Facebook Investor Roger McNamee Explains Why Social Is Over

Elevation Partners co-founder and Facebook investor Roger McNamee, who is also a rock musician, gave an amazing talk recently where he goes over some of the biggest trends affecting the technology industry.

McNamee's bottomline? Everything is changing. More specifically, a few big themes:

• Microsoft is toast because we're moving to a post-PC era;

• HTML5, the new web standard that allows to make interactive web pages, is going to revolutionize the media and advertising industries;

• Social is "done", it's now a feature, don't go do a social startup.

Here's what we thought were the most interesting points and assertions from the speech (quotes are paraphrased):

• Microsoft's share of internet-connected devices has gone from 95% to under 50% in 3 years;
  
  
• Windows no longer provides measurable ROI to enterprises, who will shift spending to other products and services; this is a huge opportunity;
  
  
• Google is a victim of its own success: its search has become polluted by SEOs. What shows that Google has failed is all those "non-search" services that really solve a search problem, like Match.com or Realtor.com. If you add them all up, they account for 50% of searches.
  
  
• HTML5 is going to change everything. "In HTML5, an ad is an app, a tweet is an app, everything is an app." "It's a blank sheet of paper, and creativity rules again."
  
  
• For example, "my band is putting out a full HTML5 site. You can watch all of our shows on an iPhone, live." It's very cheap and it changes the game because they don't have to pay anyone anything.
  
  
• In HTML5, you don't need to have display ads: Amazon can have a section of its store as an ad. So if you're reading a book review, you can buy the book right from the page.
  
  
• Because HTML5 can make sites rich and interactive, engagement on a site can go from seconds to minutes.
  
  
• So a site could say: we have 5 sponsors today, which one would you like, and the sponsor follows you around throughout your experience on the site. "The fact that you can create and satisfy demand in the same place is only true in infomercials today, but it will be true on the web." This, in turn, is highly disruptive to TV advertising.
  
  
• "The iPad is the most important device since the IBM PC."
  
  
• "Apple will sell a hundred million internet-connected devices this year. That's two thirds of the PC market." If you add the other non-PC internet devices, that's more valuable than the PC market.
  
  
• The iPad is the training wheels for HTML5. iPad apps show us what we need to beat in terms of creating a better experience on HTML5.
  
  
• Apple is an unstoppable freight train. In terms of tablets, it has no competitors and will probably end up with iPod-like marketshare. "It's like IBM in the 60s; I can't predict what that means; you need to find a way to play with it, but you also need to find a way to play over it" with HTML5.
  
  
• The fact that most people now have more than one device means the cloud is vital, because you want to have all your stuff on all your devices. It also means the old PC paradigm is dead, because the old PC paradigm means everything stored on one device, instead of everything in the cloud synced to many devices.
  
  
• In terms of keeping your stuff in the cloud, "Google, Microsoft, Facebook and Apple have completely failed to get the mobile experience right." (We'll let McNamee stand by that statement.)
  
  
• "Facebook has decided that they're Twitter on steroids".
  
  
• Currently Facebook Connect is free; eventually they'll charge for it because it's access to their social graph which publishers need, and that's how they'l make money.
  
  
• Don't try to be "social": the big social platforms are created. You can't create a social company, it's just a checkbox. "The last 500 social companies funded by the VC community are all worthless. I'm serious."
  
  
• But this creates an opportunity: while everyone is focused on social distribution, there's a huge opportunity to get content right with HTML5. "Let's create a new product, the way music videos were a new product."
  
  
• Apple makes more gross margin per iPhone than most Android phones make in gross revenue, McNamee says.
  
  
• "Television is the last protected media business," but it's going to get disrupted. For one, once televisions are computers, analytics of who watches will get more accurate than Nielsen panels. "Everyone knows that if we go to actual measurement, ad rates will collapse because the numbers aren't as good as Nielsen makes them look."
  
  
• McNamee also had a few words about the economy: "we're about 40% of the way of deleveraging the global economy, but we're only 10% of the way of deleveraging the US consumer...I don't care what your politics are, removing government demand from the economy when it's struggling is ridiculous." And to prop things up, the Fed is printing money and inflating bubbles, "but for us, that's great!": capital is very cheap; consumers are acting like the party's on, so there's lots of opporutnities.
  
  
• McNamee says he does "full contact investing": he proves the concepts of what he invests in by trying them out with his band. So he knows HTML5 is going to work because it works for his band. Then he added, to audience laughter: "You're going to say it's a dipshit little band, yeah, it is, but we like it and our fans like it" and it works.

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The open internet

We live in the age of electronics, where many aspects of daily life are shaped - for good or ill - by the capabilities of machines that rely on the flow and detection of tiny electric currents and the opening and closing of silicon-based switches.

These days most of the switches and circuits are in computers, though we should not forget that radio, the medium that many of you will be using to listen to me now, was the first mass-market electronic technology.

The things these technologies can do are truly astonishing, and their application has transformed the lives of us all - not just those like me who have easy access to the latest shiny toys, but even those who live in poverty and may never themselves hold a mobile phone or computer or share information over the Internet.

But no technology exists in a vacuum, and the growing use of powerful digital computers connected by an ever-faster and ever more pervasive networks requires us to ask hard questions about the ways they will be used to shape society.

The idea of 'openness' lies at the centre of this debate.

Defining open

If we want an open society based around principles of equality of opportunity, social justice and free expression, we need to build it on technologies which are themselves 'open', and that this is the only way to encourage a diverse online culture that allows all voices to be heard. But even if you agree with me, deciding what we mean by 'open' is far from straightforward:

Does it mean an internet built around the end-to-end principle, where any connected computer can exchange data with any other computer and the network itself is unaware of the 'meaning' of the bits exchanged? 

Does it mean computers that will run any program written for them, rather than requiring them to be vetted and approved by gateway companies?

Does it mean free software that can be used, changed and redistributed by anyone without payment or permission?

Those things count as 'open', but you might have a very different view.You might not even think that it is a good thing: openness brings its own risks, as we've seen throughout this series of programmes.

Changing reality

Digital information is very hard to control in an open world, because it arrives in a form that allows it to be manipulated by its recipient.

When you listen to the radio or record a TV programme on tape all you can easily do with the result is listen or watch again. You may be able to select which bits you watch, but transforming the stored form is complex and often impossible.

If you are listening to the podcast of this programme, however, then you have a digital file on your computer that you could load into an editing programme like the freely available Audacity, and then you can slow down… cut words up or even add another person's voice  - seamlessly.

Those whose businesses rely on limiting people's ability to copy and modify songs or images or video - the 'content industries' - find it hard to cope with the openness I've described, but so do those who want to manage the free flow of information for reasons that are not simply commercial, such as the doctors who keep my medical records or the companies storing my personal e-mails.

In some respects today's Internet is a vast, unregulated, worldwide experiment in openness, and it is already having significant consequences.

It is one that started because of the largely unanticipated consequences of the global adoption of a set of technologies that were built around an assumption of openness without any real concern for the broader impact.

We cannot simply pull down the walls to the unimpeded flow of information and expect no consequences, so while I continue to think that the real benefits of the network will only be seen if we make it as open as possible, I know that openness carries a price. And of course we could decide to do things differently.

Over a decade ago Lawrence Lessig pointed out, in 'Code and other Laws of Cyberspace' that CODE IS LAW.That means we can change the rules of the internet as easily as we change the code.

Just because we currently have a mostly open network is no reason to believe that there is a pre-ordained path towards constant improvement as we deploy advanced digital technologies throughout the world.Different choices could be made at every stage, and the outcome is far from determinated.

It could be a regulated, managed and limited network of the sort being constructed in some countries. Access to dissenting or distinct voices could be limited and managed.We could choose the apparent safety of a closed network and a closed society.

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What'll Be Inside iPhone 5?

It was Apple Inc.'s components suppliers that were responsible for leaking confirmation of a September debut for the thinner, lighter iPhone 5 (or 4S). But what will those components be, and which companies will make their way into the guts of the handset?

Investigators believe, among other things, the next version will feature a Qualcomm Inc. baseband chip for CDMA and GSM connectivity, a Broadcom Corp.  component and a much simpler system integration design. And, sources tell The Wall Street Journal that Apple has already ordered these key components for its new iPhone.

Here's a look at what else TechInsights expects was on Apple's order:

Baseband Chipset: Most have given up hope of Long Term Evolution (LTE) support in the phone, but if Qualcomm is the chip supplier with its MDM6600, there's a good chance one model will at least be compatible with both AT&T Inc.  and Verizon Wireless HSPA+ and 3G CDMA network, respectively. Most expect both carriers to get the device at the same time this year. 

Qualcomm's win in the phone is not a given, however. Steve Bitton, TechInsight's senior technology analyst, points out that while a universal phone would make the most sense, Apple did opt for the old Infineon Technologies AG  chip in the GSM iPad 2. For this reason, it might make sense for Apple to move to a newer, forward-compatible HSPA+ chip made by Infineon.

Processor: It's fairly certain that Apple's own dual-core processor, the A5, will power the iPhone 5, but it's less clear which company will manufacture it. Many have speculated that Apple will move to a smaller 28-nanometer (nm) manufacturing process from Taiwan Semiconductor Manufacturing Co. (TSMC). Bitton says, however, that it's more likely to stick with Samsung Corp. 's 45nm processor, which it used in the iPad 2.

The two companies have been warring in the courtrooms over patent infringement allegations, but Bitton says TSMC's difficulty ramping up to 28nm may make Apple reconsider. 

Connectivity: Alongside Qualcomm's chip will be the Broadcom BCM4330 for Wi-Fi, Bluetooth and FM connectivity, Bitton predicts.

Accelerometer and Gyroscope: It's not all a new-parts party for the iPhone 5. TechInsights believes that Apple will stick with the same accelerometer and gyroscope combo from ST Microelectronics that it used in the fourth version of the handset.

Camera: The camera image sensor will also come from an old supplier, OmniVision Technologies Inc., but the company will debut a new sensor for the phone just as they did on the iPhone 4. This time, it will be powering an 8-megapixel camera too. Bitton doesn't expect OmniVision competitor Sony Corp. to be a second source for Apple as some reports have suggested.

Display: Apple has recently filed patents around OLED touch screens, which could suggest iPhone 5 will include a larger, sharper display, also improving visibility in sunlight and reduced power consumption.

Production: The biggest question mark for TechInsights is around the system integration and mechanical design of the new phone. David Carey, VP of technical intelligence at the company, writes that the heritage of the iPhone’s design has been very pretty, but often quite complex, relying on low-cost human capital. Carey writes:

Given rising labor costs in China (and some not-so-nice stories about Apple/Foxconn) and its impact on the overall bottom line, we speculate that the newest version of the iPhone should see a simpler system integration design to streamline production. It’s the logical next step in the iPhone’s evolution.

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