News Notes 25-02-2012

Three stories making the news this week – Apple’s China woes have a silver lining, the continuing problems of News International and a climate science story that slipped right under the radar – the so called “Fakegate” affair.


Apple and Microsoft

Two interlinked stories in the news this week concerning the former rivals in the so-called desktop computer wars of the 1990’s; a struggle from which Microsoft emerged victorious. It’s the reason why today, despite its status as the world’s richest IT company (nay the richest company of any kind), an Apple computer on a corporate desktop is a rarity indeed. Things have changed greatly since the 90’s of course; Microsoft’s failure to truly get to the grips with the internet led to its crown as the world’s most influential IT firm being lost first to Google and now, arguably, to Apple. But Apple’s re-birth as a major force in the industry had nothing to do with the corporate desktop market; you are still just as likely to find a machine built by HP running Microsoft Windows on your office desk. No, instead Apple re-focused its business onto home entertainment with iTunes, the iPod, the iPhone and lately and most successfully – the iPad. It is the phenomenal growth of Apple’s business in China that is the true bedrock of its current status as the world’s most valuable company – $500bn market capitalisation, and on an unstoppable rise to becoming the world’s first $1tn company.

I’ve previously documented (here and here) Apple’s woes in China concerning the use of the trademark iPad and the trademark’s owners, Chinese screen makers Proview. There is no dispute that Proview owns the brand-name, but plenty of argument in the Chinese courts over Apple’s right to use it in China. This now seems to be swinging decisively in Apple’s favour as it emerges that Proview are in deep financial trouble and their attempts to sue Apple in the Chinese courts for $1bn+ are now seen as little more than a desperate attempt to skin some cash from the Cupertino Cult ahead of its critical iPad v3 launch (the machine is manufactured in China). Proview are arguing that the sale of the iPad trademark to Apple for $36k in 2010 by its Taipei subsidiary was never approved by the main management board and is therefore invalid. The Chinese courts however, don’t seem to agree. Proview’s attempt to have Apple’s products taken off the shelves in China and have an export ban imposed appear now to have failed, with the Chinese authorities expressing hope that the matter will now be swiftly settled out of court; no doubt with one eye to the fact that Apple’s products are astonishingly popular in China – any attempt to rob the Chinese fanbois of their beloved “fondleslabs” would most likely lead to a riot.

Interesting then to read that Microsoft have recently announced that it intends to develop a version of its ubiquitous MsOffice suite for iPad. This is an important move, since previous implementations of Office for the Mac desktop gave it an unexpected shot in the arm in the early noughties, and briefly rescued its reputation as a machine on which serious work can be done. Not that the iPad is ever going to seen as a serious business computer or that it even needs MsOffice. Nonetheless it is a recognition by the “Evil Empire” of the success of the iPad and of its own failure to make any serious dent in the hand-held and tablet market – they clearly want a slice of those ever growing Chinese sales themselves, and this looks like the only way that they are going to get it.

Interesting times, as they say.


News International

Another bad week for the troubled Newspaper group, as the arrests of former and current Sun employees continue and revelations emerge of a deliberate policy of deleting incriminating emails. The Metropolitan Police’s Eleveden investigation into corrupt payments to public officials continues to generate beads of sweat on the brows of News Group’s senior management. Notwithstanding the imminent publication of the Sun on Sunday as a successor to the News of the Screws, I continue to believe that what we have learned to date from Weeting (the police investigation into phone hacking) and Eleveden, plus the hearings of the Leveson inquiry have already thrown so much mud at News International that it is fatally damaged as a brand and is living on borrowed time. I believe that once the court hearings have taken place and the Leveson inquiry has concluded that the company will be broken up and it’s titles either sold off, or set up as a new company. Rupert Murdoch’s declarations of faith in the Sun and his decision to allow bailed employees back to work will have done little to quieten concerns among the staff that the end game is close. A break up of the company is naturally deeply un-groovy news to any NI employees, but with the potential harm to News Corp in the US that could be caused by a proven case of bribery abroad the commercial logic (at least in Murdochs eyes) may be unstoppable.

However, there may be some good news in at least one camp from the reports that Rupert Murdoch has expressed his support for Scottish Independence and is clearly trying to cosy up to Alex Salmond. The SNP leader, whilst I dislike his politics, is no fool – I’ve commented previously that Murdoch has many times in the past indentified that aligning a newspaper to a political cause that feels itself to be underrepresented in the mainstream media is a powerful marketing tool for a publishing company, and he may well have the SNP voter base in his sights. He’s been there before, of course. The Scottish edition of the Sun was, for a while at least, a pro-independence paper and he may be about to do the same again, either with the Sun or maybe with a new title.

Alex Salmond (and indeed the rest of us) will no doubt have great difficulty believing that Murdoch has suddenly become a Scottish nationalist, but that need not be a problem. He wasn’t a socialist either, but that never stopped him from backing Australian Labour leader Gough Whitlam in 1970’s and British Labour leader Tony Blair in the 2000’s. Murdoch doesn’t seriously believe that the SNP are going to win a referendum (at least not yet), he can read a poll as well as anyone else can – but that isn’t the point. His only concern will be “can I sell more newspapers that way ?”, and I suspect the answer may well be “yes, you can”. Wait until the current court cases have run their course and the future of News International is resolved and I predict that supporters of Scottish Nationalism will acquire a strong newspaper supporter. Whether they want it from Murdoch is, of course, a different matter – but then the average Labour supporter didn’t seem to mind that much when the Sun switched to their side in the late 1990’s.

Definitely a story to watch over the next few months.

Fakegate

You may have seen a story spread across much of the mainstream media recently concerning the right-wing US think-tank, The Heartland Institute. It appeared that several critical documents belonging to Heartland, including what appeared to be a high-level strategy document from a board meeting, had been leaked and seemed to reveal an agenda to spread disinformation about global warming and detailing some of its supposed funding sources. Some might say, of course, that the revelation that Heartland campaigns against the theory of man-made global warming is as about as profound as the idea that bears sh*t in the woods; anyone who follows the subject knows who they are and what they stand for. The anonymous leak, passed to pro AGW (Anthropogenic Global Warming) website DeSmogBlog, had supposedly originated with a disgruntled insider.

However, right from the off the blogosphere smelt a rat and began to question not only the story of how the leak came about, but also the authenticity of the alleged strategy document. This was immediately confirmed by Heartland who stated that while some of the internal documents were genuine, the incriminating “strategy” paper was a crude fake and the story of a disgruntled insider was also false – the other documents had been obtained by a blagger who had impersonated one of their board members. So far so good you might say – blagging, whilst illegal, is nonetheless a tool of the journalistic trade and can, in the right circumstances, be justified.

Within days however, stories began to circulate on the blogosphere about who the leaker really was and seemed to back up Heartland’s account. Eventually, with his name openly being mentioned on the net, the “leaker” was forced to reveal himself – a scientist named Dr Peter Gleick who works for an environmentalist think-tank called the Pacific Institute. He also changed his story, claiming that the faked strategy document had been sent to him anonymously and his subsequent blagging of Heartland had been so that he could verify the contents. This situation is all the worse for the fact that Gleick himself had previously gone on record as strongly supporting “integrity” in scientific matters – he was a signatory of this document published in Science magazine in 2010. Even Gleick’s subsequent apology and suspension from the Pacific Institute are not the end of the affair, the blogosphere is abuzz with speculation that he has yet to make a full disclosure and some have openly accused him of being the true author of the faked “strategy” document; he is now facing legal action from Heartland Institute. Amazingly, even after all these revelations, there are still some such as George Monbiot in the Guardian who are trying to make him into some kind of hero – which surely speaks volumes for what some people regard as “integrity” in science.

My own view is frankly “a curse on both their houses”. I have little love for either side in the AGW debate; with such overt politicisation of climate science is it any wonder that ordinary people are at a loss to know what to believe anymore. Only when climate science is prised out of the hands of political activists of both left and right can we ever hope to have a balanced view of this important subject and begin, slowly but surely, to restore our faith in the climate science community.

The SNP – Time They Learned The ‘M’ Word


Six of The Best

Having finished my supper the other evening, home-made bhuna murgh and coconut rice, as I recall; I was reading the biography of a noted Tory politician of the early 20th century, a denizen of Kedleston in Derbyshire, a former Foreign Secretary and Viceroy of India. He is often described by his admirers as the “the greatest Prime Minister we never had”. Not the easiest of reads, Gibson’s 1994 biography of Lord Curzon nonetheless is meticulously researched and pulls no punches. I had just covered the section documenting his harsh Victorian school years and had encountered his description of a former schoolmaster as a “professor of spanking” – when a Scottish voice (somewhere in West-Lothian ?) coming from the PC behind me grabbed my attention by saying “Six of the best for Westminster !”. I looked over to the computer, which was showing BBC News24 in a Google Chrome window and instantly recognised the jovial figure, speaking from a lectern. A well-known regional politician, he was delivering a talk at the London School of Economics on the subject of how his radical and progressive plans for re-structuring the UK were going to benefit all of us.

I had formed a favourable personal impression of this guy from the first time I saw him, many years ago, on the satirical TV show “Have I Got News For You”, which was reading out some of Prince Phillip’s more outrageous remarks. One of these concerned the time the Prince said to a Scottish driving instructor “how do you keep the locals off the booze long enough for them to pass the test ?” – the avuncular politico laughed the loudest and longest. A man with a sense of humour is impossible to truly dislike, so consequently I’ve always found it hard to dislike Alex Salmond, leader of the Scottish National Party. Personality is not politics however, and much as I may like it’s leader on a personal basis, the SNP is not a party that I could ever agree with on any significant issue. In large measure this is because I have an instinctive dislike of Nationalism in all its forms. In particular, it’s long standing ambition to separate Scotland from the rest of the UK and set it up as a fully independent state is one which I cannot, in all conscience, support. I favour the continuance of the Union that has sustained us all for the past 300 years, and will try to explain here why I think this.

Defence of the Realm

At one part of the speech, Alex Salmond had turned his attention to the thorny question of what currency the new state would have. His preferred policy, that of joining the eurozone and adopting the Euro, simply isn’t possible right now for reasons that anyone who reads the papers will be aware of. That only leaves two other options – either float a brand new currency for the new state and expect international investors to back it (a frankly bonkers option in the current economic climate) or stay in the “Sterling zone” – far from the simple option that it seems. In the end the SNP leader was reduced to an appeal to history “the Bank of England was founded by Scot” he said, and he was (almost) correct – it was first proposed by a Scot (William Paterson, a successful Scottish banker) and then set up by an Englishman (Charles Montagu, Earl of Essex) in 1694. However the same could be said of Great Britain; that too was first proposed by a Scot – James Stewart, King James VI of Scotland / I of England who, shortly after moving his court to London, named himself “King of Great Britain” and drafted the union flag by combining the flags of Scotland and England. The Union however was actually signed into law by an Englishwoman (Queen Anne) 104 years later, after first a civil war and then a bloodless revolution had twice deposed James’ dynasty. The bank had been founded, not for purposes of economic prosperity, but to fund the expensive realities of national defence. The soon-to-be formalised state of Great Britain had emerged almost bankrupt from wars with both the Dutch and the French and needed a way to fund expanded government spending, which in those days meant mainly the military budget. Prior to the establishment of the national bank the Chancellor of the Exchequer had to tour round the premises of the gold merchants of the City of London in person to arrange finance for the government. The bank’s first loan to the government was £1.2m – half of which was to rebuild the navy following its catastrophic defeat at the Battle of Beachy Head by the French in 1690.

Defence is an area where the SNP’s policies for Scotland, and indeed for the whole of the UK, fare very poorly when exposed to the cold light of day. It perhaps is inevitable for a party that spent so many years in opposition that it has adopted a whole range of fringe policies in its bid to widen its appeal. In fact it would be perfectly true to say that the SNP manifesto resembles a perfect collection of just about every off-the-wall policy that the main parties have rejected – votes at sixteen, abolition of nuclear power, leaving NATO and … Scottish independence. It’s the third of those that concerns us here- just how is the new state going to be defended, and what impact would the non – NATO state of Scotland have on the defence and security of the rest of UK ?

Scottish independence, were it to happen, would not really have that great an impact on the UK economy. Scotland accounts for only 8% of the UK population (5.1m of 62.2m), even including oil revenues its estimated GDP of £131bn accounts for only 9% of the UK’s GDP of £1.42tn. Even after independence, the remaining UK would still be one of the 10 richest countries in the world, London would still be a major world financial sector, and the UK would still be one of Europe’s most populous states. The biggest impacts on the UK would be political and strategic, and they would in almost every case be bad. The first impact would be a dramatic reduction in the UK’s territory; although Scotland’s population and GDP are dwarfed by that of England, Wales and N Ireland the UK’s territory would be reduced by 30%. There would also be a dramatic, and negative, impact on UK’s image overseas. The ending of the 300 year union would leave UK looking politically weak and ethnically divided, our seat on the UN Security Council would most likely be withdrawn. Also Scotland’s accession to the EU would have to be negotiated and would be unlikely to be rubber – stamped. Many other European countries have separatist movements of their own, Spain for instance would be very careful not to say or do anything that would give succour to their own Basque region’s plans for autonomy.

The SNP has made it quite plain that it wants nothing to do with NATO, and therefore could not permit British armed forces, which are part of the nuclear armed NATO alliance, to be stationed on its territory. That means, for instance, that the Royal Navy nuclear bases on the Clyde, which employ thousands of people, would have to close and be relocated to the south coast of England and the same would apply to any RAF airbases. The few remaining Scottish regiments, a handful of frigates and few aircraft is all they would have. They may think that that is all they need, but I can assure the SNP that that looks very different when viewed from England – from that standpoint a gigantic hole in the UK’s defences will just have opened up and a new state will have appeared there with neither the means nor the inclination to contribute to our, and Europe’s, collective defence. The greatest benefits of independence would be not be felt in Scotland, but by our competitors and by our enemies. There might well be cheering crowds on the streets of Edinburgh on independence day – there would be none in London, I can assure you; although I have no doubt that Buenos Aries and Tehran will be among the first to welcome the new state to the family of nations.

Alex Salmond brushes away such concerns by saying that Scotland will be a friend and an ally. I don’t doubt his sincerity, but he ought to understand that it takes two to make a friendship or an alliance. What kind of ally would an independent Scotland really be ? This is, remember, the leader of a party that frequently refers to the English as “colonial occupiers” and who has just steered through a breakup of the Union in the middle of a recession on the grounds that the UK (or to be blunt England) has held Scotland back and who’s influence must be removed from Scottish affairs if the country is to prosper. Add to that a newly minted facet of Scottishness called “pacifism” and you can see that selling yourself to the UK as a reliable friend and ally in those circumstances is going to be an uphill task.

The “M” Word

How on earth did we all get ourselves into such a dreadful pickle, that we are contemplating such potentially damaging changes to the UK just on the say-so of a small band of nationalists ? The problem, as I indicated at the beginning, is Nationalism itself. Perhaps it’s because I come from a diverse family and was brought up in a multi-ethnic community in London that I have always found ethnic nationalism to be a pernicious, divisive and, frankly, outdated way to view oneself or one’s country. I grew up on a street that was approximately one third white, one third black and one third Indian, a veritable melting pot of cultures from all over the world, yet one that seemed to have no difficulty accepting each other and sharing the same country.

I appreciate that many Scots feel passionately that their culture is distinctly and fundamentally different to that of England and that that fact ought to be recognised. Some go much further than this and say the only way that Scottish culture can survive and flourish is to escape from the English yoke and declare independence. Only then can English influence be rolled back, English interference removed from Scottish affairs and Scottishness allowed to flourish. Without wishing to deny the specialness of Scotland and its people, to go around in the early 21st century claiming that your culture is so different to that of England that a completely separate state is required does not seem to me to be in any sense of the word “progressive”. Wanting to re-establish the pre 1707 border and divide our small island back into its ancient tribal areas seems to be the precise opposite of that, it seems to me to be reactionary and backward looking.

England, Scotland and Wales are three brothers whether we care to admit or not. We may think that vast differences separate us, but in our heart of hearts we know that they do not. Once one begins to define oneself in terms of one’s nationality and ethnicity its only a short while before you begin to judge other people in such terms, and from there does racism spring. But there is a solution to this problem that has been staring us in the face all along. It developed in the multi-ethnic cities of England where a variety of cultures and ethnicity required that a new definition of nationhood and ones relationship to it be created. In this view of the world being “British” no longer said anything about who or what you were, it was the place you lived and the passport that you held – that was all. A new compact was forged between the state and the people whereby all that the state asked was that you obey the laws, pay your taxes and be there for us all in the event of real crisis – beyond that you were free to live the way you choose and to be whatever you want to be. Consequently when I say that I am British it means only that I was born here and have a British passport – I like living in the UK and wouldn’t want to live anywhere else, anything beyond that is, in my opinion, dangerous. Diversity is not preserved by separation, it is diluted by it.

What was the name of this philosophy for bringing all races together in the same country in friendship and respect ? It’s a word that any truly progressive party should know – Multiculturalism. Scottish culture doesn’t need the SNP and it doesn’t need independence – all it needs is Multiculturalism and an a single elected government for this small, crowded and beautiful country that we share.

Alex Salmond offered us six of the best for Westminster. I’m no great shakes at spanking I’m afraid (or so my wife tells me), so I’m going to draw inspiration from the country that Curzon once governed for the crown. Although a raving imperialist in every sense of the word, he earned some surprisingly kind words from independent India’s first leader, Nehru. In Nehru’s eye’s he had one saving grace, he loved and admired the beauty of Indian culture and that was enough for Nehru to forgive him. Hindus believe in their own holy trinity and in that spirit I offer in place of six strokes of the cane, three heartfelt pleas

Don’t DESTROY what we have built together by nationalistic division

PRESERVE what is good about our society by celebrating its diversity

Join hands as the three brothers that we are to CREATE a better place for us all to live

Copyright ©2012 Savereo John

News Notes 15-02-2012

Abu Qatada and “The Law”

I have followed with interest the learned deliberations of various legal experts on the matter of Abu Qatada, including one in the Times recently by David Pannick QC suggesting that further assurances by Jordan MAY be all that is needed to resolve this issue. Clearly adherence to the rule of law is a fundamental part of our democracy, and one that must sometimes include having to abide by laws who’s provision may be inconvenient to us – this point has been made many times and I get it, as do most people.

However, like most people, I’m not a lawyer and so look at this from the viewpoint of a layperson – and to a layperson the practical effect of the European Human Rights legislation would seem to be that we have created a one – way membrane at our borders when it comes to terrorist suspects fleeing from countries that the ECHR doesn’t like (of which our ally Jordan appears to be one). Once a terrorist suspect gains access to the UK, legally or otherwise, it would now appear to be impossible to get rid of them – not just if they are likely to be mistreated, but if any evidence against them is tainted by mistreatment of someone else. This has created a legal hurdle so high that even a avowed enemy of our country like Abu Qatada cannot be deported, and must be maintained here at our expense for ever.

No doubt some will say that to ignore laws that we don’t like brings the law into disrepute. I say to them nothing has brought the law into greater disrepute than the Abu Qatada case. We are locked into a bad law that disadvantages us and gives hope and succour to our enemies, and that simply cannot continue.

I suggest this – we give the legal profession, here and in Europe, one last chance to resolve this, perhaps along the lines above. If that fails, then we simply do what our French cousins would have done on day one – quietly put him on a place to Jordan and argue the toss afterwards once he is out of the country. Were Cameron to do this I can guarantee that ordinary citizens, be they Labour or Tory, would overwhelmingly back him.

Law is important, but the real world is not a courtroom. If we have to take unilateral action to prove this point to everyone, then that is exactly what we will do.

News Notes 14-02-2012

More from Apple

The fanbois are buzzing about the possible specifications of the eagerly awaited release of the Apple iPad v3. This is widely tipped to be in March or April of this year, with a formal announcement due next month, most likely timed to coincide with the expected release of the next version of its mobile devices operating system iOS v5.1. Buyers can expect a machine with a quad-core A6 processor, rumoured to be based on the latest ARM designs such as Nvidia’s Tegra3; which will be manufactured in South Korea by Samsung, despite the ongoing legal battles between the two companies. Also rumoured to be included are a 2048 x 1536 9.7″ display, bigger battery and (allegedly) up to 128gb of storage. Also said to be included is an NFC (Near Field Communications) chip; if this last turns out to be true then it will open up interesting networking possibilities – if it is also included in the forthcoming iPhone 5 then it would be possible to remote control any Apple device from any piece of NFC-enabled Apple kit.

The news went down well with Wall Street, which sent the Cupertino Cult’s share price briefly above $500 yesterday; continuing the phenomenal growth in the company’s value – its market capitalisation is now standing at almost $500bn. Its revenues last year (108bn) exceeded the entire GDP of Bangladesh, and it’s net income of 26bn exceeds the GDP of Latvia, and indeed of no fewer than 188 other countries recognised by the UN. Now easily the biggest company in the US, and probably the World, it has left behind its nearest rival, the energy giant Exxon Mobil, currently worth a mere $450bn; if it carries on growing into the Chinese market the way it has, it could well be the first company in history to reach a market cap of $1 trillion. Not bad for an outfit that just 10 years ago was worth a paltry $9bn and whose shares traded at around $6 each – but that was back in the days when Apple was a still a “computer” company – before the iPod, iPhone and iPad.

There is a cloud on the horizon, though. The story I reported yesterday, about seizures of iPads in China over a trademark dispute appears to have gained legs today. The Chinese company Proview, the owners of the “iPad” trademark, have applied to China’s customs authority to embargo the movement of iPads in and out of China until the dispute is resolved; since the iPad is manufactured in China by companies like Foxconn that would mean that Apple would be unable to ship its latest product. Apple’s view continues to be that it does not dispute Proview’s ownership of the iPad trademark (which the company registered in 2001), but that it legitimately bought the rights to use the name in a range of countries (including China) in 2010 from a subsidiary, Proview Taipei. They say that it is Proview who are now reneging on the deal. The fact that compensation of $38m dollars is at stake at a time when a critical product release is coming up is, I suspect, not unrelated to the current situation.

Watch this space.

News Notes 13-02-2012

Abu Qatada released from Gaol today

Perhaps we should follow the example of France and Italy – when confronted with the same problem themselves, they quietly deported the individual and let the court vent it’s wrath. One can understand their point of view. The European Court of Human Rights (ECHR) has proved inadequate to protect us from the likes of Abu Qatada so we have the moral, if not the strict legal, right to take unilateral action.

On the ECHR itself; I don’t have any kind of problem with the notion of human rights, or that they should be upheld. My problem is that bodies like the ECHR are ineffective because they never exist in the places where they are needed; Europe isn’t perfect, I know, but it’s hardly a place where there are so many basic human rights abuses that a special court is needed to deal with them. If the ECHR really wants to do some good, perhaps it should open a branch in Harare or Pyongyang.

But then bodies like the ECHR aren’t really about upholding real human rights are they ? They seem to me to be essentially an example of western society patting itself on the back at how wonderfully enlightened it is – the real human rights abuses meanwhile, carry on unabated.

Apple goods being seized in China following a court case

The big story about Apple in the most of the dailies is about their alleged use of sweatshop labour; the tech sites however mostly are reporting that Apple may have a potentially bigger problem in China. According to China Daily, authorities in the capital of Hebei province, Shijiazhuang city, have been seizing iPad’s from Apple resellers after the company lost a case in the local courts brought by a Chinese company called Proview who claim that they own the trademark “iPad”. According to them, they registered it as their trademark in 2001. The fact that the trademark was originally held by Proview is not disputed by Apple, their understanding is that they purchased rights to use the trademark from Proview Taipei via a UK company called Application Development Limited in 2010. Proview however, claim that the deal allows them to retain the use of the trademark for use in mainland China; the resulting case appearing to stem from what looks like a legal department screw up at Apple.

Apparently it’s going to cost Apple $38m and an apology to settle the case, but nothing is certain in China, where the release of any new Apple product generally causes a stampede. Apple goods are still on sale in Hebei, but re-sellers are apparently keeping them “under the counter”. Legal screw up or not, some commentators have claimed that it’s being exploited politically – possibly just to remind Apple who’s boss.

News International journalists at the Sun are complaining bitterly that News Coprs Management Standards Committee is throwing them to wolves over the bribery allegation in Operation Elevden

“It is all very well for Rupert Murdoch to try to put his arm around us, but he cannot stop what he has set in motion with the MSC. What hurts most is that The Sun had a special bond with Rupert. He loved its wit and mischief. This is a company that used to value loyalty above all else. And now the MSC is flinging people off a cliff.” (Sun journalist quoted in The Times today)

I don’t wish to be unkind, but that’s a bit rich coming from a Sun employee. The reason that News Corp had to set up an MSC in the first place is because nobody believes a word that NI employees at the Sun and (now defunct) NOTW say, right up to the level of senior UK management, and who can blame them. Phone hacking is one thing – that might have conceivably been contained within the UK business. But large scale bribery of public officials – that’s a whole different ball game; under the Foreign Corrupt Practices act, a US company can be prosecuted for bribery that occurred anywhere in the world. This could not only bring down Murdochs’ leadership of News Corp, it could bring down the company itself. Loyalty works both ways methinks; if they admire Murdoch as much as they claim it’s time to come clean before HE is the next casualty of this affair.

No doubt, journalists will say that they have to protect their sources; any policeman knows that they are only as good as their informants, and journalists are no different. Yet there is a significant difference – a police officer can contemplate turning a blind eye to minor criminality if the information leads to a real villain; yet can the Sun really say the same of its informants here – public servants all who stand accused of bribery. A journalist going to gaol to protect the identity of a vital source is a noble and lofty thing, but to protect the identity of a public official accused of Bribery – that one is harder sell.

Facebook – The Rise Of The Social Machine

All men’s gains are the fruits of venturing (Herodotus)

Into The Valley

With it’s rolling fruit orchards, the area to the south of San Francisco Bay in California, known as the Santa Clara Valley, must once have seemed like the unlikeliest of locations to give birth to a technological revolution; its main claim to fame, up to the 1950’s, was as the Prune growing capital of the United States. Yet to those in the know, the signs had always been there. From the 1930’s, with a large US Navy base nearby (Hunters Point), a world class university (Stanford) and a ready market for new technological marvels (like ASDIC and RADAR), the area began to accumulate high – tech electronics firms. Typical among them was an electrical component manufacturer, founded by two electronics students from Stanford, who scored an early success when their revolutionary new oscillator design was selected by Disney to test the newly – invented stereo sound systems that they were installing in cinemas across the US so that could they show their latest blockbuster, Fantasia.

Fast forward to 1953; the firm was by now a world renowned scientific instrument maker and the tardis – like wallet of the US Defence Department at the height of the Cold War is pouring money into technological research; the company moves from its traditional home in Palo Alto to posh premises in the newly opened Stanford Business Park. The two former Disney contractors where called William Hewlett and David Packard and the company that they founded is now the world’s biggest supplier of computer hardware and IT services. Little did they know it then, but historians would one day look back on that move and name it as the symbolic foundation of the one of the greatest technological-commercial phenomena in human history – Silicon Valley.

From Swords to Ploughshares

In 1969, Stanford University became one of the four original nodes of a newly written software program that could network computers together using the public phone system, known as ARPANET, specially designed to withstand a nuclear attack by re-configuring itself if a node was destroyed – the forerunner of the Internet. From the early green – screen days of the late 80’s and early 90’s it was obvious that there were two things that the Internet brought. First was the ability to link your computer to another and access its functionality – as soon as a computer was connected to the Net it became more feature rich. The other was the seemingly limitless possibilities for instant – and free – communication with anyone, anywhere in the world sitting in front of a similar device. Email and threaded message boards proliferated as did a system for sending small messages back and forth – IRC (Internet Relay Chat) – never heard of it ? Yeah, you have – just add a # and pastel shade and call it Twitter. So it was then, that from very early on, the internet had two distinct types of user – those who were interested in accessing content and functionality, and those for whom the Internet was primarily a communications medium. My first internet connection was so that I could get my own email address. It also tells you something important about Silicon Valley – never underestimate its ability to put a shiny wrapper on an old idea and call it something new.

Online communities were a feature of the Net from day one with systems ranging from public access sites like USENET, to subscription based communities such as CompuServe in the US or CIX in the UK; the forerunners of what we would today call internet social networking. The appeal of sites like Friends Re-United and MySpace showed that it wasn’t just the old schoolfriends that were being found and multimedia content being shared that brought in the punters. It was the vast amount of social interaction going on in the comment boxes underneath it all that was the real appeal of the site. And so it was that, inevitably, someone thought of bringing all that together into a single, integrated, configurable social networking environment. Originally designed for use by US college students, the functionality and simplicity gave it an appeal that spread like wildfire among the wider populace following its launch in Feb 2004, the same year as Google’s IPO. By the time of writing the site has an estimated 850 million users worldwide and its founder is about to launch its stock market flotation, one of the biggest in US corporate history. The site is of course Facebook and its founder, still only 27, is Mark Zuckerberg.

Perhaps inevitably, considering its origin as a system for college students, Facebook has frequently drawn the charge from its critics that it is essentially a trendy toy for western teenagers with little intrinsic value, but an examination of the demographics of its user base shows this to be manifestly untrue on both counts. Whilst the biggest age band is 18 to 25 (30%), there are twice as many users who are over 25 (60%) and 20% of all Facebook users are over 45. We can therefore say that most Facebook users are adults aged between 18 and 45; and most of the rest are adults over 50, with a small proportion (less than 10%) who are under 18. There are more women than men, 54% to 43%, with 3% declining to answer.

By continent, Europe has the most users (source internetworldstats.com)

Europe

27%

Asia

23%

North America

24%

South America

19%

Africa

5%

Middle East

2%

Oceania

1%

The ten biggest countries by user base in millions with the penetration rate (population / Facebook users)

USA

156

50.1%

India

44

3.7%

Indonesia

43

17.8%

Brazil

38

18.8%

Mexico

32

28.5%

Turkey

31

40.2%

United Kingdom

30

48.5%

Philippines

26

27.6%

France

24

36.4%

Germany

23

27.5%

Note that US and UK have penetration rates of 50% – half the population are on Facebook; both demographically and commercially, that is the Facebook heartland. The lowest (of the 213 countries on Facebook) is the Vatican City which has only 20 registered users. China, containing 25% of the world’s population has just 485,000 registered users, 0.04%, making it 94th on the list – below Ethiopia and above Cambodia.

As for its spread, something with that phenomenal growth rate across so many age groups, geographies and cultural areas has to have at least something going for it beyond its undoubted “trendiness”. Facebook spreads because it gives people something that they want in way that makes them keeping coming back and telling their friends to do the same.

“We’re so happy we can hardly count”

“Facebook was not originally created to be a company. It was built to accomplish a social mission — to make the world more open and connected,” said Zuckerberg, in the CEO’s letter appended to the IPO filing. This being Silicon Valley, the “we’re different and out to save the world” line is an essential part of the process – there was a similar load of tosh from Google when they floated; goes with the territory, I’m afraid.

From the very outset, Facebook was a profitable venture aided by a built in advantage that Google never had. Google is a “frictionless” site, you go there, find what you want then … you go somewhere else – a major problem for the company when it first started since it survived by selling advertising. Facebook, in comparison, is a “sticky” site – you go there and you stay; and advertisers love a captive audience.

Industry analyst Richard Holway, recently quoted in the Times, has compared the Facebook valuation to Google’s 2004 float and concluded that the figure being quoted now of $100bn is overcooked, but also thinks that they will probably get it. Furthermore he says “. You all know that I believe Facebook has won the social media race. It has already been hugely disruptive and I believe will change radically how we interface with the internet. Indeed, how we interface with everything and everybody. It is simply game-changing. In a few years time, Facebook will be as important as Google is today or Microsoft was in the 1990s”

In 2004 when Google floated it was posting revenues of $3.2bn and a net income of $400m – it’s value was $23bn. Facebook in comparison will go into its IPO with revenues of $3.7bn and a net income of $1bn. By applying the same PSR (Price / Sales Ratio) to Facebook as applied to Google at IPO, then Facebook might be worth $27bn; if the same P/E (Price / Earnings Ratio) is used then Facebook would be valued at $57bn. Google’s share price at IPO was $85, but that soon skyrocketed; in Dec 2007 Google shares were changing hands for $714 each; they have since fallen back and are currently at about $600. Many Google employees holding share options became paper millionaires overnight, and the same will undoubtedly happen at Facebook.

The key challenge is going to be revenue growth, but how much more can they make from advertising; have they pulled in most of what is there already ? Google’s margin at IPO was 12%, it’s now 26%, but Facebook is already on 27% – where is any profit growth going to come from ? Can they break into the Chinese market ? The latter may prove to be the most challenging of all – aggressively marketed local alternatives like Renren, Sina and Tencent are in competition plus there is a political culture that has very different ideas as to what people should be allowed to do online. Facebook may have to suffer the same dilemmas as Google did if they want to stay in China.

With the hype, and some cold hard facts, the issue that $100bn seems too high won’t matter, they will most likely get it anyway. Every tech fund manager is going to want to cash in – many of their bonuses are tagged to the tech indices so no one will want to miss out. Holway judged that it would peak early and be only a mediocre stock going forward, before leaving us a final thought on the business side “Let’s say back in Aug 04 when Google IPOed, you’d invested $1000 in both Google and Apple. Your $1000 of Google shares would be worth a tidy $7000 today. But your $1000 of Apple shares would be worth $15,300. Be interesting to see what a similar $1000 investment today in Facebook, Google and Apple will be worth in 2020. Point being that there are probably better homes for your hard earned money.”

A Social Machine for a Social Animal

The biggest growth area for Facebook right now is the burgeoning number of handheld devices, smartphones and tablet computers. This tells us something important about its appeal – the interface is very simple and intuitive, perfect for use on a small portable display. Its aim is to be far more than a Social Networking site, it’s to be no less than an alternative means of accessing the internet. Existing systems such as Windows or Mac grew up to serve the needs of their main customer base – the business community. Their systems are complex and feature rich, but for the many who want only to use it for social networking, they are cumbersome and expensive. Many already have Facebook as their homepage, but it aims to be more than that. Facebook should be thought of as an alternative operating environment for accessing the Internet, geared exclusively to communication and social interaction.

Facebook has grown in the era of “The Cloud”, a technology that allows you to store all of your data online and leaves you needing only a small low power handheld device to access it. Expect the advent of the Facebook-tablet, Facebook-phone or even a Facebook-tv. The site will now act as your primary gateway to the Internet, in addition to its existing functionality it will offer a web browser and both video and audio calling facilities. Tailored links to Home Shopping resources can be made available as can a wide variety of Home Entertainment as pay-per-view streams – whether online music and films, Sky Sports, MTV, iPlayer, IPTV – whatever we deliver now, but all integrated into one package AND with the facilities to interact with your friends and family across the world while you are doing it.

Do all that and you will have offered a great many people just about everything they want from the internet; which will not only have become a lot more fun for them, it will have become a great deal simpler as well. Now imagine that it comes on a cheap mass-produced Tablet or Smartphone with a ISP deal that gives you enhanced bandwidth priority and you can begin to see that Facebook, or something like it, could be a major player in the home shopping, online dating, telephony and home entertainment markets. So you see, I don’t accept the argument that there is no way but advertising to make money from Facebook and I don’t accept the argument that there is nothing there that anyone will pay for. There is and they will – if you can get the service product right.

That is the true nature of the technical and commercial challenge that Facebook has before it, and that is the reason why there has been such a fuss over its IPO. With the post – Steve Jobs Apple rapidly completing its transition from a “computer” company to a “home entertainment” one the really interesting interaction of Facebook with the rest of Silicon Valley may not just be the one with Google and its rival Google+ system, but the interaction of Facebook with Apple – and they won’t necessarily be rivals, they might well be partners. Could Facebook deliver the subscribers and can Apple learn to produce a tablet that doesn’t cost the earth ? Because if they can’t them I’m sure Hewlett Packard could.

More to the point, however, can they both attract the premium content ? I can think of one of content provider that would be popular and would underline the “family friendly” ethos that will be essential for the service to succeed – Disney.

What’s that you say – heard it all before ? Sure you have – from Google, their Chrome Notebooks and Google TV are on the market now and the Chrome Smartphone is about to hit the high street. But remember that captive audience I mentioned before … you can bet that Mr Zuckerberg and his investors have thought of that already.

Get this one right Mark, and the sky really is the limit.

Copyright ©2012 Savereo John