Notebook 11.27.11: AKAM, Datcenter Jobs and Bitcoin

AKAM: Is rumored to be buying Contendo.  Check mark on the thesis that AKAM would be a buyer not a seller and if they are buyer of a site acceleration service, that makes more sense as site acceleration is a high margin business.

Datacenters: Again we are reminded that operators of warehouse scale data centers would really prefer to run them lights out with minimal staff.

Bitcoin: Really interesting article here on Bitcoin if you want to take the time to read it.  It reminds me of something I wrote in late 2006 and updated in January 2007 about Second Life on my old blog.  Here is the section with the January updates marked:

(1) Web 2.0 (Broadband) Is Affecting Culture and it is not only YouTube.com

Avatar web sites are changing cultural elements.  People can create characters and exist in a world doing things they are unwilling or unable to do in their real life. Koreais the broadband capital of the world.  The government funded the basic wiring of the country, which was not overly difficult considering it is a peninsula, mountains in the middle and most people live on the edges of the horseshoe and it is geographically small compared to the US, China and Russia.  Web 2.0 is in full bloom inKoreaand the ability to have cheap and readily available broadband connections has affected how people use the internet.  Avatar websites are hugely popular inKorea.  Video gamers have become as famous as musicians, movie stars and sports heroes.  Avatar web sites inKoreaproduce revenue in the hundreds of thousands per day.  Avatar obsessed people commit hundreds and thousands of dollars to their online avatar(s).

<01.29.07 Update>: I was able to TiVo a showing of The Discovery Channel’s program on gaming called the Gamer Generation (on HD Theater).  I was absolutely amazed at the segment that showed the popularity of Starcraft inKorea, corporate sponsors, live TV matches and groupies.  This is coming to you neighborhood faster then you think.

(2) Avatar Sites Are Becoming New Market Constructs

Forget about ad revenues from search.  The Google business model is doomed.  I am only interested in the future.  The future is Web 3.0.  It is a dream evolution for venture capitalists.  I envision a world of thousands if not millions of artificial worlds in which we can all have avatars that exist and transit from artificial world to artificial world.  If I was a VC, I would be out funding Web 3.0 companies.  What is a Web 3.0 company you ask?  A Web 3.0 company is a company that creates either artificial worlds (i.e. Markets) like Second Life or they create businesses inside artificial worlds.  This is an incredible thought because we just added a new dimension to the global economy.  We can have businesses that exist inside artificial worlds.  The more artificial worlds that exist, the more businesses we can create.  Forget about Amazon.com, who cares about the eBay.com model and who needs a just in time supply chain like Dell when you can have a world that is completely artificial.  No more worries about DSOs, inventory turns or same store sales.

<01.29.07 Update>: Recent reports show that this is not only going to happen, but companies and web commerce companies are all trying to determine the path to success.  Here is a link to Sam Palmisano’s use of his Avatar in Second Life to provide a customer briefing (additional links here and here).  If the name is not familiar to you, Sam is the CEO of IBM.  Just when you

If I was a Madison Avenue marketing agency that realized over the past few months that Google is eating their lunch and dinner, I would plan to skate where the money will be.  Google is old world Web 2.0.  The future money is Web 3.0: advertising and economic transactions for content in artificial worlds.

<01.29.07 Update>: Here are two links to a blog discussion on Second Life and a rumor that Google would build a competitive world to Second Life based on Google Earth.  I would think that companies with large server farms that build content delivery or transaction systems over the web are clearly looking for strategies to monetize virtual worlds.  This means that companies like eBay, Akamai, Amazon, Yahoo and Google are going to find increasing competitive overlap in the area of the monetization of artificial assets.

(3) Doomsday Evolution Thoughts

Admittedly, I do not believe all that I am writing, but if we extrapolate the evolution of the avatar evolution to the extreme, imagine what the headlines of tomorrow will be.  If the world of Second Life grows to a 100 million residents (55 times today’s size) and daily currency exchanges grow to $35.7M per day or ~$13B a year, is this business, an industry, a market or an economy?  Understand the broad scope at what we are hypothesizing in this scenario.  This is a venture capitalist dream.  Social networking in an artificial world in which global currencies are exchanged for artificial currencies in which the corporation that owns the artificial world sets the monetary policies!

Linden Labs controls the world of Second Life and they take in global currencies in exchange for Linden Dollars.  The site runs a currency exchange with historical transaction rates.  If you are currency trader think about what I just wrote.

<01.29.07 Update>: Here is a link about in game trading of virtual assets.  I think this is interesting when you frame it with this article on eBay removing virtual items from its auction site.  I wonder if any finds this hypocritical.  The eBay business model is to provide a virtual market for the exchange of goods.  How can they claim that the exchange of virtual assets in a virtual world is ethically questionable?  I know the real issue is tracking the exchange of assets, but it does appear hypocritical and I think deep down eBay is concerned that virtual worlds that are becoming economic constructs for the exchange of goods and services is really a competitive business model.  My prediction, eBay will reverse their policy and open a virtual asset class exchange site.  Long term doomsday prediction, eBay will shrink into background or they will have to add an avatar based component to the eBay experience or link store fronts to sites like Second Life.

Second Life is an artificial world in which the company takes in global currencies in exchange for its own private currency for use in their artificial world.  Did I mention it is an artificial world in which real companies are purchasing property to promote and sell their products?  HelloMadison Ave!  Can you read what I just wrote or are you getting a busy signal on the modem?

What I like the most about artificial worlds is that the companies that own the avatar worlds (i.e. markets) set the exchange rates.  What would happen one day if Linden Labs decided to devalue the Linden Dollar?  Will there be an outcry?  Will Congress hold hearings?  Will a Federal Reserve Chairman of the future ask that Linden Dollars be pegged to the dollar or the RMB or the Euro?   Will Ronald McKinnon write a companion to his book entitled Exchange Rates in the Artificial World?  Cleary there is no comparison between Linden Dollars and global currency exchanges, but the hypothesis is interesting and profound to think about when you consider that avatar sites are in their infancy.

<01.29.07 Update>: It was bound to happen.  Here is a link to some text on the taxation of gaming assets.  I can see it now.  You are going to have to file a 1099-Articfical World Asset Declaration for the IRS every year.  Which artificial world site will be the first to automatically email a 1099 statement at the end of each calendar year with quarterly statements for those players with artificial wealth exceeding a certain threshold?

/wrk

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