Author: Blancer

Ever since he could remember, Ibrahim Boakye had a knack for understanding how things worked. There were things he could just do that no other kids– let alone adults– could understand. By the time he was five-years-old everyone had stopped questioning it, and neighbors were calling on him to fix their broken toasters, irons, or anything that was the least bit mechanical.

By his early teens, he was getting things out of the dump and fixing them for fun. Soon after that, he was teaching himself to code. He’s made an outsized living no one in his family could have anticipated by outsmarting other people on computers ever since. It’s never been about money or even in those early days about doing good deeds around the neighborhood. He gets an intoxicating rush from solving the hardest technical problem he can find and from knowing that he’s the best.

As I sat in a hotel lobby in Lagos listening to his story, I couldn’t help being reminded of Max Levchin of PayPal and Slide fame. Levchin grew up in Soviet Russia and had the same knack, that same innate ability to understand how machines worked. He learned to code on whatever he could find– calculators, pen and paper, old Soviet microcomputers. When his family moved to America, he rebuilt things he found in dumpsters too. Watching the nightly news on a old black-and-white TV helped teach him English.

For Levchin, it was also about the thrill. He once got in trouble with the FBI for cracking video game codes for a Chicago crime boss. He didn’t really think about the fact that he was doing something illegal, he just loved the challenge. And like Boakye, he’s made an outsized living no one in his family could have anticipated by outsmarting other people on computers ever since. His rush also comes from solving the hardest technical problem he can find, and from knowing that he is the best.

But there’s a big difference between the two. Levchin immigrated to the US at 16, went to University of Illinois and was inspired by the example of Marc Andreessen. He moved to Silicon Valley at the best possible time for an aggressive, insanely-competitive coder to move to Silicon Valley. A company as complex and lasting as PayPal was hardly all luck and timing, but Levchin took advantage of being in the right place at the right time and meeting the right people, most notably PayPal co-founder Peter Thiel.

By contrast, Boakye grew up in a poor section of Lagos. In a way, his timing was also serendipitous: The Internet’s emergence in Nigeria breathed new life into an old national scam: The 419 letter. And a new generation was making hay out of the naiveté of millions of new Internet users. For Nigeria’s massive unemployed population– some fifty million people today– this was every bit the gold rush that Silicon Valley was in the 1990s. And the “entrepreneurs” concocting these schemes late night after the doors were locked in Nigeria’s Internet cafes needed a brilliant coder who was more motivated the bigger the challenge. Boakye was one of the best in the country.

Like Levchin, he took advantage of being in the right place at the right time and having the right skills. Only most would say he met the wrong kind of people. At his peak he was making as much as $50,000 per day as a freelancer hacking into bank systems, stealing social security numbers and credit cards, and exposing the Web’s deepest vulnerabilities for Nigeria’s “Yahoo boys,” called that because they were known for using Yahoo email addresses.

Boakye has since left the life of crime, he says. We met my last day in Lagos; one of nearly a dozen interviews I did with current and reformed Yahoo boys in Nigeria. I won’t detail how I got the meetings, because of the elaborate personal assurances of safety. I’ve taken pains to disguise any details about the man whose name is obviously not really Ibrahim Boakye. Appropriately, I got that name off the most recent 419 email I found in my spam folder. Some of the juiciest parts of the accounts I won’t detail here, lest it put the people who personally vouched for me at risk.

Finding Yahoo boys to talk to me was near-impossible; a big change from a few years ago. The 419 scammers used to be the rockstars of Nigeria’s underground world. “Girls wanted to date us because we were smart,” one told me. “We could get money out of white men using only our brains and a computer.” There was also the justification that this was some how a revenge for colonialism; when white men took Africa’s natural resources without consent. And– as is the case with every black market– there was the lure of all that cash. Skills were flaunted in cafes, whole organizations were built out, and even rap songs were written glorifying 419.

It’s much harder to make money today. That’s mostly because Internet companies have made it harder, through restricting mass emails and educating people not to purchase any goods from Nigeria. Most ecommerce sites block Nigerian ISPs. And consumers have gotten smarter, too, the Yahoo boys say. The Nigerian government has also made greater efforts to crack down, under International pressure and pressure from the country’s legitimate tech entrepreneurs who are furious at the Yahoo boys for globally sullying the country’s reputation. The people still doing it have been driven underground, forced to keep a low profile. They don’t talk about what they do even with friends. They can’t trust anyone. One current scammer told me he couldn’t invite friends over because of the noticeable stench in his bedroom from all the stacks of money stashed under his bed.

For most of the day, I sat transfixed listening to their stories. Of course it was impossible to know whether they were telling the truth about everything. But so many of the individual stories corresponded to one another, and the complex systems of scamming were too elaborate to have been made up on the spot. Each boy would start telling his stories shyly, but once he got going he couldn’t help but boast about his methods. Sometimes the hardest thing about committing the perfect crime can be keeping your genius to yourself.

Boakye’s sheer hacker genius was the most astounding. It’s not just technical ability– he tries to figure out how the person who set up the security system he’s trying to break thinks, and outsmart him at his own game. If he can’t crack the software, he studies the hardware and learns its vulnerabilities.

The way he described the chess match with this unknown nemesis reminded me of another entrepreneur in the Valley: Dennis Fong. Fong spent his teens as a professional gamer, better known by the name “Thresh.” He rarely lost thanks to an uncanny ability to anticipate opponents’ moves. Opponents called it “Thresh ESP,” and it earned him six-figure computing endorsement deals. The way Boakye explained how he breaks into multi-national banks was identical to Thresh’s approach. I wouldn’t be surprised if he’s hacked into at least one of my accounts by now just out of curiosity. I asked him not to do anything malicious, and he promised he wouldn’t. But we were both pretty convinced he could.

As a person, I found these meeting more terrifying than my run in with Bones and his machete men in Alaba. As a business reporter, I couldn’t stop the broad smile from spreading across my face as we spoke, even breaking out in laughter once or twice. It’s the same Cheshire cat grin I get when I meet any amazing entrepreneur, anywhere in the world. You know them after five minutes of conversation. And several of these guys just had it. Born into a different circumstance, they could be on the cover of any magazine, ringing the opening bell at the Nasdaq.

This is the darkside of what we know in Silicon Valley: That great entrepreneurs can come from anywhere in the world. Sometimes some of the best technical minds fall into a life of crime. And just like corporate giants can’t keep a hot startup from disrupting them; law enforcement can’t keep people like Boakye from accessing your information.

There weren’t just stunning personality comparisons between someone like Boakye and Fong or Levchin, there were stunning industry comparisons. Like entrepreneurs in the Valley, the industry has evolved to the point where few of them need to be hard-core techies. Today, the Nigerians focus on user experience– put a less euphemistic way, their job is to find the mark and rope him or her in. Any hardcore hacking work is outsourced to Vietnam, India or elsewhere– particularly now that Boakye has retired from crime. One Yahoo boy told me he met his Vietnamese partner online when he tried to scam him. The man wrote back, “I’m not going to fall for this, but I know what you are doing and I can help you.” The world is flat for criminals too.

Don’t let the clunky syntax on these emails fool you. The Yahoo boys I met are masters of human manipulation. The latest scam revolves around online dating. Yahoo boys find a lonely man– sometimes a single man who wants a mail-order bride; sometimes a married one with kids who wants an escape on the side. They key with 419 scams is always finding someone who wants a easy shortcut in money or love. An elaborate relationship over IM begins. One boy I met excelled at these. He says he just closes his eyes and pretends it’s a woman on the other end he’s seducing. He uses carefully constructed porn clips for video chats; other scammers hire actresses to portray the fictional girls.

This Yahoo boy carries on five to seven relationships at once, playing the dutiful girlfriend to each– down to helping them pick out their clothes for work everyday. When one suitor lost a job, he used the Web to help find him an interview and pumped up his confidence to apply. He gave him several months to get back on his feet before asking for more cash. One time, he even sent the mark cash, to show how much he — or “she”– cared. “I take care of them,” he says. “They are the people who feed me.”

He helps build them up; he listens to their problems. He makes them feel loved. He calls each an innocuous pet name, lest he accidentally type the wrong message into the wrong chat window. He asks for a little bit of money here and there, until men are sending him steady amounts from each paycheck. He says it takes exactly one month for a man to fall in love with him, and once he has a man’s heart, no woman can take it.

This isn’t a short con, this is a long term game of constant maintenance. He creates fictional Web pages to back up the fictional girl’s story, so if the man Google’s her, he finds seemingly legitimate confirmation. When he goes to church, he tells them “she’s” going to church. When he makes dinner he tells them “she’s” making dinner. He’s less a 419 scammer, and more a long-distance emotional prostitute, providing a service men appear to be happy to pay for. Like any great entrepreneur, this Yahoo boy knows his customer. “if you get their heart, you have control,” he says. “You white people have very flexible hearts. We’ve seen it. That’s why there can be no true love in Nigeria. Your closest friends rip you off here.” He continued, “I wish I could stop. I’m not into the black man power like some people. I don’t want to make someone sell their house; I don’t want to take everything. I just can’t find a job. If I had a junior brother I wouldn’t teach him. You get addicted to it.”

Just like you have people in the Valley looking to flip products and those in it for the long haul; in the 419 world you have kids who try it out for easy money, and those who commit to it. To be successful today you have to work as many hours as a Valley Internet entrepreneur and have just as long term of a focus. There’s just as much creative problem solving involved; this is something you can’t really teach. A lot of these Yahoo boys told me they’ve tried to take on apprentices, but few of them last. It’s not the glamorous, quick-money world it used to be. Today being a scammer takes smarts and stamina.

Nigeria is undoubtably one of the juiciest markets in the emerging world, and by many accounts the juiciest in all of Africa. And legitimate tech entrepreneurs will be understandably upset about Western reporters fixating on the 419 world. But if they want to stay in Nigeria, they’ll have to get used to it. These kids, the circumstances that created them, and the lasting impact of the damage they’ve done to people aren’t issues the country can shrug off no matter how much it would like to. “We use our brains to get what we want. For us it’s the only way to live and survive,” one boy said. “As long as technology keeps advancing, there is no way to stop us.”

It’s Nigeria’s central issue that it will have to face, own up to, and tackle if the country is going to play a greater role in the global economy. Ignoring it is like ignoring China’s lack of political freedom; India’s deep poverty and infrastructure problems; or the civil war going on in Brazil’s favelas between drug lords and the frequently corrupt policemen cracking down on them. The reason Westerners tend to fixate on these issues isn’t because we’re opting for easy stereotypes. It’s because they are each huge problems without easy solutions. Problems that have to be faced. And you face them by talking to the real people behind them, not by sweeping them under a rug, assuming they’re all two-dimensional villains or dismissing them as a made up stereotype.

One of the active scammers I spoke with is supporting his whole family, including several siblings he is putting through university, so they have a chance at a better life. But one of them has been out of school for years, and still can’t find a job. It’s not a ringing endorsement to go legit. This guy doesn’t feel great about what he does, but he says he has no other option. He goes to church several times a week, where he wrestles with it. He tells himself he is on God’s path, and he has faith it ends with him leaving this life behind.

He’s describing the hope of anyone who is touched by the genius and the opportunity in Nigeria, as I was during my trip. That this stunning raw talent can find a way to stop relying on bilking Westerners out of cash and start using their wily genius to create local jobs.

If you’d asked me a week ago what I thought about Honeycomb, the tablet version of Android, I would have said that it was in very bad shape and that it would be several months before it could even hold a candle to the iPad 2. Because despite my excitement to see Android take on Apple’s ridiculously successful iPad, my experience with the Motorola Xoom — the first Honeycomb tablet — has been decidedly poor.

From day one things were off to a bad start. At first, Android Market would crash literally every time I opened it. The Android team fixed that pretty quickly, but the OS was still riddled with weird bugs: swiping between home screens is laggy, widgets go blank and need to refresh, and there are myriad other glitches that pop up at random. And even beyond the bugs, there are weird quirks in the OS that feel poorly thought out (seriously, why does the ‘Home’ button look like an Up arrow?). But now I’ve had some time to test out the Samsung Galaxy Tab 10.1,  the new tablet that was given to Google I/O attendees and will be available in stores beginning June 8. And after spending the last couple of days using it around my apartment, I’m much more optimistic. In fact, I’m guessing this device is going to do very well, and that it foreshadows a bright future ahead for Honeycomb.

For those that haven’t been following along, there have been plenty of reports suggesting that the Xoom has seen meager sales. Yes, there have been other Honeycomb devices released, but the Xoom was first to market and it had the most pre-launch hype, so it’s no surprise that people are using it gauge Honeycomb’s initial reception. Which hasn’t been great. For example, Mike McCue, the CEO Flipboard, has said that the company won’t be porting its nifty application to Android any time soon because the iPad will continue to own the tablet market through the rest of the year.

But I’m becoming increasingly convinced that my issues and the tepid response to the Xoom have more to do with the hardware than Honeycomb itself, because I’m enjoying my time with the Galaxy Tab much more. I’m not going to do a detailed run-through of the hardware specs (which aren’t my forte), but there are some differences that are immediately apparent between the two.

The Motorola Xoom weighs 1.6 pounds. It has a rubberized back that feels sturdy, but it meets the screen at a fairly sharp edge that doesn’t feel great in your hand. The new Galaxy Tab weighs 1.24 pounds. It has a rounded plastic exterior that feels cheaper, but also feels much more natural in your palm. The difference in weight between the two is no more than a hefty hamburger — and yet it makes all the difference.

Holding the Xoom with one hand isn’t difficult in the slightest, but it isn’t effortless either. You’re bound to feel some muscle strain if you do it for a long time, and if you balance it against your lap (or your stomach if you’re lying down), you’re not going to forget it’s there. The Galaxy Tab feels far more natural. It doesn’t weigh down on you nearly as much, and, as you hold it in your hand, its smooth edges feel more like the coveted iPad 2 (in fact, it’s actually slightly lighter than Apple’s device). These differences sound petty, but given that your interaction with a tablet is inherently physical, they’re important.

Don’t get me wrong: Honeycomb 3.0 on the Galaxy Tab is still buggy as hell. Sometimes I feel like the browser is a game — tap the wrong thing, and you’ll suddenly jump to the bottom of a webpage, or all animations will get sluggish. Even the 3.1 update, which I just tried out on my Xoom and will be available for the Galaxy Tab in a few weeks, doesn’t seem to have fixed all the performance kinks. And Android Market still appears to have fewer than 100 applications optimized for the tablet form factor.

But I think that will change soon. All of the Google I/O attendees (most of whom are developers) obviously now have the tablet, which will probably help give the OS some momentum. And, perhaps more importantly, I think this new wave of better, lighter Android tablets will spur people to actually buy them, so developers will have a bigger incentive to optimize their apps for the tablet.

iPad sales won’t suffer in the slightest (it is still much more polished and intuitive than Honeycomb, and probably always will be). But, just as we saw with Android on mobile phones, I’m guessing Honeycomb’s growth is going to start rapidly accelerating around one month from now. The Market will get fleshed out over the summer, and then things will really get going this fall as even better tablets land in time for the holiday season. In retrospect it will all seem obvious (of course the multitude of available Android tablets will give rise to a large customer base). But I don’t think anyone who has compared the Xoom to an iPad 2 would have called the rise of Honeycomb a given.

Of course, that’s all assuming they fix the damn bugs.

This weekend finds me in London, whirling around in the eye of the book launch storm and with very little opportunity to keep track of what’s making news in the world of technology.

Fortunately here in the UK there’s one tech story that’s impossible to miss: an anonymous Twitter user has been posting details of legal injunctions, taken out by celebrities to keep their alleged misdeeds out of the public eye.

Inevitably, a debate is raging both in the traditional press and online: does Twitter render so-called “super injunctions” redundant? What’s the value in gagging a newspaper when the same allegations can be published anonymously online with impunity? Is there a place for secrecy in today’s open and connected world?

It’s a subject in which I’ve long had an interest. As I wrote last month, I was once threatened with jail after I broke a super-injunction online to demonstrate that, in the Internet era, gagging orders (which only cover the UK, and so are unenforceable against, say, Twitter) aren’t worth the paper they’re written on.

Given that history, you might assume that I’d be all in favour of the current flurry of leaks. In fact, nothing could be further from the truth. Call it growing up (almost a decade has passed since my near-run-in with the High Court), call it post-Wikileaks-fatigue, call it whatever you like: the fact is I have almost no sympathy left for the idea notion that just because something can be published, it should be.

Much of my objection stems from the language of the proponents of openness. In almost all cases, from the Twitter injunction-busters to the Wikileakers, we hear the same justifications: “sunlight is the best disinfectant”, “the public has a right to know”, “innocent people have nothing to hide”. Oh please. Let’s at least call a voyeuristic spade a spade. The majority of the people couldn’t give a damn about the public interest, or of disinfecting public life: they just want to know what rich and powerful people do behind closed doors.

That attitude reached its ghoulish nadir after the killing of Osama Bin Laden. “We have the right to see the photos of his body,” cried the entitled masses – the Twitterers, the bloggers, the news media. To which I have to respond: why? Given the risk of further inflaming tensions, and of crass Photoshop stunts, and countless other arguments for blocking the publication of graphic images of the corpse of a terrorist, what exact right do we have to demand that the US Government upload them to Flickr? Simply because they exist? Simply because we have a mawkish fascination – and don’t let’s pretend it goes any further than that for most people – with what a celebrity terrorist with his eye blown out looks like?

(“But without the photos, we can’t get closure,” wail the openness advocates “we can’t be sure he’s dead.” Sure. As if seeing a photograph is proof of anything any more. Al-Qaeda say he’s dead; the government says he’s dead; senators on the other side of the aisle say he’s dead. He’s dead. Closure accomplished.)

Even accepting that some people’s interest in injunction-breaking and photo-publishing goes beyond the voyeuristic, doesn’t make their reasoning any more sound. Those supporting the breaking of injunctions on Twitter frequently make a public interest argument: what right do celebrities have to cover up their bad behavior? Well, for one thing, not every injunction is an example of a guilty celebrity using the law to cover up a sordid affair. Injunctions are frequently used by high-profile people to prevent the publication of malicious and untrue allegations which would destroy families and ruin reputations. In those cases, it’s no use suing for libel after the fact. Anyone who thinks that “the public” (whoever they are) will hear an allegation and not assume it’s basically true is living in a fantasy land.

Even where there is a genuine story being covered up, it’s still far from given that just because someone is, say, a famous footballer or TV personality that they have surrendered the right to a private life; particularly when the privacy of their family is also threatened.

And even in cases with a stronger public-interest – the Bin Laden photos, the Wikileaks allegations – the notion that everything should be shared with the people and the press is dangerous and disingenuous. I’ve written before about how Wikileaks damaged the ability of diplomats to do their job in return for – what? – showing that American and British diplomats aren’t all that corrupt at all, actually. Great.

The truth is that, at some point in the past decade or so, an idea grew to maturity that secrets are inherently bad: that the public has a right to know every detail about everything so that we might make our own judgement on it. If anyone in a position of power or influence – a celebrity, a government minister, a spy – writes a document or takes a photograph, we have the right to see it and comment on it.

It’s perhaps no coincidence that this era of entitlement coincides with an era in which we are entitled to comment on every other damn thing in the universe. A world in which everyone is a book reviewer, or a film critic. A time when no news programme is complete without inviting the viewer to share their opinion and no news article truly comprehensive until the comments of readers have been taken into account.

Is it any wonder – when we’re constantly being told that our opinion is as valid as that of experts, or ministers or journalists or any number of people who are actually paid and trained to make decisions or provide analysis – that we’ve come to assume that we’re entitled to know or see everything, no matter how private, sordid or distasteful?

It’s no secret that eBay has been heavily investing in a local commerce strategy. The central core of this is trying to capitalize on the $917 million online-to-offline buying market, which Forrester estimates will eventually reach $1.3 trillion (although this number seems low) and account for nearly 50% of total retail sales by 2013. Virtually every acquisition in the past year (besides the company’s $2.4 billion purchase of GSI Commerce) has been of a company that is dabbling in local payments or linking to merchants (Milo, RedLaser, Where, FigCard). If you look closely, a clear strategy is emerging that positions eBay at the center of mobile shopping, local commerce, and payments (through PayPal). Let’s connect the dots.

Online-To-Offline and Comparison Shopping

eBay’s first foray into the local commerce arena was though the acquisition of barcode scanning mobile app RedLaser last June. RedLaser’s barcode scanning technology allows users to comparison shop on the go. Anyone can scan a barcode on an item at a store and then automatically access any eBay listings of the product on the marketplace. Sellers can also use the scanning technology to scan an item and list the product in very little time. RedLaser’s technology was quickly integrated into eBay’s dedicated iPhone and Android apps.

The company then bought Milo for $75 million, which aggregates and lists real-time in-store product inventory for over 50,000 stores across the country; featuring over 3 million products from Target, Macy’s, Best Buy, Crate & Barrel and more.

Most recently eBay integrated Milo into a few of its core products, including RedLaser. So with a single scan of a product in a store, users can see which nearby retailers have a product in store, and at what price. eBay also integrated Milo’s results into its own marketplace, allowing users to include local shopping tab in search results to check a product’s local, or in-store, availability directly from the eBay search results page.

But surfacing local product results and integrating barcode scanning only scratches the surface of local and mobile commerce and its potential. There’s no doubt that eBay is reaping the benefits of mobile commerce (the company expects to do $4 billion in mobile gross merchandise volume in 2011).

Local Payments

And eBay realizes that in order to really capitalize on local and mobile in the ecommerce experience, the company also has to be a part of the point of sale for local merchants. And eBay has a player in this race—payments giant PayPal. PayPal has been making its own small forays into local commerce and late last year launched a new version of its popular iPhone app that allows users to find businesses near their immediate location that accept PayPal as a form of payment. The feature rolled out in San Francisco initially, but we haven’t heard much about the initiative since last November.

Why? Well, scaling this feature broadly to other cities is a challenge for even a large company like PayPal. Not only do they have to find the local businesses, but PayPal has to teach them how to use their mobile apps as a payment mechanism. Wouldn’t it be much easier to acquire a company that could help PayPal and eBay do this?

Enter Where, a geo-location service and mobile advertising company that already has millions of active users across many mobile platforms. The apps show local listings for restaurants, bars, merchants, and events, and also suggests places and deals for you based on your location and past behavior. Where also offers a location-based ad network, which allows advertisers to show their mobile ads only to people near their store, or perhaps near a competitor’s store (after the user opts in to see these types of ads). Currently, more than 120,000 retailers, brands and small merchants use Where’s network daily to reach new audiences and deliver real-time foot traffic to their doorstep.

eBay of course acquired Where a few weeks ago, and housed the company within PayPal. Not only does this give PayPal much more of a reach with its payments service, but it gives eBay a platform to to enter into the the local deals market. As Where’s CEO Walt Doyle told us after the acquisition, “eBay is about connecting buyers and sellers and Where is about connecting people with places.” Ebay can now tap into connecting consumers with local businesses and can be a part of the transaction with PayPal.

PayPal also just bought mobile payments startup FigCard, a Boston-based startup that allows merchants to accept mobile payments in stores by using a simple USB device that plugs into the cash register or point-of-sale terminal. All the consumer needs is the Fig app on his or her smart phone. The connection with PayPal is that when consumers setup their payment information, they could add PayPal as a payments option and pay for goods via their mobile phone.

Eliminating the need for an actual wallet has always been a goal for PayPal, and if the company can scale FigCard’s technology (perhaps to many of those merchants using Where?); PayPal could have a stake in the mobile wallet race.

The ‘Pivot’

In the past year, it’s fair to say that eBay and PayPal have spent over $200 million on the acquisitions I mentioned above. That’s a fair chunk of change even for a company that is making billions each year.

There’s no doubt that eBay is invested heavily in this strategy and believes that the future of the company is based on both online to offline purchases, local and mobile commerce. eBay VP of engineering Dane Glasgow recently told us that one of the challenges for eBay in this strategy is being on the pulse of technology, which is constantly evolving.

But as retail evolves, eBay is shifting its business as well, and it will undoubtedly be interesting to see if the company can connect the dots with all these acquisitions and technologies to create a powerhouse in mobile and local commerce. The challenge is that some of these initiatives aren’t really that complimentary to eBay’s core marketplace and auction business.

While eBay won’t be quitting the auction business anytimesoon, the marketplace business itself isn’t growing as fast as PayPal. PayPal now represents 39 percent of eBay’s total revenue, and nearly made $1 billion in revenue for the company in the first quarter of 2011, up 23 percent from the same quarter in the previous year. Marketplaces brought in $1.5 billion, up 12 percent from the same quarter in 2010.

Pivot is a word that tends to be over-used in the tech world, but in eBay’s case that is exactly what we are witnessing—a major pivot in the company’s business model to local commerce. It’s certainly not easy for any company to “pivot,” especially one as massive as eBay. If it manages to pull this off so late in the game, it could herald a whole new era of growth for the company.

As Glasgow tells us, “it’s a new retail environment, where the convergence of online and offline are coming to life through mobile and local experiences.” Can eBay position itself fast enough to flourish in that environment?

Editor’s note: Guest contributor Semil Shah is an entrepreneur interested in digital media, consumer internet, and social networks. He is based in Palo Alto and you can follow him on twitter @semilshah.

The world is full of illusions. Magicians use a cascade of mirrors, smoke, and misdirection to trick their audiences into believing the unbelievable. In the process, they mystify them, capturing their attention. Whether it’s David Copperfield cutting his lovely assistants in half with a saw, or David Blaine wowing street audiences by levitating himself, these types of artists rely on illusions to thrill, captivate, and influence in their followers.

None of these magicians, however, hold a candle to the illusions provided by the characters who dance on television channels. For decades, the masses have been planted in front of the tube, waiting for packaged content to tickle their eyeballs and smooth the edges of modern life. Whether it’s the stars of a soap opera, anchors on political news networks, or preachers channeling the wishes of higher powers, TV provides the possibility of distribution according to audience segments in return for huge sums of advertising revenues.

Even criminals and mass murders try to create these illusions. In the wake of Osama bin Laden’s death, one of the most fascinating kernels of information to emerge from the raid on his compound is the video footage of the world’s most notorious terrorist watching himself on television replay. These particular clips are disarming because while the world painfully knows that bin Laden is a master communicator, we have yet to see how he makes his particular brand of sausage. There are parts of bin Laden’s image that now, in retrospect, seem to have been carefully crafted. He wasn’t hiding in the caves of Tora Bora, and his age showed in his graying beard, which he dyed black for cameras.

And now we have the Internet, especially social networks, where the multiple forms of content shared by people and brands form signals that amplify in even greater ways. Today, those who participate in various social networks online also engage in a form of magic, using illusions to broadcast signals to their audiences. Instead of studios producing content on television, the willing participants play the part of studio and producer, using a variety of mechanisms to interact with audiences. We share check-ins from concerts and sporting events, and send Instagrams to make sure others know how yummy weekend brunch looks. We are in the age of the ubiquitous status updates, constantly sending ambient signals, where our audience has only two choices: to form some loosely-tiled mosaic of who we are—or to tune out entirely.

Surely, the benefits of participation are well-documented, but there are costs, too. While information is being channeled through these social networks, the fact remains the same illusions created by television have mutated into a stronger strain within social media. While more interesting information gets to us faster, the downside is that the new channels—and, we are all the channels—sometimes unknowingly create “little white illusions” that, over time, compound into something that may or may not reflect real life.

Well, life is full of illusions. And on social networks, those illusions are amplified. Many who broadcast are not who they appear to be. I don’t say this negatively—rather, this is the magic of social networks. All of the tools we have to update our status, to share pictures, to broadcast location, and any other signal empower us all to express ourselves online and (hopefully) eventually help us end up where we’d like to be.

The dark underbelly, however, is that much of the content we consume through these networks are highly subject to illusion. We may get the impression that folks are more famous, powerful, influential, or informed than they really are, or funnier or nicer than they really are. Social networks naturally concentrate and amplify particular voices, no matter whether those voices are right or wrong. We’ve all at one time at least fallen prey to these false signals, myself included, further fueling the engine of social networks.

I have recently met more people who tend to only inform themselves by what they read online, particularly Twitter, putting real-time information ahead of real-life information and basic common sense. I see folks who assume that because they are followed by someone with influence or because they engage in light @reply banter with specific people that they have the inside track on access, and that eventually that access could convert to something real. Sure, this can and does happen once in a while, but the reality is that most of the time, it does not.

We are all following someone we want access to. It all has a cumulative effect, and we are all both pushers and addicts. The combination of blogs, tweets, updates, mentions, and @replies oftentimes act as mirrors and smokescreens, potentially tricking us into believing that what we see on social networks may truly be what actually occurs in real life. Enjoy the show.

Image by Alex Clark

As of today certain aspects of the Flipboard experience have been blocked for Chinese users, at the very least access to Facebook and Twitter according to Flipboard CEO Mike McCue. While direct access to Facebook and Twitter is routinely blocked in China, the Flipboard app talked to its own US-based servers, which in turn talked to Twitter and Facebook so this block is particularly interesting.

“Lots of folks in China had been using us happily until now,” McCue said, “Guess we had unwittingly poked a hole in their wall which has now been shut down… Presumably unless we block Facebook and Twitter ourselves in China.” The iPad app is still available in the Chinese app store.

McCue tells me that it’s still unclear if you can access Google Reader, Instagram or Flickr from China and that we’ll know more in the morning about what exactly is going on.

While McCue says that a small percentage of the app’s users are Chinese, Chinese clones like Tencent’s ICare, MagSina and the NetEase Reader are quite popular. Flipboard itself recently raised $50 million on a $200 million valuation.

Says McCue on the clones, “They are complete replicas visually (though they are super slow performance wise),” begging the question, ”Do the Chinese censor US services to protect their regime or to protect their market?”

Update from McCue:

“I can now confirm Flipboard itself is being blocked. All services (not just Facebook and Twitter) no longer work. [Users] used to be able to login to Facebook and Twitter using VPN. Now with our servers blocked, even if you had successfully logged in, we can’t show data. Also, users who had setup Flipboard from outside china used to be able to use Facebook and Twitter when within china. That is no longer the case.”

@legallytech
Bradley K. Newman

@alexia @sarahcuda @martinvars whats the difference between China's regime and its market?

about 16 hours ago via TwittelatorReplyRetweetFavorite

Earlier today, I wrote about our brush with machetes, the chaotic world of Nigerian filmmaking, and a company called Iroko Partners that’s working on bringing order and YouTube distribution to Nollywood. It’s made stunning progress in the short four months it has been in business, and it’s barely scratched the surface of Nollywood demand.

Below is a video we shot with founder Jason Njoku. He describes the business in more detail, and the clip opens with some glimpses of the chaotic Alaba International Market where Nollywood movies are bought and sold.

Video below.

It was when they pulled out the machetes that I started to worry.

I’d seen men with machetes in Africa before, but they were rusty, practical tools used for clearing away brush by the side of the highway. These were long, shiny and housed in decorative sheaths, pulled out ostensibly so the men could sit down more comfortably, but done with a clear, understated flair. They were more like sultan swords than jungle tools.

The kicking in my six-month pregnant belly had gone eerily silent since we entered the vigilante court at Alaba. I reassured myself that I’d been through things like this before. The time I went to visit Brazilian entrepreneur Marco Gomes’ hometown in the crime-ridden slums of central Brazil, comforted only by his reassurance that “No foreigner has ever died in my hometown, because no foreigner has ever been to my hometown.” And the time I was driving along the boarder between Rwanda and the Democratic Republic of Congo and armed Rwandan guards stopped our car, wordlessly got in the backseat and hitched a ride for several miles. And then there was the time we were charged by a baboon.

Looking at those beady baboon eyes rushing towards me, I was instantly convinced I was losing an arm. Now, in this Nigerian “courtroom,” my husband was looking at the machetes having the same thought. I was just hoping they didn’t realize he’d slipped the camera’s memory card in his pocket. I tried to pat my stomach as apologetically as I could. Sorry, son. Welcome to life as my kid.

Sometimes I write provocative leads that aren’t quite what they seem. Like the time I said I was in a wheelchair getting a blood transfusion in Singapore. As the second graph explained, I was actually at a hospital-themed bar where you sit in wheelchairs and drink out of IV bags. My cocktail was called a “blood transfusion.”

But this time, I’m not being hyperbolic or clever. There’s no twist coming. My husband, our unborn child and I were actually sitting in a Nigerian vigilante court being tried for– as near as I could tell– taking photos and not respecting authority. The makeshift courthouse looked like a set of a Western. The judge was named “Bones.” The police? Well, there was a station not too far from here, but the police ceded Bones authority in Alaba. They didn’t what to get involved.

It could have been a scene in a movie. That irony wasn’t lost on us, because our accusers, the people speaking for us, and the judge, jury and — well, let’s just call them the guys with the machetes– were there to protect the interests of the rough-and-tumble world of the Nigerian filmmaking. They call it Nollywood.

Nollywood sprung up a few decades ago and is the second largest film industry in the world by volume. Producers churn out hundreds of movies a month, most shot on a shoe-string budget of about $15,000 per picture. We visited a set of a film called “The Stripers.” It reminded me of the photos in Larry Sultan’s book about low-frills porn sets, “The Valley,” sans sex and nudity of course.

The film– a romantic comedy where one of Nollywood’s hottest actresses turns a gay man straight– was shot in an empty suburban house rented for a few days with a crew of no more than ten. The assistant did the hair and makeup, and the producer did most everything else.

There are few theatrical releases in Nollywood. Most of these movies– which Nigerians consume as rabidly as Brazilians devour their telenovelas–  are seen on local TV stations and sold over DVDs. And these producers move fast: Last week we saw a movie on the market called “Dead at Last: Osama Bin Laden, Complete Season One: Life and Death.”

Like most industries in emerging markets, Nollywood is developing in a very different time than Hollywood or even Bollywood developed, and that alone means it’s developing in a very different way. On the plus side, cheap modern digital production tools have made it all possible. But rampant digital piracy means there’s no honeymoon period for producers to build an industry around protected copyrights. They produce content millions of people love, but most of these scrappy street producers are constantly operating on shoe-string budgets, lucky to break even on each film.

Alaba International Market is where the producers all have their store-fronts and distribution hubs. We met dozens of them inside a long, dark cave-like hallway where each producer operated out of a cell-sized office, filled with paper records, movie posters pasted over movie posters, and spindles of thousands of DVDs.

Some of these producers are highly-educated entrepreneurs following their passion the same way the best entrepreneurs in Silicon Valley have. We met one man named Ulzee, a Nollywood pioneer who decided to make movies after getting a science degree. (Pictured right.) His wife, trained as a lawyer, joined him along the seemingly crazy journey. His biggest hit was “Osuofia in London,” one of the first Nollywood films to get international attention. He shot it on location in London and it cost about $6,500 to make– a jaw-dropping investment for a Nollywood picture back in 2003. But it grossed more than $650,000.

Much like the 419 scam business, members of Nigeria’s 50 million-person unemployed class see the glamorous, seemingly easy money of Nollywood and have flooded into the business. Ulzee doesn’t respect many of them, saying they aren’t artists. They shoot once and release the same movie with four different covers just to make an extra buck. Of course, given the rampant piracy that’s destroyed their margins, you can understand why these producers are constantly trying to milk revenues out of the same film.

Here’s what makes the mood at the Alaba market so tense: Before you get to that hallway of producers peddling their movies in their cell-like offices, you walk past the open air markets where the software and DVD pirates have set up shop. Unlike Hollywood where the producers  reside in glamourous offices and pirates operate the the shadows and basements of the Internet, in Alaba the content creators and those destroying their hopes of revenues reside in the same place, selling the same product side-by-side. Fire-and-brimstone evangelical preachers set up keyboards and microphones in the middle of the street to save souls, only adding to the chaos. (Video of some of this in the next post.) So I could understand why Bones and his council occasionally need some machetes to keep the peace.

After 40 weeks in emerging countries, markets tend to blur together, but Alaba was unlike any place I’ve seen before. It was rawly and intensely Nigerian. Nigeria isn’t a culture based on pleasantries. A local saying painted on the backs of trucks sums it up: “No Paddy for Jungle,” or no one has friends in the jungle.

And Lagos is like a jungle. On Victoria Island– the ritzy section of Lagos– incomes are high even for a dual economy, thanks to oil and corruption. The most basic four-star hotels cost upwards of $500 a night, and the rich buy up rooms for a whole year or more, artificially constricting supply. Plots of land cost millions and a middle-of-the-road dinner for two without drinks can run $100 or more. But on the mainland in Lagos, you see the real Nigeria, the one where one-third of the population is unemployed. I talked to people furious by the corruption in the country, and what they felt was an unfair nepotism among the rich that made it almost impossible to climb the societal ladder.

Even the people I met in “easy money” businesses such as scamming and Nollywood toil entrepreneur’s hours to build their fortunes, constantly under pressure to outsmart the people out to kill their livelihoods– whether that’s law enforcement in the case of scammers or pirates in the case of Nollywood.

The tension is palpable. Stuck in traffic on the freeways, we saw fist-fights break out. Unlike some other developing countries where hawkers will smile and flatter Westerners in an attempt to sell them outrageously priced goods, Nigerians don’t play that game. They’re happy to sell you something if you show the cash. Otherwise, keep moving. They have little use for smiling, nodding and pandering. It’s not necessarily that there’s more anger, resentment or corruption in Nigeria than the rest of the emerging world; Nigerians just wear it on their sleeves.

Part of me loves that. The warm hospitality many people showed us– in both poor and rich areas of the city– was genuine. You know where you stand in these places; it’s all out in the open. But it makes walking through these markets intimidating. Look at a hawker and smile on the wrong day, and you’ll get screamed at just for being there. As one 419 scammer told me, “If I can’t even trust a man with the black flesh, why should I ever trust you?”

Our guide through Nollywood was an entrepreneur named Jason Njoku (seen on the right in this photo, haggling with producers). His parents are Nigerian, but he grew up in the United Kingdom. He became entranced with Nollywood a few years ago and was bored with London. So he moved here, stunning his family and friends. He started Iroko Partners to catalog this vast Nollywood inventory and give it a new global distribution life on the Web. It sounds like a recipe for a city boy to get fleeced, but so far that hasn’t been the case.

Njoku spent weeks trolling the Alaba markets introducing himself to producers and trying to explain to them how a YouTube channel could be an answer for revenues, not simply another channel for the pirates to steal their intellectual property. Once he sold a few of the bigger ones like Ulzee, word spread and more producers piled in. Just four months in to his business, Njoku has bought the online rights to 500 movies from 100 different one-man production houses. Last month his YouTube channel had 1.1 million uniques, 8 million streams, and is on pace to do more than $1 million in revenues this year from YouTube ads. Those numbers are massive for a Nigerian-based Web company, particularly in such a short time. Facebook has one of the largest user-bases here, feeling ubiquitous in the city. And yet it has less than three million users.

Njoku is playing a long-game. Most of his traffic is from outside Nigeria, because broadband penetration is still so low there. He’s paying more than he would have to for rights; about $3,000 per film, roughly what TV stations pay. That immediately returns about one-third of the production costs, a welcome surprise for a new medium that most of these producers had never really considered before. He provides a lot of other value-added services too, like creating an IMDB-equivalent for the messy Nollywood industry, and watching all movies to strip out things like the unauthorized use of a Beyonce song. In the future, he’s going to provide French subtitles so the movies can find new audiences in surrounding West African nations.

The checks have endeared Njoku to this rag-tag community of producers. One of Njoku’s several cell phones rings constantly with producers calling him to check on contracts, release dates and when they’re getting their next checks.

And that loyalty came in handy about the time a screaming mob broke out in Alaba over the presence of two unknown Americans taking pictures. I’m still not sure if they actually thought we were spying on their business or just wanted to extort us for cash. I’m still not sure whether it was the pirates, the producers or other rabble rousers who were the instigators. The ring leader appeared to be a terrifyingly huge, enraged, bald guy wearing a tight, white muscle shirt that said “SKULL SHIT” in big letters.

We barricaded ourselves in Ulzee’s cell-like office until it died down. We didn’t have another choice. We were half way down a long, dark hallway of offices, and there was no way out without going through the mob. Ulzee’s wife, who’d been lounging on some boxes when we arrived, sprung into action, explaining to the accusers that we were their guests and welcome to do what we wanted.

Eventually, the chaos died down, we promised not to take anymore pictures and we tried to leave. But as soon as we left the office, it erupted again and the crowd encircled us. The screaming intensified, echoing through the cave-like hallway. I tried to go back into Ulzee’s office, but the doors were being locked behind me by Bones’ crew. We were trapped, and the angry faces were circling in tighter, the screaming unintelligible as it echoed from wall-to-wall.

“Trust me, it’s better that this plays out here than on the street,” Njoku said. “Half of the people yelling are on our side.”

News of the uproar reached Bones, the man entrusted to keep the peace between producers, pirates and rare interlopers like ourselves. And that’s when we were summoned to his court. A phalanx of producers escorted us through the streets making sure no more harm came to us before we got there. “Don’t worry,” Njoku whispered. “As long as I have my checkbook, they still need me alive.”

We sat on one bench. The producers sat on the other. And that’s when Bones and the machete-men strolled in. After hearing all the  evidence, our insistence that we respected his authority, the producers vouching for us, and of course, some cash changed hands, the machetes stayed sheathed and they let us go.

Njoku didn’t break a sweat. Rather than convincing me he was trying to regulate something that couldn’t possibly be regulated, the whole episode made me more bullish on his company. It was clear how much the legitimate entrepreneurs in this community valued him, the depth of his relationships after just four months, and his innate understanding for navigating crisis in a terrifying situation.

If a businesss like this were being built in the West, there’d be few barriers to entry. Someone can always just pay higher license fees. But in a country like Nigeria, these sort of relationships, this kind of trust in a place where no one trusts anyone are more solid barriers to entry than patents.

The demand is there. The supply is there. Nollywood will emerge out of this chaos as something hugely profitable. There’s suspicion, competition and chaos surrounding the market, but that’s business in emerging markets. At the end of the day the producers weren’t unreasonable. They asked that next time Njoku bring guests, he give them a heads up and they’d provide protection. They’re justifiably suspicious because their industry is finally starting to take off, and they sit next to the people trying to eroding it every day. And my bet is that when Nollywood does take off, Njoku will be one of the guys to reap the benefits.

Of course, we couldn’t leave without pressing our luck and asking to take Bones & Co.’s picture. It’s below, and he’s on the bottom right. Note: Those smiles were nowhere to be seen before the cash changed hands.

(All photos © Geoffrey Ellis. The fact that you are seeing them is courtesy of Bones.)

In part III of Erick Schonfeld’s interview with the man of many interests, Gary Vaynerchuk, Gary discusses his daily-deal wine venture, Cinderalla Wine and throws props to similar deal delivering sites like Lot18. Overall, he says, on the need of these sites to strategically position themselves. “I think the acquisition of consumers might be on the verge of being mapped” says Vaynercuck, “the battlefield is going to be retention and lifetime value.”

Vaynerchuk has been spending more time lately with Daily Grape, where he combines videos about wine with deals and reviews. He also owns the domain for Monthly Grape, which may become a future product. At about 5:30 into the interview, Gary dishes up another interesting bit of information. “I am thinking about launching a wine website where there is a deal and the crowd can dictate how cheap it can get.” He calls it, “reverse deal of the day.” The more people who sign up for the deal, the lower the price will get. Make sure to check it out.

In the final part of the conversation, Vaynerchuk tells Erick why he is no longer tethered to a 10-book contract deal, and says sales of his latest book, The Thank You Economy, are trending above his last book, Crush It (which ended up selling 190,000 copies). When asked if he is going to continue writing, Vaynerchuk says, “I think I need to shut the hell up.”

He explains below.

This is a really weird time to be a writer. Agents are becoming publishers; publishers have moved to “the agency model“; and some self-published authors are making millions—all because e-books are now outselling all other segments. Magazines and newspapers are dying, blogs and aggregators are thriving, and the line between them all is blurring. Last year Apple was their savior; now it’s damned as a destroyer.

So what’s a writer to do?

These days I’m mostly a developer, but I’ve had a clutch of novels (thrillers about globetrotting techies) published by traditional houses, and also experimented with just about every form of The New Publishing. My latest book (an epic urban fantasy about a squirrel) was Creative Commons-released and self-Kindle-published before I sold it to a publisher. I’ve scripted a Vertigo Comics graphic novel, and a free online comic for Engineering.com. Plus I write here, and for magazines. And the news I bring from all my literary peregrinations is this:

…in the immortal words of William Goldman, nobody knows anything.
And that is awesome.

@sarahw
Sarah Weinman

I'll say it again: Hachette digital sales are at 22% of total, S&S at 18%, Random House around the same. Future is here, ladies & gents.

May 3, 2011 1:56 pm via Seesmic twhirlReplyRetweetFavorite

Goldman was talking about Hollywood in the 1970s, before Steven Spielberg singlehandedly ushered in the blockbuster era. Now, 70s music, fashion, politics, economics, and culture may have been a waste of time, but it was the greatest cinematic decade in history—precisely because nobody knew anything; so they had to experiment. Until, alas, the studios figured out how to please audiences with cookie-cutter three-act pablum, and the raging bulls and easy riders were tamed.

We are about to enter just such an era with books. Got a well-written story with no easily defined genre or obvious target market? Experimental form or content? Not long ago, that would have been a big problem. Nowadays, though—nobody knows anything. I’ve been calling the major publishers dinosaurs for some years now, but they are slowly being forced into greater willingness to experiment… and even if they don’t, you can always pull a Hocking and e-publish your book yourself. Sure, most such books will be crap, and most of the rest will fail to catch fire; but a few will become cult classics, and a tiny handful may turn into modern-day The Godfathers.

What’s a writer to do? Glory in this febrile, fecund chaos, is my answer. There has arguably never been a better time to write.

But unfortunately this is also, simultaneously, a bad time to be a reader. Because the dinosaurs still don’t get it. Ten years of object lessons from the music industry, and they still don’t get it. We have learned, painfully, that media consumers—be they listeners, watchers, or readers—want one of two things:

• DRM-free works for a reasonable price
• or, unlimited single-payment subscription to streaming/DRMed works

Give them either of those things, and they’ll happily pay. Look at iTunes. Look at Netflix. But give them neither, and they’ll pirate. So what are publishers doing?

• Refusing to sell DRM-free books. My debut novel will be re-e-published by the Friday Project imprint of HarperCollins UK later this year; both its editor and I would like it to be published without DRM; and yet I doubt we will be able to make that happen.
• crippling library e-books
• and not offering anything even remotely like a subscription service.

Book piracy isn’t a big problem yet—though it’s certainly happening; too cheap to buy my book Blood Price? Here’s an illegally pirated edition—but I hereby predict that it’s only a matter of time before it and its concomitant scare tactics, moral panics, and ethical dilemmas raise their ugly heads in a big way. Sorry, readers. Maybe you should try writing instead. These days, that’s a lot more fun.

[Image: Geek and Poke]

The Gillmor Gang — Craig Burton, John Taschek, Kevin Marks, and Steve Gillmor — survived the week of Google AeeEeeI/OUuu, Facebook slimeware, and the embalmerization of Microsoft with nary a scratch. Robert Scoble briefly joined via the iPad and FaceTime from a layover at O’Hare, but he couldn’t hear us and we could hear him say so, over and over. Kinda like Facebook, who somehow got its Dumb on with a PR campaign designed to dredge up all the privacy stumbling of yore.

MG probably has it right that we will forget this by next week, but not if Google continues to wander around in the social desert. Larry Page doesn’t seem to have made the case for a change in leadership, as Google extends its lead in automated cars to automated houses. Google TV and Music continue to languish without support from any real vendors, while the New Yorker, Fortune, and a stampede of streaming players rush into the AIrPlay cloud. With Skype the new dongle for Windows and only Dave Winer thinking Apple will give up on its Flash boycott, the move toward iOS took several giant steps for mankind. If only we could hear any of this over Craig’s lawn doctors.

Editor’s note: Steven Carpenter is an entrepreneur that writes the TechCrunch Teardown series that looks at the business models of consumer Internet companies. He has previously written in-depth analyses of Zynga, Groupon, Etsy, Chegg, and the 13 Consumer Internet Business Models. Carpenter is currently an Entrepreneur In Residence at Accel Partners.

My last TechCrunch Teardown outlined the multi-billion dollar online brand advertising opportunity. As part of that research, I looked at the top Facebook brand pages to see how some brands were successfully using social media to connect with their consumers. With soaring Facebook revenues, a significant share of which comes from brand advertising, I went back again to look at how the top 165 brand pages performed in Q1 2011 to get a sense for which firms continue to get the most out of Facebook. And to see if some brands are showing signs of slowing growth.

For instance, here is how the 10 largest brands on Facebook are doing:

Top 10 Facebook Brand Pages “Like” Growth (Q1 2011)

As you can see in the longer table below, which ranks the top 165 Facebook brand pages by growth, many of the top brands on Facebook continue to experience strong fan growth, even with bases of multi-million fans. For this research, I specifically looked at those brand pages that had an installed “fan base” of 500,000 users and above in December in order to get the best measurement of the health of the platform.

Facebook itself grew it’s users by 13.7% (from 585 million to 665 million, in terms of raw number of accounts) so I would expect to see the top brands seeing a multiple of this considering the nascent stage and untapped potential of commerce on Facebook. Conversely, if a brand page’s growth lags that of Facebook’s in general, it may be an early indicator of a stalled social media strategy.

Top 10 Takeaways

1. Only 10 top brand pages grew their audience 100%+ last quarter and only three (Hollister, Sour Patch Kids, Trident Chewing Gum) saw 200% or more growth.
2. 31 brand pages (19% of the total) grew less than the overall Facebook growth rate of 14%. Starbucks, the 2nd largest brand page on Facebook, was the largest brand in the bottom 31. By contrast, Coca-Cola, Facebook’s largest brand, grew 26%, and Disney, the new No. 3 most popular brand, grew its fans by 42%.
3. Food and apparel retail are two categories of note that appear to be among the fastest growth areas. This is interesting considering consumption for these products mostly occur offline.
4. Apparel retailers, specifically, seem to be doing a better job of tying their retail store promotions to their Facebook presence. Interesting to note that Hollister and Abercrombie are No. 1 and No. 4, respectively, and are owned by the same company. American Eagle, Forever 21, H&M, and Zara are all doing something right.
5. Walmart was the No. 12 fastest-growing fan page, adding 2.5 million fans. Along with its recent acquisition of Kosmix, I believe Walmart will continue to invest heavily in social, commerce, and campaigns.
6. In the next decile, quick-serve restaurants such as Domino’s, Pizza Hut, In-N-Out Burger, and Wendy’s appear to signal another trend worth noting. The key question for these firms is how to drive restaurant visits and sales from these pages when food is, by definition, offline activity.
7. Fanning specific niche passion products (Olive Garden bread sticks, Sharpie markers, Swedish Fish, Cookie Dough) and seasonal items (Cadbury Eggs) may plateau when the initial novelty and/or the natural “audience” for those products is achieved.
8. Inter-category brand differences are evident and warrant further investigation. For example, why are Hollister, Abercrombie, and Forever 21 growing so much faster than Wet Seal (27%) and Pac Sun (42%)? And why do these same three brands have 3X-4X more fans than their competition?
9. An interesting brand story is happening right now in Dove soap. While Dove did not qualify for my initial analysis because it only had 271,000 fans in December, it’s 340% growth made it the No. 1 fastest 1-million fan brand page in my analysis.
10. As brands achieve critical mass and become more comfortable investing in their Facebook presence, they will become far more concerned with fan engagement, fan differentiation, loyalty and efficacy. The key question is: once they have an audience, what will they do with it?

Editor’s Note: This is a guest post written by Prasad Thammineni, the CEO and Co-Founder of OfficeDrop, a scanner software and digital filing system. You can follow him on Twitter @OfficeDrop_CEO.

Competition between software companies used to mean safeguarding your code and suing anyone that came close to it. Today, many larger technology companies are adopting a different strategy of actually bringing new users to companies they would have tried to squash a decade ago. The cloud is changing the old-school software mentality that a customer’s data needs to be locked down—giving rise to a new ecosystem where everything interoperates. So companies that in the past would have been bitter enemies are now working together as pseudo-friends—“frenemies,” if you will.

Software is absolutely nothing like it was even just a few years ago. App marketplaces have made it possible for buyers to select just the features they need, where in the past they were forced into “bloatware” that had a ton of features they didn’t even touch. Packaged software is becoming more and more scarce as small businesses and consumers have this “a la carte menu” of options to choose from—with all of these options playing nicely together in the cloud.

Years ago, Marc Benihoff got out his shovel and started burying packaged (and hard-to-install enterprise) software. People thought it was a crazy PR tactic but he turned out to be right. Proprietary, closed systems are being replaced with interconnected services that let the user’s data flow. Earlier this year, the Washington Post pointed to a new era of collaboration amongst software giants like Google and Microsoft, and cited the revolving door of talent in the Valley as a key driver in this cooperation.

Open Platforms and Picky Customers

I think the Post’s thesis is partially true, but that’s not the whole story. The emergence of “platform companies,” plus the fact that everyone has open APIs, has created a cooperate-or-die environment for large and small companies alike. Rather than create every feature themselves, platform companies are staying open to innovation and development from outside companies (sometimes within their own walled gardens, but that’s a whole other story). These big players benefit by creating a marketplace-type ecosystem for their users’ needs, keeping them happy and productive. Smaller players get distribution—and those who don’t want to play ball risk withering away while some competitor benefits from a large platform player’s distribution.

Customers are the other main driver in the frenemy movement. Users are looking for a solution to their particular problem. They don’t care who’s competing with whom—they want it to be easy, and they demand that data flows from one service to the other. The days of having to re-enter data into different systems is over—customers shouldn’t even have to export a CSV file, manipulate it and import it into a different program. Customers also no longer accept that they have to stay stuck with a poorly designed feature in their expensive installed bloatware. Rather, they are looking for fully integrated services that work with their platform of choice: for example, Apple, Google, Evernote, or Zendesk. Not integrated? No interest.

Frenemies 101

So how can you win in an environment where you have to cooperate with your competitors—and they’re just a few clicks away? There may be several other apps like the one you offer, but the keys are to 1) do something better than anyone else 2) make it easy for others to add on services to your own and 3) make it work with the platforms that your ideal customers are already using—even if what they’re using seems quasi-competitive to your own product. You don’t want to feed into the post-traumatic stress users are experiencing from the age of packaged software. Take part in the open exchange of data between services in the cloud because soon enough, that will be the norm. Consumers and businesses alike don’t like to be stuck—that goes for their data, too.

This doesn’t mean that you have to be developing some kind of cloud software to get in on the action. Hardware companies have their place in this chain, too. In my world, Fujitsu’s ScanSnap Marketplace does a good job of getting scanners connected to the cloud. I’m also very interested to see how the whole interactive, app-ready TV market will play out. Cable companies are much like the packaged software companies of the past. They will also see that attempts to resist the open marketplace movement are futile.

So maybe the technology industry has finally cracked the code—a distribution model that works for both collaboration and free-market competitiveness. It seems to work for consumers who value their newfound freedom of choice. What do you think? Is this almost bizarre non-competitiveness good for business? Or are startups making deals with the devil in the name of distribution?

Photo Credit/Flickr/pagedooley

Construction material manufacturing often produces hazardous byproducts that are either toxic or difficult to recycle, as are many of the materials themselves. Brooklyn based Planetary ONE is experimenting with the idea of grow-your-own construction materials by making bricks from mushrooms.

Their latest project, Mycoform, places mushroom roots known as mycelium spores into a mold and feeds them with agricultural byproducts like buckwheat husks. In just over a week at 80 degrees, the spores grow to fill the form, resulting in a light yet solid structure. The brick is heated to 100 degrees when complete to kill the spores, preventing further growth.

Maria Aiolova, a Planet ONE team member, said they have been working on the idea of growing building materials for more than a year to develop materials for a variety of uses. In addition to construction materials, Mycoform can be used to make acoustic tiles, insulation, shelters for disaster-stricken areas, and temporary structures such as street fair booths. Another company, Ecovative, uses a simliar process for creating shipping materials.

In their experiments, the Mycofoam team found the edible Reishi mushroom provides consistent results. The finished structure is entirely biodegradable.

Although Mycofoam by itself is sun, mold and water resistant, biodegradability makes it a poor solution for longer-term structures. To address this, the team makes brick molds out of recycled aluminum sheets. When grown inside this aluminum casing, the bricks are expected to last between 25 and 30 years. Each brick can withstand about 2000psi, equivalent to the strength of a regular brick.

As much as half the cost of manufacturing traditional bricks can go to energy for kiln firing and drying. Traditional brick production also produces up to 1.3 pounds of carbon dioxide per unit. Mycoform bricks require very little energy, produce no carbon, and cost as little as a quarter of a penny per unit. The startup cost of Mycoform brick manufacturing include a $150 hydraulic press and $50 steel mold for shaping the aluminum, and a greenhouse structure, which can be made from plastic and wood, for growing the spores.

The team has applied for grants to expand their production capacity and, in the future, hopes to send Mycoform kits to developing countries.

Shroom house art by Cornelia Kopp
Mycoform illustrations by Planetary ONE

Ever wish you could just call your keys? Well the Ycombinator-backed Lockitron aims to replace physical keys entirely by letting you control your door lock with your phone. The Lockitron  web app and hardware package are as of today available for general users, for a one time fee of between $295 to $500.

Instead of using relatively unreliable wifi, the service works by utilizing a plug server and ethernet cable tied to an electronic lock. Your smartphone talks to the server controlling the lock via the web which means that you can control the lock from wherever you are. Lockitron also has an NFC option if you’ve got a Nexus S or are planning on buying a iPhone 5 if/when NFC happens. The system works with both deadbolt and handle locks.

While the Lockitron locks do accept traditional keys, the main advantage of using the same technology as found in car key fobs to open your front door is that everything is in the cloud (your data is encrypted). With Lockitron you can create multiple “keys” and pass them around to friends via email. You also no longer have to worry if you’ve locked your apartment in the morning, as you can just control the lock from your phone.

Says co-founder Paul Gerhardt, “I wanted to be able to email a key or text a key to somebody else, the technology was there, it just needed a good experience on top of it.”

The app is particularly useful for people who need to have multiple efficient ways to enter a shared building. For example, the initial beta was sixty Lockitrons installed, supporting 400 users.

Schlage, a giant in the lock space, also has a smart phone unlocking product that is available at a $9 a month fee and a $300 hardware price point. That product is more hardware focused and not nearly as accessible to end users, according to founders Gerhardt and Cameron Robertson. Text is the only Lockitron subscription feature at $5 a month.

Apigy, the company behind Lockitron, wants to be seen as appifying hardware and has a Lockitron iPhone and Android app in the works for its next project. But the founders have set their sights beyond locks, “At the end of the day we just want to make sure that there’s one less thing in your pocket,” Gerhardt said.

TT Sa?l?k