TRANSPARENT BUNDLES by Seth Goldstein

100 Billion Cookies and Nobody is Paying Attention

Despite all the hyperbole about the Internet advertising market M&A activities, I am surprised at the lack of critical perspective about the consolidation of cookies being placed and managed on users' computers without their knowledge.

The recent spamacornucopia means more than $10 BILLION DOLLARS OF  YOUR DATA IS BEING EXCHANGED AMONG BUYERS AND SELLERS THAT YOU DON'T CONTROL, starting with DoubleClick (and H&F their private equity owner) and Google, and then Right Media (Redpoint) and Yahoo!, and then 24/7 and WPP, and now aQuantive and Microsoft.

I have heard that a profile is worth a dollar.

One could assume that a clickstream is worth $10.

We know, after all, that a mortgage lead can be worth more than $100.

How much is a cookie worth?  As in, how much does it cost a company now on average to place a cookie on a user's desktop?  Of course the folks at Tacoda, Blue Lithium and Revenue Science would know this with more granularity, but my sense is that a cookie is currently worth about $.10.  Please comment below if you have additional perspective.

And so, the $10 billion dollars worth of  online advertising deals would equate to about 100 billion cookies served.

Do we as users have any sense of this reality, or any control over its consequences?

Transparent Bundles from Wall Street to Web 2.0

I am slowly starting to settle into a routine here in California.  The past few months have been filled with new beginnings- a new school for the kids, a new job and commute for Tina, new grocery stores and restaurants and little league fields.  The Taxi cab-hailing hustle of Manhattan has given way to hustling my bike to the top of Mt Tam. Ideas don't change at the same pace as activities, however, and I find myself thinking through the same issues about transparency that stimulated this blog in the first place.  Back then I was focused on soft dollars and the opacity of financial markets not media markets:

...soft dollars and bundled commissions are the vig that generates much of the wealth among the brokerage industry in New York, which in turn lubricates expense accounts at lunch time and grand Park Avenue co-ops and East Hampton beachfronts. Is it not ironic that New York has a mayor whose namesake company benefits more from monthly soft dollar payments than perhaps any other financial institution. In a way, Bloomberg has taken the notion of value-added brokerage services to the peak of civic duty. Our city itself reflects the residual value of opacity in financial markets. And so the question comes back to what happens to the brokerage industry when transparency become of more value to investors than opacity?

Three years later, soft dollar pratices are as opaque as ever.  The SEC has catered to the rich interests of hedge fund and stock brokerage lobbyists and enabled both sides to continue their practice of doing business with eachother in a very gray market.  Even the most sophisticated individuals outside of the financial services industry have little sense of what is really going on, in terms of the ways in which large institutional investors and large banks and brokers profit from closed data practices.

This is not that different from the dynamics of the online advertising environment- there are large institutional advertisers doing business with large media companies and advertising networks.  Despite the pre-text of openness and transparency, the online media market works hard to obscure the discovery of price by the very individuals producing it; namely the people who are using the medium, searching for things, clicking on ads, and conducting commercial transactions.  The web user, like the individual  investor, has resigned himself to letting larger interests capture, aggregate, and monetize his data behavior.  He has been led to believe that this is simply part of the bargain of having such "low" transaction costs for trading stocks or searching for information.

If I had to draw a continuous line through all of my disparate activities over the past ten years, this would be it:  identifying and interpreting the direct economic value of an individual data actor.  We may never in our lifetime see a day when a person develops an acute, vested interest in the value of his data; the spread between the value of a handful of clicks and that of a mass of aggregate behavior is significant.

Although it may be hard to keep track of the progression of Media Futures, we are stuck between the end of Alchemy and the beginning of Arbitrage.  This is where the creativity stops and the money kicks in; not that surprising against the backdrop of so much M&A activity (DoubleClick, RightMedia, StumbleUpon, etc.)

In May 2005, I made this transition in the first Media Futures series.  It was etymological in nature and only hinted at the real activities that I was engaged with as an entrepreneur, as I handed over the reins of Majestic Research to a new CEO in order to focus on creating Root Markets.  Flash forward two years and I am at a similar juncture; this time moving from Root in NY to AttentionSoft in SF. The transition from Alchemy to Arbitrage that I want to describe this time will be more personal, now that the philosophical ground work has been established.  I want to trace the evolution of a central idea- transparency- through the founding of a new investment research process in 2002 all the way through the creation of a new consumer data platform in 2007.

As always, thanks for staying tuned.

Wall Street 2.0?

 

Tom Glocer,  CEO of Reuters, stands in front of  Media Futures at the Open Data Conference in NY

And so, what does exhibitionism have to do with Wall Street? How does the voyueristic behavior of 20-somethings relate to the commission decisions of hedge fund masters of the universe? Traditionally, very little. Or at least we weren't aware of these connections.  Now, however, the advent of personal surveillance technologies has begun to popularize processes that up until now have been unavailable to individuals.

This resonates with a comment that Reuters CEO Tom Glocer made at the Open Data Conference.  It was the night before the conference, over dinner, that Glocer gave his perspective on the evolution of "open data" in the context of financial services. 

He told a story about the transformation of individual data points into market data.  Surprisingly, he didn't start with a traditional financial services firm, like Reuters, but rather with an individual Schwab customer. This retail trader, by virtue of her decision as to what to buy or sell and at what price, is the most granular actor in the price discovery machine.  As Glocer told the story, the online retail investor was the proverbial butterfly flapping its wings in Hawaii causing hurricanes in China.  Her only action was to trade a stock in her 401K account online; but unbeknownst to her, Schwab took this trading data, along with that of all of the other individual retail investors, and established a higher level trend.  This process reverberated up through larger institutional brokers like Goldman Sachs and ultimately exchanges like the NYSE.   At each step up in aggregation and abstraction, significant economic value was extracted.  Although this individual's behavior is too volatile in and of itself to offer much in the way of trend analysis, this does not mean that her behavior is worthless.

This is the foundation of Wall Street 2.0:  the individual data producer is beginning to wake up to the economic value she is creating. This economic value had in the past been appropriated by those aggregating up the data from above.   Our electronic behavior, whether it be querying a search engine, clicking on an ad, checking out a stock, or trading a share, is generating value for other people that are in a position to aggregate and sell this information to institutions, who in turn transform it into some other form that ends up getting sold back to individuals.   Alchemy... to... Arbitrage.  This is nothing new.  What is new, however, is the extent to which our behavioral trails are no longer hidden, but are instead now available to us via various modes of personal Attention services, also known as myware.   This is the window that Open Data flows through:

Open data is to media what open source is to technology. Open data is an approach to content creation that explicitly recognizes the value of implicit user data. The internet is the first medium to give a voice to the attention that people pay to it. Successful open data companies listen for and amplify the rich data that their audiences produce.