2012 was supposed to be the year of stalking apps for the hyper-networking types: Glancee, Highlight, Banjo – you name it. Once we arrived at SXSW, we would use these platforms to meet new people, find new connections. A funny thing happened.

Nobody cared.

Besides the usual technology cheerleaders, most SXSW participants just shrugged their shoulders and moved on. It’s pretty apparent, these are total duds. The technology and philosophy behind many of these apps is sound as the concept of implicit social graphs tied to explicit graphs through background location is indeed an interesting idea. Yet, they fail because they don’t solve any problem.

Foursquare and Gowalla (and gazillion other forgotten platforms) were the hot startups a few years ago that dominated the conversation when it came to social location, focused on the check-in model. Foursquare, the winner of the first location-based arms race, with its check-ins plus deals, tips, photos and to-do lists is mildy useful. It’s good for events like SXSW where you want to connect with people in your graph. It’s a reactive app.

The next generation of location apps will be about ambient location: You could be planning on going to one place and see that your friends are at another and go there instead. The app could pull you to a different place than your original destination. Ambient location apps will have amazing data sets: Better location and social models based on location awareness mixed with the data created by such interaction theoretically could have a profound affect on user behavior. In addition, brands and retailers could find this information useful as well.

It’s clear that Glancee, Highlight and Banjo did not crack the code of background location data. (Delete, delete, delete.)

In the next two parts, I will be exploring the differences between noisy and calm technologies, followed by a glimpse in the future of ambient location platforms and the emergence of calm technologies.

“(In the publishing business) the readers are the product, and the customers are the advertisers.” – Dave Winer

It started with Path last week, and now we learned that Facebook, Twitter, Foursquare, Instagram, Foodspotting, Yelp, and Gowalla all either upload your contacts’ phone numbers or email addresses to their servers for matching purposes.

As the post on Venturebeat states:

“Some of these applications perform this action without first requesting permission or informing you how long they plan to store this data. Foodspotting is the worst of the bunch, as it appears to transmit your data over an unencrypted HTTP connection (in plain text), making it even easier for mischievous parties to intercept.”

It’s a sign of a major problem.

Tulip Mania. Railway Mania. Poseidon Bubble. Japanese asset price bubble. Dot-com bubble. Rice bubble. Housing bubble. Bubbles after bubbles. After the housing bubble, one would think we’d have enough of bubbles for a long time to come. Think again.

The dot-com crash had nothing to do with technology. It had everything to do with the business model used to pay for the technology, which was primarily either display advertising revenue or VC money advanced with the expectations of returns based on display advertising. Display Advertising was trackable, it would be more effective online than offline. The bubble burst, crazy valuations went away and the digital ad market boomed. Ad Networks, DSP’s and exchanged drove down the value of ad impressions. CPM’s went from $100 for premier placements to $10. And impression junk was and is still anywhere. Suddenly, new businesses that relied on advertising revenue to support their model had to pivot.

Welcome to the age of user data.

Massive assumptions are now being made based on revenue generated (or soon to be generated) by personally targeted advertising drawing on user data. Facebook has a business model but their valuation is based on future realization of user data. Twitter doesn’t have a sustainable business model yet but it’s worth billions of dollars.

Often, companies don’t even know what to do with this data, they just have it because one day it will rain gold. You can’t open your computer without reading of the promises of Big Data. Your user data, goes the theory, allows ads to be specifically targeted to you. Should you buy a big bag of dog food, you will likely receive more ads for dog products, sometimes coupons. You’ll be grouped in a segment with other “dog food buyers”, your age and location will be determined, and a data model of you will be developed. A very simplistic one-dimensional model of you is living in some data warehouse and that’s why you encounter all those online ads.

The problem is not with the use of data to make decisions – the problem is with the simplistic one-dimensional use of data to make decisions. And the other problem with this assumption is that it believes in the rational consumers. Targeted advertising draws on the idea of our observed behavior presenting a coherent and realistic picture of our desires and needs.

It doesn’t.

My spending behavior in 2010 bears no relation to my spending currently or in the future – economies change, circumstances change, tastes change, opportunities change. More importantly, we are social beings, not rational beings. We are more driven by emotions and our clique than anything you can find in our brains.

As we know, targeting works on a limited scale. It does lift metrics, it improves performance. But the user data dream that one day all served ads will be relevant and lead to immediate conversion is just that: a dream. I’m not trying to minimize the opportunities at the intersection of data and human behavior, as explained in “How companies learn your secrets.” from the NY Times. I just don’t believe the way to collect and use data right now will lead to a pot of gold.

Tulips have value. Houses have value. Data has value. But the value is not as high as people tend to estimate while the user data bubble is expanding. It’s highly questionable if even a small part of these valuations can be realized. At least, I haven’t see any evidence of that, yet.

Nobody wants to hear things like that, when everybody is enjoying the user data ride. Just like nobody wanted to listen to Nouriel Roubini when he predicted the financial crisis. Nassim Taleb the “Black Swan”. Or Dave Winer the end of the data bubble. But something is wrong here, very wrong.

VCs spend billions of dollars investing in companies based on the user data model. They even tell kids to leave college early to participate in the gold rush. “You can be the next Mark Zuckerberg.”

They fund companies that need our personal data to succeed, just like the mortgage bundlers needed the junk mortgages to create fictitious AAA ratings. One day, when reality sets in and the fundamentals don’t add up anymore, the bubble will burst. A lot of money will be lost. A lot of people will be hurt.

Out of the ashes, new companies will spring up that have realistic expectations about the value of user data. And, who knows, even give us control over the data. Now, that’s valuable. Correct, Doc Searls?

Yahoo!, the last traditional media company, is in deep trouble. Just like AOL, MSN and Forbes.com – dinosaurs founded in a time where media agencies had to manage scarcity. The Yahoo! Homepage used to be part of a digital media plan just like buying commercials during the NFL season for beer brands. Two things changed: ad networks, DSP’s and ad exchanges changed the focus of media agencies from placement buying to audience buying. And, more importantly, people are less interested in reading professional content and pay more attention to content created by their friends.

What is Yahoo’s response to a changed marketplace and customer behavior?

More content, more video, more, more, more. I wonder if Albert Einstein’s “Doing the same thing over and over again and expecting different results” has become Yahoo’s mission statement. More is not the answer. Traditional media companies will never be able to compete with the amount of content created on Social Networks, Twitter, Foursquare, YouTube, Facebook, Google+, Blogs, sites, Tumblr, etc. I’m not predicting the death of Yahoo!, nothing ever dies. VCR’s are still flashing “12:00” in millions of households, papers are being delivered to millions of door steps each morning and millions of faxes are being delivered each week. It took decades after the telegraph

was invented until the last telegraph was sent. (January 27, 2006, to be exact.) Yahoo! will be around for a long time to come. More irrelevant and less valuable by the day.

The demise of Yahoo! points to an important development

Online advertising is in the middle of a radical evolution but the majority of agencies/brands are acting as if it was still 2005. During that period, the majority of digital marketers were complaining about silos and the fact that they were cut off from the traditional campaign. Digital advertising had no place at the table and was not more than an afterthought: “Make sure the banner ad looks like the commercial.”

The disconnect is now between display advertising and social media

I see more integration between TV/Print campaigns and Social Media compared to Display Advertising and Social Media. The challenge is that Display Advertising continues to be deeply anchored in the world of Direct Marketing, creating a massive disconnect between that display advertising and Social Media. When your goal is to convert prospects into leads, a Social Media integration seems nothing than a silly distraction. Or, is it?

We’re reliving 2005 in the display advertising space: SEM/SEO is always at the table, Social Media the hot new toy and display advertising was relegated to the basement and algorithms.

What is the remaining value of media buying agencies?

The agency role in this new ecosystem will be re-evaluated by brands. The main challenge for media buying agencies will be their unique value proposition. It used to be access, buying power and custom tools. That competitive advantage is slowly disappearing because content created outside of traditional media properties gains importance and relevance over time.

The secondary challenge is the lack of trusted measurements. Ask 100,000 marketers about trusted and reliable measurements and you will get 150,000 answers. Is it impressions, clicks, conversions, engagement, connections – what the hell is it? It’s a lack of industry leadership but also a lack of confidence by agencies based on the fickle brands. “Oh, you focus on conversions? Sure, we can do that.”

Sorry, I don’t know the answer. I just have a lot of questions.

The marketing landscape continues to evolve rapidly. We’re still trying to answer the questions of 2005, while our clients expect us to answer the questions of 2012. As a industry, we need to find better ways to measure, to attribute and to communicate our value proposition to clients.

The conference season is upon us. I hope we can spend less time talking about case studies and acting as if we knew the answers. Instead, let’s ask more questions.

First there were portals. AOL, Yahoo and all the other sites with names we don’t remember anymore.

Then came Google.

And now there’s Facebook.

History has shown us that early dominance doesn’t translate into long-term leadership. While Google is still a dominant player in search, they are struggling to remain relevant. Their latest move to tie bonuses to social success smells like Microsoft with a hint of Yahoo!

Facebook is as vulnerable as AOL Google.

Facebook is the dominant Social platform. No doubt about it. But just like Google, they own only part of the pie and the majority of the pie is up for grabs or still in development.

Facebook has been successful in aggregating our social graph. For most people, it’s a mess of friends, co-workers, family and weak ties. Our social graph has become a very weak social network: difficult to navigate, even more difficult to control. The truth is: we have hundreds of networks. Our work network, our employer network, our commute network, our hobby network, our family network, our local community network. There are opportunities to develop networks for sporting events, movies, any shared interest.

While I’m writing this, I’m watching the Masters. I would love to tap into a temporary network to share my viewing experience with others. Facebook is not the right platform for it.

I would love to tap into a temporary network of my office building to help with improvements or get to know other tenants better.

I would like to meet somebody within 2 miles to go out for a run. Facebook can’t help me with that.

Disposable and temporary networks

The answer could be to develop thousands of disposable and temporary networks. Many location-based apps feel that way: Foursquare is a great tool when attending massive conferences like SXSW but it’s a daily nuisance to see my friend checking in at the same Starbucks over and over again. Color has gotten a lot of attention (mostly because of its disastrous launch and $41 million investment) but it’s an interesting attempt to tap into network for a moment in time.

However, when I look at all the apps battling for attention on my iPhone, I hope there will be aggregators that can develop disposable/temporary networks based on my interest and location. And integrate new friends into a bigger network. Such a platform would make Facebook feel like Microsoft: too big to be agile.