Dark Side of Network Effects :: March :: 2006

Niel Robertson came by my office today and we had a great 1 1/2 hour conversation about everything from SAP/Oracle business to online advertising arbitrage. The advertising topic is what spurred this post upon reading Will Hsu's post about the Dark Side of Network Effects. I had a good laugh with Niel when I told him about the recent Under the Radar event and how every company that got onstage seemed to have the same answer to the "what's your business model" question: "we are advertising driven".

If you run the numbers on the wide range of companies that intend to be advertising revenue based you quickly come to the conclusion that the numbers just don't seem to work unless they have extremely well targeted demographics and high value click throughs. in other words, getting paid $30 for an insurance signup clickthrough (CPA/CPC) only works if it costs you less than $30 to deliver that one clickthrough. For most businesses they won't get to those numbers, as per Will's post, and they won't get to the kinds of volumes that are required to sustain a low value CPM driven model.

With Microsoft building the "Internets largest advertising network" I would suspect that online advertising will continue to be a buyers market.

this is a cautionary tale for all the web 2.0 plays out there. . . if you attract the wrong kind of community initially, you are building the wrong kind of network effects that could quickly deterioate

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New SAP Blogger

Welcome Thomas Otter, new blogger who also works for SAP. BTW, this is one of the best looking blogs I have seen, I was stunned to see that it's a standard template in wordpress.com. The ranks of SAP bloggers is slowly but steadily building out, we should put a community page on sap.com.


I continue to be fascinated by the Dashboard feature in my new Mac, there is an amazing array of widgets available that extend the functionality of existing services in very useful ways. I have also seen a trend of vendors offering widgets or encouraging their community to develop widgets, as evidenced by this contest that 37Signals ran offering a year of premium service to anyone who developed the best Dashboard widget.

Widgets, of all kinds, are one of the realized benefits of SOA (whatever incarnation you want to refer to) because rather than requiring users to go to you app you are bringing your app to them, and more importantly you are enabling an external community to actually take responsibility for developing useful widgets (and their close cousin, mashups).

I can't wait for enterprise software vendors to get on this bus, however it's not evident that we're even at the bus stop as of yet. Salesforce comes close with their appexchange, but I'm not sure that is full web 2.0 as yet. I have seen some Firefox extensions for SAP, although I would bet that it is a complete mystery to most developers at SAP, and if not, then why didn't someone at SAP write these?

SAP and Unions Works Council, a German issue

I wish I had more color commentary on this issue, which has been brewing for a while in our German headquarters, but it's largely a mystery to me how these union issues work.

I know there are some pretty intense emotions on the anti-union side, which is interesting and hopefully reflects a generational shift in attitudes toward markets and labor in Germany. However, having read what I just wrote I probably wouldn't agree with it either for the simple reason that college graduates per capita is still lower than the U.S., and unemployment for youths is still high compared to other economies, such as the UK. Lastly, there is a lot of anxiety about jobs moving offshore to India and nearshore to Eastern Europe, and this largely plays into the hands of the old-time union folk. 

SAP moves to create non-union workers' council | InfoWorld | News | 2006-03-15 | By John Blau, IDG News Service SAP has taken steps to form a workers' council comprised of non-union employees in an effort to fend off what the German software vendor views as the harmful influence of unions on its "startup" company culture.

UPDATE: It was pointed out in the comments that I was confusing the issue of works councils and unions, and that it is correct. In an effort to clarify what a "works council" is, here are some of the rights that they enjoy. The last point is the most important one because I don't think that the current effort to establish a works council is motivated by benefits, I think it is driven by the fact that SAP has been building substantial software development capability in India, the U.S., and Eastern Europe.

More influence for employees. Works council has to be consulted by the Board if company plans to:
– lay off or hire people
– introduce technical means to control peoples work habits or behaviour
– introduce new remuneration models or change existing ones
– build new technical facilities (but this applies more to the industrial sector)
– change work processes

Work council can furthermore influence:
– protection of work safety and health conditions (pregnacy, ergonomics etc.)

More information for employees. Board has to notifiy works council if the plan to:
– lay off or regroup people
– relocate workers to other workplaces
Important: Works council has legal means to oppose. If Board and council cannot agree, they will have to go to court over this

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History in the making, Google takes a product out of beta

Does anyone know what other Google developed services, aside from the OS (Original Search), are not in a beta status?

Inside Google Desktop: Take 'ctrl' of your Desktop

in the new version of Google Desktop 3 (which is coming out of beta today), we’ve fixed a few things from the beta, and we’re also introducing a new element that makes it more convenient to find what you're looking for by enabling you to search the web as well as your local computer, or email, as you type. We call it the Quick Search Box.

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