeller) you get better efficiencies in the mid-altitudes where there is a ton less traffic and less climb and descent times. Those atltitudes are fairly empty because traditional ducted jet engines are really inefficient until you get up almost to 30,000 feet.

Combine that with a composite design (like the 787 but it sounds like they are taking it further more like my Columbia), and a relatively small passenger capacity (for lots of direct flights, shorter bording / exit times) and it seems like you have a real winner. They seem to think they can get Boeing ot Airbus to build it by 2015. I hope those guys are paying attention since it seems like an airplane like this could be a real successor to the 737 (which so far is pretty much the most successful commercial aircraft design in history on a number of metrics from safety to production).

Meanwhile there was an interesting program on NPR this morning about the “overloaded air traffic system”. While I grant that there are some choke points where things get overloaded, it was really disappointing to see the bullshit from the representative of the Airline Transport Association. Most of the time, in most of the country there is plenty of extra capacity (although I’ll grant that the controllers are probably overworked and that we potentially have a serious issue with mass retirements over the next couple of years).

The ATA, representing the major airlines, is creating a “crisis” here to mask the incompetence of their larger members. The big airlines are so out of control for a number of reasons, including poor systems, business model flaws (the crazy pricing system), their hub system, and others, that they are flailing around to blame others.

Let me give some examples- I’ve looked at the arrival schedules at the major airports and the same airline will have 100 airplanes arriving in the same 30 minutes. Go figure they have some traffic problems? They are surprised they have delays from this? They also haven’t figured out how to spread to the other feeder airports in a meaningful way. They love to complain about General Aviation (GA) as being part of the blame, but for the most part we are using the OTHER 5000 airports across the country and are in completely different sets of altitudes (at least until that EasyJet design comes into play).

American Airlines is so incompetent that I have witnessed multiple incidents of an airplane arriving only to have no ground crew to meet it and bring it into the gate. Their overall network of flights is so complicated and messed up that every little delay they have cascades into others. You could hope they could figure out how to not have 40 airplanes push-back to taxi for departure at the exact same time at a major airport, possibly even requiring the different airlines to coordinate a bit? But not only can’t they do that, they can’t even figure it out within the same airline- I don’t get why I frequently see a line of 10 American jets wasting fuel in a line out there waiting to depart.

So the ATA guy blames it on the ATC running on “world war 2 technology”. Scary old stuff like radar. What’s so wrong about radar? The modern radar is displayed on fairly new terminals that give the controller lots of data, that automatically identify aircraft by N-number, and all that stuff. Radar is a very reasonable technology to use in conjunction with other stuff, and while granted there have been hiccups in deploying some of the new systems, its just obnoxious the way they try to pass it off as ancient.

Things won’t really get better for air travel in this country until the old air carrier system dies for real and is replaced by the nimble new-guys. Let’s hope that congress can resist continuing to bail these guys out and prolong the situation.

Fun headline, right? Most of you out there are probably saying “duhhhhh”.

Matt Cutts wrote a good piece on his reactions to Privacy International’s rating of Google’s privacy as the worst. And I agree with most of his points (with a disclaimer that I’m not an expert so I don’t know first-hand which specific claims are true or false). However, the bigger story is that Google is going through a similar transition to what Microsoft dealt with in the late 90s when you have an internal group of people dealing with a widening perception gap between themselves and the greater community.

Now, Microsoft didn’t have a tag-line like “don’t be evil”, but for the most part I personally witnessed very little of the kind of thing that people complained about as Microsoft’s evil practices. Sure, we competed vigorously with each products direct competitors, but that’s just business/life. I can’t vouch for other parts of Microsoft like the sales teams or licensing, but for the technical folks in product development, we were all about building great products for our customers and trying to do some great technical innovation. When people started bashing us in public our reaction was very much like Matt’s. We were just doing the same stuff we had always done, doing the same stuff that all the other competitors had been doing, and now all of the sudden we were the evil empire and everyone was out to tear us down, usually (it seemed) unfairly. We would go build something cool and do the quick to market thing, and then get roasted over some security hole, or privacy implication, or impact on some strange enterprise scenario. We would sit around at lunch and gripe about how unfair it was that we got horrible press on some obscure security bug, yet some major hole from someone else got barely a blip of attention.

There are a couple of things going on at Google right now that relate to the extra scrutiny they are getting and some advice that I wish we could have figured out at Microsoft back in 1997 before it all got much worse.

First of all, suck it up. This is an inevitable result of being on top. The way the press and public treats you changes, and you just need to accept that. David vs. Goliath is the most popular story that the press likes to repeat over and over. Folks at Microsoft suddenly realized that while we had thought we were David (Exchange was #2 to Lotus Notes at the time for example), everyone else thought we were Goliath. Once you realize that everyone thinks of you as Goliath you need to do your best to focus on being the gentle giant. David gets to whine about how tough his situation is, Goliath doesn’t.

Second, realize that now that you are on top, you need to execute to a higher standard. Its not just good enough to be more careful than the other guy, you need to lead. Its assumed you have the best infrastructure, best ability to execute so the scrappy “lets throw something out there and see how people react to it” stuff doesn’t fly anymore in the press. If you need any more evidence of both this point and the previous one, I’ll just point out that there was a nice long segment on the Daily Show with Jon Stewart about the Google Street Views feature. To me Google Street Views is fairly innocuous- it doesn’t show anything that isn’t technically in the public sphere, but it has been roasted across the board. If some scrappy start-up did this feature the reaction wouldn’t be nearly the same.

Of course one implication of the previous point is that you now can’t be as agile, or at least its a lot harder. Microsoft hasn’t been slower just for the fun of it, but because they had already learned this lesson, at least somewhat.

Finally Google has one unique problem here. Google’s main initiative on things like these privacy issues are is “don’t be evil” slogan. However, while I hear that the communication inside Google is amazingly open and transparent, Google is a very secretive organization with respect to the rest of the world. Matt is one of the few exceptions, which certainly relates to why his blog is one of the more popular ones on the Internet. So the rest of the world hears a slogan like “don’t be evil” but doesn’t get to see how things actually work. What measures are being taken to make sure that the log files (which have personal information for 18-24 months) are kept safely? Who does information actually get shared with? What policies really are keeping this stuff private? Could a Google employee look at my private Google Spreadsheet “just to debug something”? I’d assume not, but we don’t really know. Or maybe even if they can’t look at my spreadsheet, can they do aggregate analysis of all the data that might leak keywords or something that is confidential?

So it all comes down to Google asking us to “trust us, we won’t be evil”. But given a society where the administration asked us to trust them that they wouldn’t break any civil liberties protections in their pursuit of terrorism (and their political enemies), most people are understandably a little bit skeptical. What happens the first time the Google execs are looking at the possibility of missing a quarterly earnings target? They have had an awesome run of growth, but the more you grow, the harder further growth gets, and the temptation to bend a few rules, cross a few lines to keep that stock price afloat/rising becomes incredible. Keep in mind, that while you can argue that Bill Gates, Sergei and Larry don’t personally care about the incremental net worth, many people in their organizations DO, and they all know that if it goes south they risk the whole organization unraveling and any of these guys would resort to extreme measures to stop that from happening.

All in all my best wishes are with the Google guys on this one. They have built a great company amazingly quickly and have so far had a decent track record getting out in front of other growth issues faster that Microsoft did, although at the same time their growth has been so meteoric that they have to react even faster. It will be interesting to observe how they tackle this- come to embrace that they are a big company and adapt to that, find some novel way to tackle this huge business challenge, or ignore the whole thing and go down in flames (or at least suffer a little bit).