IBM Revenue by Country

May 1, 2019

DarkCyber spotted an interesting graph generated by DazeInfo. “IBM Revenue by Country” illustrates some of the economic consequences of IBM’s billion dollar bets. First, the US accounted for 37 percent of IBM’s revenue. Surprisingly, Japan generated about 11 percent of the company’s 2018 revenue. In 2004 IBM’s revenue from Japan amount to $12.3 billion. At the end of 2018, revenue from Japan was about $8.5 billion. International revenue in the last three years is also stagnant or declining. Watson, what can be done to remediate these declines? Watson, Watson, are you there? Can you hear me? Are you in a meeting with James Holzhauer, the professional sports gambler, who is winning on Jeopardy. You won once too. Do you remember Charles Van Doren?

Stephen E Arnold,  May 1, 2019

Facebook and Digital Money

March 4, 2019

Digital currency like Bitcoin is often associated with cyber crime. Rightly or wrongly, Bitcoin evokes images of Dark Web markets selling drugs, an association reinforced by the Silk Road bust.

Facebook, on the other hand, evokes smiles from grandmothers, but a UK investigative body characterized Facebook is more negative terms. My recollection is that the British government sees Facebook as an example of Wild West capitalism which intentionally or unintentionally enables outfits like the now defunct Cambridge Analytica.

I thought about these associations when I worked my way through “Regarding Facebook’s Cryptocurerncy.” The write up asserted:

just because Facebook launches a stablecoin cryptocurrency for peer-to-peer payments doesn’t mean people will actually use it.

Facebook’s possible angle is getting money. The write up points out:

Remittances are the obvious target market here. And it would be huge, and important, and wonderful, if Facebook were to make remittances 10x cheaper and faster … but that would require much more than fast international stablecoin transfers, because, again, those stablecoins are not legal tender at their destination, and I don’t know if you’ve noticed but businesses tend to have this whole thing about receiving legal tender.

The fix is for Facebook to find ways to get organizations to accept Facecoins.

The other angle is:

for Facebook to establish relationships with cryptocurrency exchanges worldwide, or — even more dramatically — become or sponsor exchanges themselves.

The write up is interesting, but it left me with several questions zipping through my admittedly limited brain:

  1. How could bad actors make use of Facecoin?
  2. Will Facebook provide these digital currency data to government authorities?
  3. What third party services will Facebook enable through an existing or new API?
  4. What audit mechanisms are in place?
  5. What if Facebook’s presumed digital currency is used for illegal activities?

I would suggest that when digital currency becomes part of an organization which the British government views in a less than positive manner, regulatory authorities may be sitting on the sidelines.

Stephen E Arnold, March 4, 2019

When Free Fails the Doers, the Dreamers, and the Disillusioned

February 17, 2019

My team and I worked for several “open source software companies,” before I decide to hang up my Delta Million Mile Club name tag. (Weird red tags those puppies are.)

I read “Free Labor of Open Source Developers. Is That Sustainable?” The question caused me to chuckle. The answer is fairly straightforward.

Nope. Not for individuals. For outfits like Amazon, yep.

Under specific conditions, open source software does “work”. Now “does work” translates as “makes money, delivers fame, and/or makes those participating [a] happy, [b] feel like the effort is sticking it to the “man”, [c] proves that a person can actually write code which mostly works, and/or [d] builds a psychic bond with a community.

Some big companies do the open source “give back” and “contribution” and “support” dance. For these outfits, open source software is a part of a business model. Usually the practitioners of this type of marketing and sales offer for-fee widgets, add ins, and digital gizmos. Then the customer who downloads and uses the open source code has the opportunity to use the software and [a] buy engineering services, [b] buy training, [c] pay for “enhanced support,” and/or [d] attend conferences for insiders. I find Microsoft’s embrace of open source amusing.

For individuals, a pet project can provide satisfaction and a job maybe.

The write up does a good job of explaining the idealistic roots of open source software. I must admit, however, that I do not drink alcohol, so the analogy “like free beer” does not make any sense to me. The roots of open source software seem to be anchored in a desire to have software which did not [a] cost money to use, [b] could be modified; that is, not put the users in handcuffs, and [c] was updated on a calendar often wildly out of sync with the needs of the licensees. Proprietary software meant “bad” and the new open source software meant good with hints of revolution and “I just can’t take proprietary software anymore.”

The write up reviews a popular paper about the economics of open source software. I did not spot a reference to a later study which suggested that large companies were the biggest adopters of open source.* If that research were correct, the reason boils down to [a] big companies want to trim their costs for proprietary software’s license fees, mandatory upgrades, mandatory maintenance, and contractual limits on what changes a licensee of proprietary software can make. The researchers pointed out that large companies had [a] the staff and [b] the money to make open source software work for their use cases.

Flash forward to 2016. The Ford Foundation’s Roads and Bridges** makes clear that software development performed for free has a built in flaw. Developers can quit. Dead end? Maybe. Large companies can step in and embrace the project and, of course, the community. Outfits using this method range from the Amazons to the smaller firms which allow employees to work on projects. The open source approach can be overwhelmed or a victim of abandonment.

I am not sure I am convinced that the open source community exists. There are factions and many of them are at war. Consider Lucene/Solr’s contentious history. I also am not keen on the simile comparing open source to a religious community. Once again there are fanatics, and there are those whom the fanatics would like to either [a] imagine roasting in hell or [b] actually burning alive after a presentation at an open source meet up.

Net net: Amazon has crafted a new chapter in the lock in playbook. The approach borrows from IBM’s FUD to the more New Age methods of being famous and getting a “real” job.

If you are tracking the world of open source software, the write up is a useful addition to one’s library of analyses. One suggestion: Keep in mind that “free” open source software is a lure in certain circumstances. Think of it as a form of digital phishing, particularly for marketing oriented outfits.

Stephen E Arnold, February 17, 2019

——–

Note:

* Diomidis Spinellis and Vaggelis Giannikas, “Organizational Adoption of Open Source Software,” Journal of Systems and Software, March 2012, page 666-682, and Stephen E Arnold’s The New Landscape of Search, June 2011.

** See https://www.fordfoundation.org/about/library/reports-and-studies/roads-and-bridges-the-unseen-labor-behind-our-digital-infrastructure

Google: Just Like a Colonizing Force?

February 15, 2019

Can a company cross over into the monetization methods of a country? I read “Google’s Sidewalk Labs Plans Massive Expansion to Waterfront Vision” and formulated this company-country question.

If accurate the Star’s report seems to outline a way for a commercial enterprise, based in the US, to monetize or “cost recover” via methods usually associated with a nation state. The techniques may be more gentle than those early colonizers of Peru, but the goal seems to be similar.

I learned:

Google’s futuristic development on the eastern waterfront, Quayside, is only the first step in an expansive and ambitious plan to build new neighborhoods — and new transit — throughout the entire Port Lands, the Star has learned. In return for its investment in this vision, Sidewalk Labs wants a share of the property taxes, development fees and increased value of city land that would normally go to city coffers.

The source of this monetization method comes from “internal documents.” Like Bloomberg’s revelations about fiddled motherboards, the information could be viewed with skepticism.

google toronto

Let’s assume that the story is spot on. The revenue from this technology revitalization effort is characterized in the article:

These future revenues, based on the anticipated increase in land value once homes and offices are built on the derelict Port Lands, are estimated to be $6 billion over the next 30 years. Even a small portion of this could amount to a large, recurring revenue stream diverted from the city into private hands.

The money generated from what is usually described as “development” by property professionals would flow to the government entities. These in turn would repair roads, provide services, and educate children. Google, I assume, would use these funds to further its commercial interests and continue its efforts to solve death, develop more sophisticated online advertising methods, and rekindle the Google Glass technology, among other high value endeavors.

There are upsides. The area would become more valuable to the city and its residents.

Nevertheless, the coupling of funding methods commonly associated with nation states and governmental agencies with Google is interesting.

Perhaps the same approach would work for Google in China and Russia? But leaders in those countries may not entertain Google’s 21st century approach to a public private partnership.

In Louisville, Kentucky, Google pulled out of its high speed access project. That’s just one risk of cutting deals with commercial enterprises. Google, in particular, can change its mind. Like Amazon, companies wield real power. New York City and environs are waking up to the reality of Amazon’s bidding the Big Apple farewell.

What happens if Google becomes disenchanted with Toronto? A pull out could have significant financial consequences.

But the idea is interesting, and certainly worthy of Francisco Pizarro’s advisers.

Stephen E Arnold, February 15, 2019

Stephen E Arnold

Palantir Technologies and KT4 Partners: Information Decision

February 14, 2019

If you follow Palantir Technologies, there is a dust up between KT4 Partners and the producer of intelware; that is, software designed to provide intelligence solutions to licensees.

Like Palantir’s dispute with the original i2 Ltd., the details are difficult to discern due to the legal processes themselves, the desire of those involved to remain out of the spotlight, and the time lag between events.

If you do follow the legal machinations, you will want to read “Delaware Court Provides Guidance for Books and Records Demands to Limit Producing Electronic Data to Stockholders.”

I am not a lawyer and lawyers in general make me nervous; however, it appears that KT4 will be able to access certain documents to which Palantir has denied access.

Why’s this important?

Palantir and KT4 know that money is at stake. Expensive settlements may have an impact on Palantir’s IPO. Furthermore, documents may contain interesting information which could find its way into the media.

Worth monitoring this matter.

Stephen E Arnold, February 14, 2019

Google News: Not So Much News As Control and Passive Aggressive Offense

February 12, 2019

I read “One Analyst’s Attempts to Demystify the Types of Traffic Google Sends Publishers.” The write up explains some of the clever ways Google manages its traffic and any related data linked to the traffic and content objects.

To put it another way, Google is continuing its effort to control content for its own purposes, not the publishers’, not the users’ or the advertisers’ goals.

The article makes it clear that Google is adapting in a passive aggressive manner to the shift from desktop boat anchor search to the more popular mobile device approach to search.

Users want information and no longer are troubled with thinking up a query, deciding what service to use, or questioning the provenance of the information.

The write up takes a bit of time to figure out. There are acronyms, Googley lingo, and data which may be unfamiliar to most readers. Spend a few minutes and AMP up your understanding of what Google is doing to help out — wait for it — itself.

Surprise, right?

The downstream implications of this approach are interesting. Perhaps an analyst will tackle the issues related to:

  • Time disconnects between event and inclusion of “news”
  • Ability to “route” and “filter” from within the Google walled garden
  • Implications of inserting “relevant” ads into what may be shaped streams so that ad inventory can be whittled down.

Interesting and just the tip of the Google content management iceberg.

Stephen E Arnold, February 12, 2019

Bloomberg Continues to Needle Palantir Technologies

February 1, 2019

Buzzfeed once was a good source of anti-Palantir Technologies’ information. But change is constant. Now Bloomberg finds news in the company that tries to keep a low profile.

Palantir Technologies, as you may know, is a firm which is a search and retrieval system on steroids. One can use the system to find an entity amidst the process content. If search doesn’t work, the firm has bundled a range of software modules to identify those elusive facts an investigator, a financial analyst, or a drug researcher seeks.

Bloomberg’s “Palantir Slashes Its Own Stock Price to Boost Morale” reports that employees are a bit unhappy. The company is 15 years old, and not really a start up. The firm’s technology is a bit long in the tooth as well. Big systems are difficult to reengineer to keep up with the waves of newcomers. For example, I am not sure a comprehensive list of Palantir-like start ups in Israel exists. I have lists, but these are far from complete. Ever hear of Narrative Science?

The write up points out that Palantir’s high valuation has begun to slump, like the eyesight of a teen who has played video games for a decade every night for five hours in his or her bedroom.

The main point of the write up strikes at the soul of the Silicon Valley capitalist: “The stock adjustment raises an important question: What is Palantir worth?”

The answer is that search centric companies, regardless of how they are packaged, lack the ability to generate cash in the manner of Facebook, Google, or, praise the Austrian economists, Amazon.

This Bloomberg statement casts a shadow over Palantir and its management team:

Because Palantir typically offers lower salaries than many nearby tech companies, equity is a big part of the sell. But the stock options were overpriced, according to Palantir shareholders and prospective investors. All seven mutual funds that own Palantir shares have slashed the value of their holdings since their 2015 high of $11.38. SP Investments Management values Palantir at $7.87 a share as of September, the most recent data available. Morgan Stanley’s mutual funds have decreased prices seven times in three years, to $2.49.

Employee unrest, poaching of staff, and financial fancy dancing are routine in Silicon Valley. Why target Palantir? That’s a question which I find more interesting than why the company is trying to keep employees happy?

The answer, “Real news.”

Stephen E Arnold, February 1, 2019

Palantir Revenue: Close to $1 Billion

January 18, 2019

I read “Palantir Posted Nearly $1 Billion in 2018 Sales, Executive Says.” The write up states:

Palantir Technologies Inc., the data analytics startup co-founded by Peter Thiel, generated almost $1 billion in revenue last year, an executive said in a French television interview.

Half of that revenue came from commercial clients. The other half came from non commercial clients like government agencies and non governmental organizations.

The company’s new Foundry product contributed to a boost in revenue, which had been forecast to be $750 million.

How close to $1 billion is Palantir? It seems that Palantir is closer to $800 million in revenue which is going to be okay for financial horse shoes.

How long has it taken Palantir to reach the $800 million figure, assuming that it is accurate?

Palantir was founded in 2003. That’s close to 15 years. How long did it take Autonomy to get close to $800 million in revenue? About 14 years.

What’s Palantir’s secret sauce? Its proprietary systems and methods. What was Autonomy’s secret sauce? Its secret neuro dynamics system.

Interesting. Palantir and Autonomy share other similarities as well.

The trajectory of Palantir’s initial public offering will be an event for investors who have injected about $2 billion in the firm.

Few search centric, content processing, analytics companies have achieved this type of revenue.

Like me, stakeholders in Palantir will be anticipating a pay day. Once the dust settles, I will get more information about sustainable revenue and other tidbits about the company. Perhaps other parallels with Autonomy will become evident.

Stephen E Arnold, January 18, 2019

Big Data: Cost Control May Be a Challenge

December 24, 2018

I read “AI’s Dark Secret? A Desire for Data.” The write up states:

The AI revolution is hungry for personal data.

Those data come with a catch.

To ensure that AI algorithms work properly and to get the bugs out, they need to fed a consistent stream of data. The data needs to be reliable, accurate, and objective and that costs a lot of money. Venture Beat shares how data has a downside in the article, “Could Data Costs Kill Your AI Startup?”

AI startups that discover their funds are chipped away by data costs should consider moving that cost from the research and development line to the costs of goods sold column. The article explains it is a golden opportunity to scale up your company, drive costs down, so that margins will increase.

Startups use data in three basic ways: acquiring, storing, and annotating the data to train the algorithm model. All these steps cost money and can tack on more expenses based on what resources and services you offer. There are different ways to scale down costs at each of the steps, but how and what depends on your individual project. The best way is to figure out how to optimize not only your costs, but also all of your tools:

“The first successful AI businesses came to market offering AI-free workflow tools to capture data that eventually trained AI models and enhanced the tools’ value. These startups were able to achieve software margins early on, since the data and AI were secondary to the startup’s value proposition. As we move to more specialized applications of AI, however, the next wave of AI startups will face higher startup costs and will require more human labor to provide initial value to their customers, making them resemble lower-margin services businesses.”

The only fact you can be sure of with your AI startup is that costs will continue to rise. In order to maintain your relevancy and sell your product, figure out how you can make the most of everything available to you.

Whitney Grace, December 24, 2018

Facebook: WhatsApp and In App Payment

December 22, 2018

I noted two developments which Facebook may roll out.

The first is the story in Newsweek “WhatsApp Child Porn Groups Exposed.” WhatsApp is an encrypted messaging service. As pressure on “old school” Dark Web sites continues to escalate, bad actors are looking for new, easy ways to communicate, share, and locate information that is of interest to them. Encryption, according to many investigators, allows bad actors to go dark. The authorities are, therefore, blind to potentially useful information. The write up suggests that Facebook is taking some action. The article said:

Facebook said working with police may be their best option to combat the material.

The second item concerns transacting, buying, and selling within WhatsApp. I noted “Facebook Explores Blockchain Tech For WhatsApp Money Transfers.” According to the write up:

 

In an effort to help WhatsApp users transfer money, Facebook is reportedly creating a digital currency. Unnamed sources told Bloomberg that the company is at work on a stablecoin, which is a cryptocurrency tied to the value of the U.S. dollar, and is reportedly eyeing India’s remittance market.

How quickly will bad actors interested in salacious or illegal content embrace Facebook’s vision of seamless buying and selling?

I would suggest quickly if the system sort of works.

With Facebook’s record of fine tuning its digital compass, WhatsApp could become the new Dark Web.

On the other hand, maybe Facebook will create a positive, uplifting union of services. Yep, maybe.

Stephen E Arnold, December 22, 2018

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