Yet another media business being threatened by the Internet? Stock photography. Rumors are flying today that Getty Images (GYI), the top syndicator of photos to wires, newspapers, and other media, is considering buying Jupitermedia (JUPM), a major competitor. Why? A long post by Thomas Hawk, CEO of Zooomr, a photo-sharing site, over at Seeking Alpha brings up some pretty interesting ideas:

The stock photography market will be changing dramatically in the next few years - with or without the current market leaders. It's inevitable. The laws of economics require it. When I met with Getty CEO Jonathan Klein late last year he said that the biggest threat to their business was the [Canon EOS] 5D (figuratively) that I was holding in my hands when I asked him the question.

Example number one million of the democratization of newsphotography is the recent JetBlue runway mess story, where newspapers and websites were splashing photos taken onboard by a passenger with a cellphone cam.

Hawk notes that both Getty and Jupitermedia have acquired smaller microstock companies that buy photos off the web, from smaller professional photo agencies, amatuers, and hobbyists. Corbis (another big stock-photo provider) will start doing some microstock of his own.

But Hawk says his Zooomr will start helping its users, who can be anybody, sell their photos directly to the wire servies (like AP and Reuters) that distribute the photos widely to media. And that represents the real threat to the biz, because the photogs themselves will defect. Here's his case:

Photographers everywhere will find this a far more attractive model than the current one today where they might get 20% to 50% payouts on images that are sold for $1 to $20.

Getty currently gets approximately $242 per royalty free image sold. Corbis gets about $214. More of this money belongs in the pockets of the growing army of photographers out there, producing some of the best imagery you've ever seen.

Hey Oscars buffs. So you loved The Departed? You can put your money where your eyes are and buy a contract at intrade.com, the division of Tradesports.com that offers bets on entertainment events. You'll be in good company.

But... last year the market predicted the award to go for Brokeback. But then there was a Crash. It could've just been a fluke. Should you trust in the collective wisdom of the Web, as represented both by bettors and the blogger-predictors? After all, Tradesports was nearly dead-on in predicting the Democrats' seat margin in the midterm election.

If you don't have any other particular reason to watch this Sunday, the Oscars will be an interesting test of whether the Web is smart enough to read into the minds of the Academy voters. Keep in mind that general political elections are different than Academy voting: Anyone can vote in an election, whereas the Academy is a relatively small number of expert voters with very different interests in movies than the general public. Maybe the Web is powerful enough to understand the Academy and last year was a fluke. Or maybe Academy voters even like to just mess with everyone by reading Tradesports and voting the opposite way. In any case, it's reason to pay attention.

In some other tech news today, Apple (AAPL) and Cisco (CSCO) have put down their sticks. Both will use the iPhone name. This might result in a few confused grandmothers buying the wrong Christmas present, but it effectively ends this news story... or does it? After all, Cisco was just picking on Apple because it kinda had a crush. InfoWeek immediately spins the deal as an opportunity for Cisco to get its VoIP and Wi-Fi know-how into the iPhone. PC Magazine also reports the news as a win for Cisco CEO John Chambers, who has always wanted not to get rich from licensing or kill the Apple iPhone but just to make sure Cisco plays some key future role on the gravy-train that the iPhone is expected to be.

So what exactly was included in the deal? Apple, after all, rejected interoperability the last time the two companies negotiated. Did they agree to something this time around? The Mercury News says the companies aren't talking details yet. Will it even be something legally binding? Or just a promise by Apple? Maybe that was enough for Cisco. Can't wait to find out.

In any case, it's probably not VoIP. Anyone saying so is jumping the gun. Remember what CNET News was reporting last month:

Apple has not indicated that the Wi-Fi connection could be used to launch voice over IP calls, he added. In fact, Bajarin said that consumer VoIP clients such as Skype can't be downloaded onto Apple's iPhone.

"Apple has made it very clear that the iPhone is not a VoIP phone," Bajarin said. "The company wants to make it very clear that this is a cell phone; not a VoIP phone."

Personally, the Browser doesn't think Apple really needs VoIP. After all, it's partnering with AT&T's Cingular (T) exclusively for service, and Cingular surely would not appreciate having that competition. It would also require Apple to either develop VoIP software or use someone else's, which is probably not healthy for the iPhone's smooth operation. One of its big benefits will be its integrated, nicely designed software -- the lack of which is a massive drawback to most other cellphones. If Cisco gets anything like that, it may be because they just had Apple pinned into a legal corner on the name thing. And that doesn't bode well for future cooperation.

February has not been kind to Google (GOOG). The fragile status of its YouTube unit was on display this week, as The Browser noted yesterday, when Viacom (VIA) announced that it would zap its videos over startup rival Joost. The National Hockey League, which had once embraced YouTube, is now apparently yanking videos from the site. And while it's a single-market hit, we noticed that Norwegian media giant Schibsted announced that it was starting a local competitor to YouTube. Now comes word in today's Wall Street Journal (subscription required) that the much vaunted deal between Google and CBS (CBS) seems to be falling apart.

And thus descend the vultures. Over at PaidContent, Rafat Ali was so eager to write the bad Google news that he let several typos go up on the site uncorrected.

Nobody's arguing that the company is going to go out of business; the stock is down a little this morning, but so's the rest of the market. The Browser thinks instead that certain realities about Google's business are beginning to sink in. YouTube is a tremendous first-mover in the promotion of online video but, to paraphrase something the wonderful James Fallows once wrote, if first-mover advantage were really absolute, I'd be writing this item on a Kaypro and you'd be reading it on a Wang. Adam Lashinsky's masterful Fortune cover story last fall on Google's embrace of chaos sounded cutting-edge, but it could just as easily fall into a form of neglect. Google may develop and buy fabulous products, like the Blogger publishing tool I'm writing on, but it is not always good at cultivating and growing them. The company needs focus, and until it finds it, February could turn out to be a very long month.

Take a look. That's JetBlue founder and CEO David Neeleman apologizing to customers via YouTube after a very, very bad week for the airline: 1,100 flights canceled due to last week's snow storm and thousands more irate passengers. Neeleman's unpolished, earnest delivery makes this one mea culpa the Browser would consider accepting. But then again, we weren't stuck on a tarmac for eight hours.

Boy did negotiations for a licensing deal between Viacom (VIA) and YouTube fall apart. Earlier this month, Viacom asked YouTube to take down 100,000 clips of copyrighted programming. Today there's news that Viacom -- purveyor of 18-35 demo favorites like The Daily Show and The Colbert Report -- is taking all its content over to Joost.

Okay, so who and what is Joost? Brought to you by the same folks who created Skype and Kazaa, it's another online video service - although the major difference from YouTube is that the company aspires to be a real alternative to TV. And it does it with peer-sharing technology, not hunks of data streaming one way from the source. From the Wall Street Journal article: "Unlike YouTube, which carries mostly short video clips uploaded by users, Joost's strategy is to run full episodes with high-quality resolution. 'What we're trying to do is real TV online,' Mr. Friis said in an interview." So no home-brewed videos. Just the commercial stuff.

As far as the Browser can tell, the sticking point for Viacom with regards to YouTube /Google (GOOG) was that YouTube couldn't guarantee any kind of copyright protection for Viacom's shows. One reason, YouTube says, is that it simply doesn't have the technology yet to filter everything that goes up on the site.

But a lot of questions remain here: If it's true that Joost is giving Viacom two-thirds of related advertising revenue, was the problem copyright-protection technology -- or was Google unwilling to agree to those revenue terms? And let's not forget how ridiculously new Joost is. Until as recently as January, it was known only by its development name, The Venice Project. And it's still in Beta form.

An old-school, giant media company handing much of its online future to a nascent, barely-released internet service? That's how frustrated Viacom felt about YouTube.

In a comment posted to one of yesterday's items about quantum computing, a reader named Peter Hooper said:

Who cares about Sudoku?...maybe you should focus more on the practical applications of a quantum computer rather than 3 posts of Sudoku. What advantages do quantum computers have over traditional computers? Is it the beginning of a new wave of technologies? Will we finally calculate the meaning of life or just have better Sudoku and Chess tournaments?

Hooper's got a point. In The Browser's interview with Geordie Rose, the CTO of D-Wave, he held out the prospect that fully functioning quantum computing could do tasks "a million or a billion times faster" than today's computers. Speed, of course, has profound implications, and will allow computers to tackle tasks that today elude them. That could create havoc: security encryption, for example, is going to have to undergo a revolution in sophistication. Rose believes that the most dominant users of quantum computing will be in the life sciences, which is why one of the tests Tuesday (in addition to the Sudoku) involved matching molecules. The video of this portion is here:


One likely application of this technology would be in pharmaceuticals: with superprecise molecular mapping, scientists could determine the exact effects of a drug without ever having to do trials in living beings.

But let's not dismiss the Sudoku component altogether. The presumed ability of quantum computing to solve "NP complete" problems like a massive Sudoku puzzle could have tremendous applications for essentially all kinds of businesses. That's because modeling for things like resource allocation or efficient use of transportation will become far more robust and useful.

Will quantum computing, to use Hooper's phrase, "calculate the meaning of life"? Perhaps not, but it should deepen it.

The debate over Net Neutrality, which got so heated over the summer then faded as Washington turned to the mid-term elections, is back in the news. (Net Neutrality proponents would like to see rules prohibiting phone and cable companies from limiting or prioritizing Internet traffic on their networks.) Direct Democracy has a post (third item) on Net Neutrality legislation being introduced in states such as Maryland and Maine.

And earlier this month, Net Neutrality pin-up Tim Wu issued a new paper on the idea of wireless net neutrality, which the Washington Post sums up nicely.

Proponents of wireless net neutrality wonder why wireless service and devices have to be sold together in the U.S. With wired networks, you can buy any old phone from Radioshack (RSH) or Target (TGT) and plug it into your wall jack. Why can't you do the same with your wireless device?

Part of the reason has to do with networks - the U.S. operates on two different wireless standards, so a phone that works with T-Mobile service simply isn't compatible with the Verizon networks. But mostly it has to do with the wireless operators' desire to control what rides on their networks. This isn't entirely unreasonable: If your Motorola (MOT), Nokia or Blackberry phone breaks, chances are you don't call the device manufacturer for customer service; you call the wireless carrier. On the other hand, as one Nokia (NOK) executive is fond of saying: "You wouldn't buy your computer from Verizon (VZ) or Comcast (CMCSK). Why would you buy your wireless phone from the phone company?"

An interview with Geordie Rose, founder and Chief Technology Officer of D-Wave, has clarified some issues. First: The Sudoku demonstration was a last-minute addition. A D-Wave employee who is a Sudoku fan wrote the application "a couple of days before the event, and we thought, we'll show that, too," Rose told The Browser. Second, the Sudoku demonstration was NOT intended to show the best abilities of quantum computing. "The point was not to demonstrate superior performance [to conventional computing]," Rose said. "It was to show that it was possible at all."

In other words, this was a proof-of-concept event for quantum computing in general (you can read more about Rose and D-Wave in this Business 2.0 article from 2004). Rose says he anticipates that his system will "become better than conventional approaches" by the end of 2008.

So what might a genuine quantum computing approach to Sudoku look like? Here's how Noah Green, a programmer who is a VP with Lehman Brothers Fixed Income Research, describes the problem:

It's easy to write a [Sudoku] solver and most computers can do it in under a second. However, if you go out past 9 X 9 [squares in a Sudoku grid], believe it or not you enter into a whole different problem space. Why this is and what this implies is the subject of a huge research area of theoretical computer science. Basically the generalized (i.e. > 9x9) Sudoku problem is "NP complete," which means it's a problem that will take forever to solve computationally. Note the word "computationally" - this means a person can conceivably still solve it unsystematically in a much shorter time....

Till now, you could throw all the hardware you want at this stuff and still reach the same frustrating conclusions. What was true in the 1940s and 50s, when Turing did his work, is still true today. That's what is so elegant about theoretical computer science - it's about math, not transient things like hardware. However, hardware could make a big difference if the hardware was something that shifted us away from the Turing mathematical model and/or the von Neumann architectural model. People often tout quantum computing as being that hardware. Of course, we haven't really had quantum computers before.

Green also recommends this article for those wanting to know more about the science of Sudoku.

All told, I'd say D-Wave's Sudoku demonstration created a classic public relations quandary: they succeeded in getting people's attention, but at the same time blurred slightly what exactly makes their approach distinctive--most of the coverage treated the Sudoku puzzle-solving as a gee-whiz achievement.

But at least we're now clear on the benchmark for '08--a 10 x 10 Sudoku grid solution or bust!

My Browser colleague Oliver Ryan jogged my memory this week by pointing out the role that MeetUp.com played in the early organizing days of Howard Dean's 2004 presidential bid. It's easy to forget that between mid-2003 and Janaury of 2004, Dean looked close to inevitable as the Democratic nominee, due in part to the fact that he was using state-of-the-art organizing techniques.

Now comes word, via ZDNet's Steve O'Hear, that John Edwards has set up camp in Second Life, apparently the first major party presidential candidate to do so. O'Hear quotes Jerimee Richir, Edwards' SL campaign manager who is affiliated with the real-world Edwards campaign, defending the effort as worthwhile:

I bet that half of Second Life users regularly contribute to multiple blogs. So it is a smaller community [than MySpace or Facebook], but I would argue it is a more influential community. So SL campaigns generate more buzz, not because, "the media is stupid" but because Second Life users do more talking.

The Browser has no idea whether Richir's estimate is accurate, but it hardly matters. As a general rule, beware the candidate or consultant who tells you that there is an advantage to this kind of high-tech canvassing; look at Dean's fate once the voting actually began. For one thing, if it's at all worth doing (and maybe even if it isn't), you can bet Clinton and Obama and everybody else will be on SL any day now.

But more importantly, there's a reductive stupidity in assuming that SL participants are going to base their political decisions on whether or not candidates have a presence there. Yes, this development might be one more stepping stone toward the mainstreaming of SL. But once it's mainstream, it loses it distinctiveness; the assumption is akin to saying that television viewers will prefer Edwards because he advertises on television. Real-world messages and real-world organizing still matter most. And as a guy who couldn't even deliver his home state of North Carolina for the Democrats in 2004, Edwards ought to be spending as much of his time in "First Life" as he possibly can.

Following up on yesterday's post, there is a video available on YouTube that does appear to show the D-Wave quantum computer solving a Sudoku puzzle more or less instantaneously.



This still doesn't tell us very much, though. As the AP reported this morning, no one can be certain if the computer in question is actually making quantum calculations. And as The Browser's excellent readers have pointed out in comments to the previous item, you don't need a quantum computer for this relatively simple task. (Kevin of Baltimore: thanks for the code! But I don't think we can publish it here.) So it's still unclear why Scientific American and other outlets are touting this as evidence of a breakthrough.

Those of us who write headlines for a living know that from time to time a really good pun or catchy phrase may win out over pure accuracy. The Browser suspects that something like this happened over at the august headquarters of Scientific American. An article posted yesterday on the SA site carried the headline "First 'Commercial' Quantum Computer Solves Sudoku Puzzles." It's a fascinating story about a Canadian company called D-Wave testing a "quantum" computer, which has digital bits that can apparently grasp something as 1 and 0 at the same time, and thus in theory take on more complex tasks than ordinary computers.

But if you read through the whole article, it doesn't actually say that the computer "solved" a Sudoku puzzle. What the writer said is this: "The quantum computer was given three problems to solve: searching for molecular structures that match a target molecule, creating a complicated seating plan, and filling in Sudoku puzzles." Nowhere does the article say that the computer actually FINISHED the puzzle, much less finished it with its unique correct solution. And the company's press release makes no mention of Sudoku at all. (The Browser is awaiting comment from D-Wave on this matter).

And besides: as complex as Sudoku puzzles may be (I interviewed Wayne Gould a couple of years back; he spent seven years writing proprietary software that can create a near-infinite number of Sudoku puzzles), since when is solving one meant to be a benchmark for artificial intelligence? (UPDATE: A number of readers have noted in comments below that there are programs available for download that solve Sudoku puzzles. This reinforces the point: why are SA and a number of bloggers focusing on this apparently mundane accomplishment?) After all, IBM's (IBM) Deep Blue beat chess grandmaster Garry Kasparov in a six-game match back in 1997. Maybe I'm wrong, but I think chess is significantly more complicated than Sudoku. Perhaps the distinction here is that D-Wave is talking about a commercially viable computer, which Deep Blue isn't. But even so, I think Scientific American is overhyping this development, even if unintentionally.

Very close web watchers are giddy today at the possibility Google might have misspelled itself. Can you see an "L" in their Valentine's Day-themed logo at right? Well, our friends at Gawker couldn't, and they were quick to pounce. But Gawker sibling Valleywag actually managed to make a call to Google's PR crew who claim that "the stalk on the strawberry is supposed to be the L." Emphasis on "supposed to be." OK, nothing more to see here. Keep moving.

In honor of Valentine's Day it seemed fitting we delve into the world of online romance. Jupiter Research is hawking a new report on online dating that shows much of the growth in the U.S. market is coming from higher fees, rather than growth in the number of subscribers. "Over the last several years we've seen a steady drop in the percentage of US online users who report browsing online dating sites," says Nate Elliott, Senior Analyst at JupiterResearch and lead author of the report. Could all those users be finding love - or finding new ways to find love?

The report suggests that online dating in the U.S. has reached its natural limit, while European matchmaking sites, according to Jupiter, continue to see steady subscriber growth.

Fair enough, but we wondered what our Canadian friends are doing to find love online. Coincidentally, we recently met with a Vancouver-based entrepreneur who started telling us about a friend of his whose matchmaking site, plentyoffish.com, apparently is the top dating site in Canada, as measured by Alexa's traffic rankings for the country.

It turns out Plentyoffish CEO (and sole employee) Markus Frind is a blogger, and in his latest post he boasts that thousands of people have found love and marriage through Plentyoffish. (He also claims his site is the largest dating site in the world measured by "relationships created.") He writes, "it's getting hard not to find people in your group of friends that haven't found someone on plentyoffish at least in Canada."

For those hopeless romantics interested in reading the real-life stories of Canadians in love, click here. Warning: Some of these stories are pretty darn sappy.

Remember MeetUp.com, the web tool that put Howard Dean on the map during the 2004 Presidential elections? Well, if you haven't been paying attention, you might be forgiven for thinking they were somewhat of a flash in the pan. Not so. In fact, guess who's revenues spiked 30% in January over December? Yup, the data point comes direct from CEO Scott Heiferman who shared it with the crowd at his monthly, eat-your-own-dogfood NYC Tech MeetUp last week.

In a follow up email to The Browser, Heiferman offered his explanation: "Seems related to New Year's resolutions; not just fitness related. People resolve to get involved in a cause, to connect with some passion/interest/hobby or whatnot." All this fresh resolve is clearly good news for the syndicate of blue chip VCs, including eBay (EBAY), Pierre Omidyar, and Draper Fisher Jurvetson, who collectively bought 10% of the company last spring.

Just to crunch the numbers a bit: MeetUp.com "facilitated" 33,848 meetings in January, and its primary revenue stream comes from meeting organizers, who pay a $12-$19 monthly fee for the service. Based on our very rough, unscientific estimate of total meetup groups and possible ad dollars, we figure the company might be grossing as much as $500,000 a month, which puts them at $6 million in annual sales. We welcome better estimates, but, regardless, this is not exactly Google (GOOG).

Still, with double digit month-over-month growth, a $6 million revenue run rate can quickly become a much more serious number. We're just saying. And Obama and Hillary have barely gotten started.

Viewed from a distance, music labels, movie studios and TV networks have all been fighting the same battle ad nauseum against copyright interlopers. And there's never been any question who their lawyers should be calling. Once upon a time, it was Napster. These days, it's YouTube.

But there's something different about this particular fight. Earlier this month, Viacom (VIA) asked YouTube to remove 100,000 unauthorized videos from its site. YouTube complied, but Viacom's not so dense as to think that YouTube hasn't been a boon to its most popular shows. Surely all those Steven Colbert clips formerly on YouTube only encouraged more people to watch Comedy Central every night at 11:30.

The same argument has been made regarding music: All that MP3 swapping ultimately promotes individual songs and their artists, even if it doesn't line anyone's pockets in the near future. But in fact, unauthorized video clips are far less threatening than illegal MP3s. They offer all the promotional advantages with less of the cost to the copyright owners. As James McQuivey, an analyst with Forrester Research, explained to CNET.com:

Video is not like the music space, where access to or a download of a free track will satisfy a person's interest in a particular copyright material and cause the creator to directly lose money, said McQuivey.

While an MP3 provides access to a hit single in its entirety, reducing the likelihood that it will be purchased, a video clip of MTV's Laguna Beach may very well motivate viewers to tune into the commercial broadcast. Someone at Viacom gets this distinction, which is why, in the next few months Viacom will start posting its video clips on its own websites and let blogs link to them.

The corporate lawyers may be playing hardball with YouTube, but deep down the executives must know that YouTube is no Napster.

Interesting news from the 3GSM World Congress this morning in Barcelona: Adobe (ADBE) has announced that the next version of its Flash Lite software for mobile devices will support video. Please recall that the ability of Flash to stream and display video seamlessly across multiple operating systems and web browser types was critical in unleashing the explosion of video online. Both YouTube and MySpace, for example, use the Flash video format, and now, in theory, all that content can be streamed seamlessly to your smartphone.

From a software and operating system point of view, smartphones remain a terribly fragmented universe, and the prospect of a single, easy-to-use video format is obviously compelling. Naturally, Adobe is hoping to extend its position in video from desktop to mobile device. It's all about broadening what they call the "Flash ecosystem."

Still, duplicating in mobile the company's success on the desktop may not be so easy. Yes, they've already made some inroads: "The number of Flash-enabled devices sold worldwide tripled in 2006 to reach more than 200 million," reports Richard Martin at Unstrung, adding that "120 million devices running Flash shipped last year, representing 12 percent of the mobile-phone market." But that still means that 88% of the mobile market does not yet have Flash. Among those that will not support Flash Lite, says Martin: the super popular RIM Blackberries and Palm Treos. Ouch.

Still, this is clearly the right move for Adobe, which is perhaps why the stock, down roughly 12% since late December, has ticked up nearly 1% since Friday.

Thought "dual core" microprocessors sounded impressive when they hit the streets a few years back? Forget about it. Intel (INTC) today introduced a chip with 80 "cores," or 80 distinct microprocessors arrayed in a microscopic grid, that collectively can churn through a trillion "floating point operations" a second. That makes it the world's first "teraflop" chip. FYI: "tera" comes from the Greek word for "monster."

OK, so this hot rod is not quite ready for prime time. It's still being shown off by the guys in lab coats. More importantly, John Markoff, among others, points out that nobody really knows how to write programs that take advantage of so many cores. It's a problem that has afflicted the world of "massively parallel" supercomputers for some time. It seems the hardware geeks are way ahead of the software types, and so Slashdotters have met today's news with a certain degree of frustration and self-flagellation. "We are doing something wrong," writes Ardor. "The human brain provides compelling evidence that massive parallelization works."

That's certainly what Intel believes, and it has been telling reporters it believes the new chip will excel at software problems involving "recognition, mining and synthesis." Not sure if all this is cool or creepy.

For the record, it's only been ten years (that's 1997) since the supercomputers first broke the teraflop barrier. The machine that did it was the ASCI Red at Sandia National Laboratories. Today's supercomputing champ is IBM's BlueGene/L, a machine capable of 280.6 teraflops. Want more? Check out The Smartest Machines on Earth....

Paid Content has an item on the launch of Virgin Media, a UK cable company that counts Sir Richard Branson as a big shareholder.

The company, which Branson is rescuing from the scraps of NTL Telewest, aims to compete with Rupert Murdoch's Sky satellite service. The Paid Content post noted that as part of the relaunch, Virgin is launching a new online portal that will go head-to-head with Yahoo, Microsoft's MSN and Time Warner's AOL.

Sir Richard is no stranger to entering new markets, and though his businesses historically have been in more traditional markets such as retail and transportation, he's certainly no stranger to technology, as this fun article by my colleage, David Kirkpatrick, gleefully shows.

But many of Virgin's launches are vanity brands: almost no one drinks Virgin Vodka or buys Virgin travel insurance. In those fields where Virgin does genuinely compete, it's by offering a product that is better, or at least more interesting, than the competition's, and the Browser fears Virgin Media and Virginmedia.com is neither. The old NTL (formed from the merger of NTL and Telewest, two struggling cable operators) didn't have the best reputation for service.

Meanwhile, the portal is just plain uninteresting. Okay, the site is new, and maybe subscribers get a different experience than those of us on the other side of the pond, but call us unimpressed. Particularly offensive is prominently placed but thoroughly insipid interview with actress Uma Thurman. But oops, nowhere does the item mention that Thurman is the mouthpiece for the Virgin Media rebranding campaign.

Fortune's Brent Schlender writes:

Steve Jobs is calling on the recording industry to unlock music and set consumers free. Why now? Could it have something to do with the iPhone?

So Steve Jobs has written an open letter to the world, suggesting that it's time to do away with the Digital Rights Management (DRM) technology that locks up downloaded music from being played on competing digital music players, such as Apple's iPod, Microsoft's Zune and a bevy of others. How magnanimous. But before you take what he says as gospel, you have to ask a couple of questions: Why? And, perhaps more interesting: Why now?

Let's take the first question. Apple is already the obvious kingpin of digital music players and digital music downloads. It's not as if either the iPod or the iTunes Music Store need more competitive leverage to succeed in the marketplace. Besides, the iTunes Music Store has by far the widest selection of music available for download.

Nor, as Steve points out, is it difficult for users to find other ways to import music into an iPod than simply via the iTunes Music Store. Remember "Rip, Mix, Burn," Apple's early marketing mantra for using iTunes to import CDs into a computer? Well, all any iPod user has to do is "Rip, Mix, Sync."

He contends that 97 percent of the music in a typical iPod isn't DRM protected anyway. Moreover, it's true that adding a layer of DRM is a technological headache and anything but bulletproof. So yes, it would be more convenient for everyone if all digital files could be played by any player or any other digital device. But where's the customer clamor? There must be another reason.

So let's go to the second question - Why now? Especially now that Apple is trying to develop a market for rock videos, TV shows and even movies, how does doing away with DRM for music give video content providers any comfort that their downloaded shows won't be even riper for online bootlegging? That nascent market for video downloads is still unproven, and besides, distribution technology is still a moving target. It’s not unlikely that both wireless and broadband bandwidth will soon be sufficient to simply stream video content in real time, rather than require viewers to acquire it, store it and then play it back.

Most intriguingly, what about the timing of this manifesto in relation to the announcement last month of the iPhone, a device that is primarily a Web-enabled media player? From the get-go (once it goes on sale this summer), the iPhone as it is currently described will be prevented from directly downloading music or video itself, even though it is a wireless broadband-capable device. To get songs or shows into the iPhone, you still have to tether it, via a docking cradle, to a Mac or a PC even though it easily should be able to handle this task all by itself. Something here doesn't compute.

Jobs himself says the "rub" really comes down to its licensing deals with the content providers - the big four music companies, and the TV networks and Hollywood studios. "Since Apple does not own or control any music [or video content] itself, it must license the rights to distribute if from others."

Indeed those licensing agreements are very restrictive, but it was the best deal he could get at the time. Now, however, Jobs is in the catbird seat, at least in terms of doing the best job of demonstrating and delivering to the world a complete digital music and video buying and consuming experience. He's proven the concept, and made it cool. Except for that last link from the new iPhone and other wireless/network-savvy personal digital entertainment devices to the online content stores, that is.

So the real question may be this: Could Jobs' eloquent plea on behalf of consumers all be a gambit to force Apple's content suppliers to renegotiate their deals and make it possible to download music and video directly onto the iPhone? After all, the iPhone certainly has the wireless capability and the processor smarts to handle such a simple online transaction. And Apple has the iTunes Music Store ready to do business.

I wouldn't put it past him.

Hitwise has the hot data on whose Super Bowl XLI ads did the best job of driving traffic to their web sites. Strictly in terms of percentage gain of Internet audience share, top honors go to Snickers whose man-on-man Kiss ad drove a 1478% spike. Keep in mind, however, that the huge increase is coming off a tiny base: on average Snickers.com pulls a meager .006% of the total U.S. Internet audience. True also that the ad seriously aggravated the gay community, and has since been yanked from the airwaves. But you can almost hear the Mars company execs thinking to themselves, "No such thing as bad press."

Meanwhile, second place went to Bud Light whose comparatively mild spot involving axe-wielding hitchhikers managed to drive a neat 656% gain.

Yesterday, Conde Nast launched Flip, a sort of rich media social network for teens, and this raises all sorts of questions. Could it be that the most smugly low tech of old media laggards is quietly stepping into the future? It goes against our finely honed Innovators Dilemma instincts, but the thought had crossed our mind; especially since a certain highly placed CondeNet operative recently took The Browser aside and argued persuasively that the tech scene over there wasn't nearly as hopeless as vicious rumor would suggest. Fair enough: we must give credit for the success of Epicurious, the smart purchase of Reddit, and now the launch of forward-looking Flip.

Flip-style multi-media, you see, is in fact the future of teenage social networking. Say goodbye to two dimensional, static MySpace pages, and hello to Flash-heavy slideshows reminiscent of those Vogue-Elle-Seventeen collages that teen girls used to spend their weekends creating.

Want proof? At DEMO last week, one of the slicker presentations came from start-up VUVOX, creator of a multi-media authoring tool that promises to turn every amateur web page creator into an Adobe (ADBE) Photoshop genius. Honest to god, "Flipbooks" are in the same ballpark. Who'd of thunk the CondeNetties would be so up with the times?

Of course, it's a bit early to proclaim Flip a victory. Our dogged friends at TechCrunch, for example, have already noted some issues, like the fact that Flip isn't exactly over-protective of teen privacy. "Flip profiles are freely browsable and searchable," writes Michael Arrington. "This allows the site to create more networks and generates extra page views, but it also allows predators to browse profiles of young teenage girls."

That's a serious issue to be sure, but at least it's the sort of problem with which any self-respecting Web 2.0 player should be struggling.

Cast your mind all the way back to last week, and imagine you were with The Browser, holding down the VIP room at the "legendary" Costas nightclub at the Marriott Desert Springs Resort and Spa in Palm Desert, CA, the latter a highly irrigated, artificial affair that would make David Lynch smile.

Venture capitalists are everywhere, the bar is open, and the band is wailing away, for it's party night at DEMO 2007, the excellent tech conference. But back to the band: emphasis on "wailing." This being the ultimate Web 2.0 crowd, conference impresario Chris Shipley had opted for an open mic format. Much like Time Magazine, Shipley had declared ours to be the age of individual empowerment. So, naturally, the band should be user-generated.

Alas, despite the pleasant murmer of PR flaks and a remarkably productive smoke machine, the dance floor remained stubbornly vacant. That is, until the boomer CEOs strumming Grateful Dead tunes abandoned the stage in favor of the local crew of mercenary musicians playing "Sex Machine," at which point dancers were suddenly everywhere.

The irony of the situation was not lost on at least one observer, a bemused and philosophical Managing Director from Granite Ventures nursing a cocktail near The Browser. "The UGC bands produced a scene that perhaps reminded everyone more than they would like of high-school dances. The parquet became a real world web-cloud, if you will, an all too real realm where no one dared shed personal inhibition to shake and shimmy. What they needed was the comfort and quality of mass produced media."

The moral of this feeble story? "User generated" does not a hit necessarily make.

At high noon today (Easter Standard Time), Yahoo (YHOO) will flip the final switch on its overhauled search advertising system, code-named Panama. Miguel Helft at The Times has the color commentary in today's paper, calling the Panama "the most important new product for Yahoo in years."

In a nutshell, the key change is this: in the past Yahoo prioritized ads based soley on how much advertisers were willing to pay for them. But the new system takes into account how the ads actually perform, that is, how often users click on them. Yahoo hopes the tweaked algorithm will improve the efficiency of its ads, allowing it to close the revenue gap with Google (GOOG). According to Citigroup (C) analyst Mark Mahaney, who was quoted by Helft, "Google made 4.5 cents to 5 cents on every search, while Yahoo generated only 2.5 cents to 3 cents a search."

Of course, greater yield is only part of the problem, a point not lost on the many Yahoo critics poring over today's news. "Will Panama make a huge difference for Yahoo?" asks Don Dodge. "No, I don't think so."

Yes, he says, it will improve revenues per search, but the bigger problem is that Yahoo just doesn't have enough search traffic. "Most of Yahoo's traffic comes from Yahoo Mail (33%) and home page visits (32%), both of which can not be easily targeted because there is no user indication of interest like a search keyword. Yahoo generates less than 11% of its traffic from search while Google 88% from search."

That's a critical metric -- and Panama doesn't look like it's going to change it.

UPDATE: While not strictly disputing Don Dodge's numbers above, a Yahoo PR agent was quick to call The Browser to provide further numerical context. In essense, Yahoo would like you to know that their search volume is still pretty good thank you very much: First, please note that according to Nielson/NetRatings, Yahoo's search business grew faster in December (30.1%) than Google's (22.6%.) Second, the latest Comscore data shows that "Yahoo Sites" actually gained .3 share points of U.S. searches in December, keeping themselves in a solid second place with 28.5% of searches vs. Google's 47.3%. Fair enough. But keep in mind that Google actually gained .4 share points in the same month. When you have a bigger base, even if you grow more slowly in absolute terms, you can still be winning the market share battle. And that quantitative insight remains problematic for Yahoo, and presumably even more so for the likes of Microsoft and AOL.

File this under rumor: the Google Operating System blog yesterday posted evidence of what looks a lot like a Google (GOOG) answer to Microsoft's (MSFT) Powerpoint. Recall that Google purchased the maker of an online word processor called Writely last year, and has since relaunched the tool and re-branded it Google Docs and Spreadsheets (along the way it added the spreadsheet capability.)

It seems a few people snooping around Google Docs' header files have discovered repeated references to something called "Presently." Get it? Other embedded references include telltale hints like: "Convert document to presentation."

The clues are substantial enough to cause a stir. Michael Arrington was quick to pick up the thread, but found that even as he was typing, the evidence was being cleaned up: "During the time it took us to write this post," he writes, "the document was edited and all references to "presently" were removed." Think an enthusiastic programmer might have made a mistake at Google? Let chaos reign!

Paul Kedrosky, meanwhile, makes the important point that Google's Office-killer apps are already good enough for him. "While critics will be quick to point out that none of these apps are the feature equivalent (or even the 20% equivalent) of the Microsoft counterpart, I frankly don't care. For my entirely self-serving purposes when I have to do a quick doc, run a spreadsheet, more often than not I use the available Google tool."

So Viacom, parent of Comedy Central and MTV, wants Google's YouTube to remove all Viacom clips from the interactive Web portal. Apparently the companies failed to reach an agreement to make Viacom (VIA) content available on the Web.

Former Browser Owen Thomas notes in his blog that these guys already had a deal with Google (GOOG) to test online video distribution. But that deal was announced back in August 2006 - when Tom Freston was still running Viacom, and when Google wasn't the owner of YouTube.

Much has been made of the different directions (subscription required) taken by Viacom and its former sibling CBS. (The two split about a year ago.) Most notable is the stock performance of the two companies: CBS is up, and Viacom is, well, down.

Now another big difference is emerging: CBS is a prominent YouTube partner (I'm old and go to sleep early, so if not for YouTube I'd never see any Letterman). Moreover, under Les Moonves, the company is showing a real willingness to experiment with other interactive and digital initiatives, including a trial of a new clipping service from Sling Media, makers of the Slingbox.

Meanwhile, Viacom is apparently choosing to put its content on its own site, much like Disney's (DIS) ABC unit. To be sure, Viacom has plenty of good stuff people will seek out - music videos, comedy shorts, etc - but to opt out of the one place everyone goes for clips seems shortsighted. And while viacom.com - or wherever they chose to place the content - isn't exactly a walled garden, that approach seems very old-fashioned, at least by Web standards.

I'm not saying every blog needs to be snarky like Gawker or deeply personal a la Dooce. But who doesn't love a fun blog? Alas, there's pretty much nothing fun about this new blog that's ostensibly about the television series "The Office."

The blogger, Julie Elgar, recaps each episode with Dwight Schrute-like seriousness, and then proceeds to explain all the human resources and litigation risks associated with the various Dunder Mifflin shenanigans. (What? Sexual harassment in the office is wrong?)

She puts a price tag on each episode, estimating how much the infractions might cost a company to defend in real life.

Elgar is no mere slacker TV fan. She's a lawyer specializing in employment litigation, and I learned of her blog because a public-relations firm sent me a pitch: "The blog is launching today and it would be great if you link to it, or mention it in a post." (Mission accomplished.)

The challenge for Elgar is one of tone. Her earnestness and use of legalese (like this lengthy disclaimer) is exactly the kind of thing "The Office" skewers each week. She's blogging about a sitcom, so a little humor would help.

For pointers, check out the surprisingly funny, NBC-authorized Schrute blog. (Note to NBC: Those character blogs need to be updated once in a while.)

So YouTube will start paying some people for their videos -- or at least "we're definitely moving in that direction," says co-founder Chad Hurley at Davos (hat tip to Jeff Jarvis). He doesn't say how that would work, but he does explain a new "audio fingerprinting" system that would help record companies identify their music being used in user-generated videos. The idea, I think, is that both the record company and the video producer would share in the ad revenues generated by traffic to the video.

Earlier this week, The Browser discussed the fact that in its pre-Google (GOOG) days, YouTube seemed dead-set against this concept. And in his comments at Davos, Hurley certainly sounds like he's not necessarily 100% behind the idea himself:

We didn't want to build a system that was motivated by monetary reward. We wanted to really build a true community around video. When you start out with giving money to people from day one, the people you do attract will just switch to the next provider who's paying more. We're at a scale now that we feel we can do that and still have a true community around video.

Certainly YouTube isn't the first site to try this. In fact, there's a whole category of enterprises called "consumer-created content companies" (or C4's) that work on this model. Examples in the video domain are Revver and Eefoof, but there's also JPG Magazine for photos and Threadless for T-shirt designs. So Hurley is right to worry that paying users will cause people to jump ship to the highest-payers. But is he also right his site's "community" will keep users glued to the YouTube?

Some brands, like Harley-Davidson (HOG) or Apple (AAPL), probably could get away with just asking customers to create content for them (that they'll then use to make money) since very, very passionate fans don't have to be rewarded. But is YouTube one of those brands, or communities? Because if a competitor does pay better, and gets some A+ content out of it, why wouldn't people go where the good stuff is? There's no transaction cost to switching your web-browsing habits. And is anyone in love with YouTube for any reason other than that its got the most, and the best, stuff?

So I think Chad is right to be skeptical of the idea. It's a shame that YouTube's advantage in this fight -- scale -- is also what probably drew record companies to pressure YouTube to develop this kind of revenue-sharing model in the first place. Ultimately YouTube will need to create other reasons for people to not bounce to various clipsharing sites, and that might require an even more dramatic change to their business. I'm not sure this is why Chad and Steve got into the business. Google's billions have certainly come with a serious price tag.

First Dell (DELL) CFO Jim Schneider makes a quick exit, then CEO Kevin Rollins steps aside yesterday, paving the way for Michael Dell to return, Steve Jobs-style, in glory to lead his namesake company. There isn't much I can add to this, as Browser contributor David Kirkpatrick had the world's first post-succession interview with Michael Dell.

But the news reminded me of a great piece by Jon Birger in last year's FORTUNE 500 issue highlighting some research showing that founders might be better leaders for their companies than anyone else.

The stocks of these 27 companies [run by founders] returned an average of 18.5% annually from year-end 1995 through 2005, which is seven percentage points better than the FORTUNE 500's average return over the same period. Their profit growth has been superior, too, increasing at an average rate of 19.6% a year from 1995 to 2005, vs. 11.7% for the FORTUNE 500. ...

[Ohio State University finance professor Radiger] Fahlenbrach has a few theories on why founder-CEOs seem to be better corporate stewards. One is that they simply care more. Their companies are their life's work, so they're more likely to embrace long-term strategies. Supporting the theory is Fahlenbrach's finding that founder-run companies have bigger capital budgets and invest considerably more in research and development than nonfounder-run firms.

I guess we'll find out if there's some real truth here, or just a sample bias.

Google (GOOG) triples fourth quarter profits -- and its stock tumbles $20, or about 4%. Why? MarketWatch says:

The company's gross profit margin also fell slightly, however, as Google increased investment in new businesses. Also, Google reported that the amount it pays affiliates and partners rose during its fourth-quarter, and will continue to do so in the future. Margin and cost concerns contributed to a premarket decline in Google shares. The dour investor sentiment spilled over to Thursday's opening moments, when Google shares fell 2.8%.

Seems plausible, right? We could speculate all day. (Here's theStreet.com's take.) But Fortune's own editor, Andy Serwer, has a simpler explanation:

Luv the buy on the rumor sell on the news on Google. Dang stock up $7 to $501. Then earnings come out...nearly triple! And the stock's off $9 in the aftermarket. Newsflash: It's not over. [It's down $20 as of 11 a.m.]

Seems to be a pattern lately. It's always good to remember that the market isn't a thinking individual, with reasons for what it does, but just a place where people speculate for a living. Andy's right that it's hard to read much into what it does on a given day.

[UPDATE: Alex in New York comments: "Is this morning's selling institutional or individual?" That's a good question. Is one person dumping out, or are just lots of big traders -- like mutual funds, pensions, or hedgies -- realizing their gains? It's hard to answer that question on the day of trading if you're not on the floor. Hopefully someone's recap tomorrow might have that answer. Otherwise, check your Bloomberg terminal or Yahoo Finance next week to see if they posted any big movements in major shareholders. There's generally a lag to posting stuff like that.

Also of interest: Google was actually upgraded today by eight analysts. Unlike Apple, which was downgraded by some analysts, including J.P. Morgan (which said "our view on Mac share gains has proven to be too optimistic") on the day it announced a great first quarter. This further points to an un-meaningful drop in GOOG's shares today.]