Inflation: How Professional Publishing Companies Cope

August 18, 2014

I saw a Twitter message at Here is the image I noted:


I then saw by happenstance another post on Imgur, a source with which I am not familiar:


I wonder if there is a relationship between these two items. I wish I were a student so I could help the publishers deal with the rising cost of paper, shipping, etc. I also wish I could be on a faculty or a library board so I could vote for more expensive peer reviewed journals and more databases of content produced by professors and researchers. Note: I do not want to be a professor or researcher. I think the pay for scholarly output is not as good as working in some other occupations; for example, professional publishing management at Springer, Elsevier, Wiley. Of course, these data may be bogus. If true, I find them suggestive.

Stephen E Arnold, August 18, 2014

Big Data: Oh, Oh, This Revolution Requires Grunt Work

August 18, 2014

I read “For Big-Data Scientists, ‘Janitor Work’ Is Key Hurdle to Insights.” The write up from the newspaper that does not yet have hot links to the New York Times’ store, has revealed that Big Data involves “janitor work.”

Interesting. I thought that Big Data was a silver bullet, a magic jinni, a miracle, etc. The write up reports that “far too much handcrafted work — what data scientists call “data wrangling,” “data munging” and “data janitor work” — is still required.”

And who does the work? The MBAs? The venture capitalists? The failed Webmasters? The content management specialists? The faux consultants pitching information governance?


The work is done by data scientists.

The New York Times has learned:

Before a software algorithm can go looking for answers, the data must be cleaned up and converted into a unified form that the algorithm can understand.

Quiet a surprise for the folks at the newspaper.

How much of a data scientist’s time goes to data clean up? The New York Times has learned:

Data scientists, according to interviews and expert estimates, spend from 50 percent to 80 percent of their time mired in this more mundane labor of collecting and preparing unruly digital data, before it can be explored for useful nuggets.

What’s this mean in terms of cost?

Put simply, Big Data is likely to cost more than the MBAs, the venture capitalists, faux information government consultants, et al assumed.

No kidding.

So as the volume of Big Data expands ever larger, doesn’t this mean that the price tag for Big Data grows ever larger. I don’t want to follow this logic too far. Exponentiating costs and falling farther and farther behind the most recent data is likely to make the folks with those fancy, real time predictive models based on Big Data uncomfortable.

Don’t worry. Be happy. The Big Data did miss the Ebola issue, the caliphate, various financial problems, and a handful of trivial events.

Stephen E Arnold, August 18, 2014

Venture Outcome: The Search and Content Processing Angle

August 14, 2014

I suggest you read “Venture Outcomes Are Even More Skewed Than You Think.” The write up contains several factoids. I highlighted one and added a couple of exclamation points. I suggest you print out the article, grab a writing instrument, and do your own filtering.

The main point of the write up is buried in the paragraph that begins “This really underscores the challenge of crating a venture portfolio that produces reasonable returns.” The factoid I honored with exclamation points is:

In my hypothetical $100M fund with 20 investments, the total number of financings producing a return above 5x was 0.8 – producing almost $100M of proceeds. My theoretical fund actually didn’t find their purple unicorn, they found 4/5ths of that company. If they had missed it, they would have failed to return capital after fees.  Even if we doubled the number of portfolio companies in the hypothetical portfolio, a full quarter of the fund’s return comes from the roughly ½ of a company they invested in that generated 10x or above. Had they missed it, they would have produced a return that roughly approximated investing in bonds – not the kind of risk adjusted return they or their investors were looking for.

I know this is a hypothetical. Assume that the analysis is off by plus or minimum 10 percent. What do we get? Lousy returns; that is, returns comparable to dumping cash into bonds. I think about the banking and venture firm meetings in which I have participated. I cannot recall any of the smiling MBAs considering that their best ideas could perform on a par with bonds. My hunch is that the people who pushed money into venture funds and bank VP-inspired investments are not thinking bond-type yield.

If the number is accurate, I wonder if those folks who have pumped tens of millions of dollars into outfits promising a money ball from search and content processing will get their money back. Forget an upside. Break even may be tough. Search and content processing makes headlines like this one every day:


To get similar results, navigate to Google News and enter the query Autonomy HP or Autonomy CFO.

The second item I circled with my pink marker was a diagram:


The important part is the small number of “winners” graphically embodied in the miniscule 0.4% column. This is a broad swath of investments. For search and content processing, the payoffs have to be measured in what money flows via revenues or a sell off like Fast Search to Microsoft, Exalead to Dassault, or Autonomy to HP. The number of folks who made big bucks and are really happy may be modest. In fact, judging from the legal hassles with regard to Fast Search and the recent HP Autonomy headlines, even those who were MBA winners may have headaches. Information retrieval seems to deliver a number of headaches for stakeholders.

The third item is the factoid that makes clear the failure rate of start ups. Search and content processing poses similar challenges. There is a twist. Once a search and content processing sells to a larger firm, how many have become major money pumps to the acquiring companies? The question is very difficult to answer. The absence of information tells me that there are not too many feel good stories to tell. The pleas on LinkedIn enterprise search discussion threads for positive case studies about search are easy to ignore. Good news with regard to search and content processing is not sloshing around the Big Data bucket in which we exist.

How long with companies that have been in business for many years promising a money ball from search be able to survive? How long will the old soft shoe about search and content processing open checkbooks? How many years will it take some information retrieval companies to replace red ink with the blank ink of hefty after tax profits? How long will it take those seeking answers to information retrieval problems to wake up to the fact that consultant saucisson, Star Trek fantasies, and marketing hyperbole are unlikely to deliver a Disneyland-like “win”?

The data set for the Seth Levine write up is large enough to warrant a tentative answer, “Probably never.” Search and content processing are different. The algorithms and methods are decades old. Talk does not change what can be accomplished with affordable computational resources. Pumping money into search, therefore, may be painful when the actual financial data are reviewed by investors and stakeholders.

Why aren’t their abundant “good news” cases for search and content processing? There just aren’t that many. Think a power curve of implementation successes. There are more examples of search going off the rails than home runs. This is surprising when so many profess to be experts in search and so much money has been injected into information retrieval start ups. The business strategy of search and content processing companies may be raising money. Any other work may be of little interest.

Stephen E Arnold, August 14, 2014

Google Investing Billions to Get Billions. Obviously.

August 10, 2014

I read “5 Google Projects That Will Pave the Future.” The title confused me. I think the author wanted me to think that Google was paving the way to the future. What I interpreted the title to mean is that Google wants to cover the future with Google’s own digital macadam.

The point of the write up is that Google is doing some big, speculative projects. Bell Labs used to do this, but without the fanfare. But there is a public relations and marketing battle underway among the giant companies that seek to monopolize markets if not the “future.”

The write up mentions Project Loon (the big balloons that will deliver Internet access to folks without the benefit of non balloon methods), Calico (this is the live forever stuff that recently experienced the departure of a nanotech self assembler due to some differing opinions), robots (mobile, smart gizmos that entrances the folks at DARPA), self driving cars (more time to surf the Web and consume ads in a vehicle), and DeepMind (more of the artificial intelligence hoo hah).

Good stuff for those who consumed science fiction, Star Trek, and Star Wars. The only problem is that those billions have to come from someplace. That’s a point overlooked in the Loon plus four article.

That’s why you will want to read “Dear Google, I Am Writing an Open Letter from the Search Wilderness.” The main point of this write up is that Google is investing considerable time and effort to generate revenue from its traffic. I suppose this is obvious to most Mad Ave types, but it appears to have come as a surprise to the author of this letter.

The passage I highlighted was:

It is now a directory of large public or soon to be public companies, who dominate every inch of our screens. I am sure we have all walked down many high streets with all the same chain stores and brands. This is Google Search today across many of the world’s markets. Gone is the opportunity to explore and unearth gems and engage with individuals on the world’s largest stage where a digital high street could have a thousand specialist shops with ease. There are sophisticated ways and means to search and uncover the unusual, the new and the people who care and services that actually work. But directionally, “Search” heads to the money instantly!

Note the phrase “heads to the money instantly.” Here at Beyond Search, I am indifferent to traffic, PageRank, speed with which Google indexes the content, and anything other than the topics that catch my attention. The reason is that I am retired and this blog is a way to fill time between walking my dogs and napping.

For the author of the letter, Google’s focus on money is, it appears, destroying his business. Well, that’s what happens when one builds on a free service. Personally I think Google can destroy as many businesses as necessary to generate money for:

  • Projects like Loon
  • Flying around to cut deals for Google Glass
  • Replace people like Babak Amirparviz (aka Parviz, Parvis, and Amir Parviz)
  • Paying for Google health care so some Googlers can spend three months in Stanford’s medical facilities
  • Paying for jets
  • Using Steve Ballmer’s running into the wall method to crack into money making television
  • Buying companies to amplify usage behavior capabilities.

These initiatives cost money.

I find the complaining in this open letter like King Lear’s howling in the storm:

Lets face it though, with so few slots its a money page now, not a joy to visit any longer!

Wow. Harsh. Google results are not objective and fun.

Here’s an even more subversive view of Google’s search system which cost billions to develop:

So quite interestingly the guest who has relied on Google to sort his problems and assist in his own search has been guided by Google’s very own algorithm to a hotel or holiday home that is not necessarily the best for him, at the best price or with the best amenities who often stands no chance of communicating with the accommodation provider until he has booked! Pay up and hope for the best as the business has no product knowledge, location familiarity, in depth business knowledge, controls or quality control in place!

And here is a thought that I have never entertained:

The consumer may just look elsewhere and try other search engines, as all he may see are the high street brands, the ones he was overjoyed to have dodged when the web was in its infancy and when Google Search revealed a whole myriad of exciting new places, people and products!

Well maybe.

The point is that Google is essentially operating as a country. The country’s productivity has to go up. In order to pump up the revenue, the altruism and baloney like “do no evil” or “make all the world’s information accessible” are shibboleths for monetization.

What I find interesting is that Google’s business model is not a Google invention. The idea for pay to play came from ( Yahoo owned this company. Google was inspired by Overture’s revenue methods and Yahoo settled for some money in a mild dispute about the use of this monetization method.

You can believe in Loon. I believe in what Google does after 15 years: Sell ads. Last time I checked, the folks with the money can buy lots of ads. Folks who cannot afford to advertise need to find their future elsewhere.

If some Web sites get zero traffic, well, get on that social media tsunami. Google has a mission to deliver revenues and profits every 90 days. That mission does not necessarily coincide with that of others. If you are unfamiliar with this Google process, find and MBA and ask.

Stephen E Arnold, August 10, 2014

IBM Buzz Equals Revenues: The Breakthrough Assumption

August 8, 2014

I am no wizard of finance. I have kept track of money for my Cub Scout troop. I do understand this chart from Google Finance:


The blue column shows that revenue is going nowhere, maybe even trending down. The red line shows IBM’s profit margin which is flat. And the gold bar presents IBM’s operating income. Notice that it is flat. The flat lines are achieved by cost cutting, selling off dead end businesses, and introducing innovations like offices an employee has to sign up to use.

I have focused on IBM Watson because I am interested in search and content processing. To eliminate confusion, I don’t work in this field. It is a hobby. This is a fact that perplexes the public relations professionals who want me to write about their client. Yep, that works really well. If you read my comments in this blog, you will know that I take a slightly more skeptical approach to the search and content processing saucisson that flows across my desk here in Harrod’s Creek, Kentucky. If you are a fan of ground up mystery meat, you can check out my most recent saucisson reveal here.

What caught my attention today was not a report about IBM landing a major deal. Nope. I did not notice a story about IBM’s Jeopardy champ smashing Autonomy’s single quarter revenues prior to the company’s sale to Hewlett Packard. Nope. I did not read about a billion dollar licensing deal for IBM’s semantic technology to a mobile phone giant. Nope.

What I learned about was an IBM chip that does not use Von Neumann architecture. Now this is good news. In my intelligence community lecture about the computational limitations of today’s content processing systems, the culprit is Von Neumann’s approach to computing. In a nutshell, some numerical recipes cannot be calculated because of pesky hurdles like Big O or P=NP.

IBM, if I believe the flood of remarkably similar articles, has kicked Von Neumann to the side of the road with SyNapse. I do like the quirky capitalization and the association of a neural synapse in a brain and IBM’s innovation.

Check out “IBM Chip Processes Data Similar to the Way Your Brain Does.” You can find almost the same story in the New York Times, the Wall Street Journal, and other “real” journalistic constructs. (IBM’s public relations firm certainly delivered some serious content marketing in my opinion.)

Here’s a quote I noted from the Technology Review article:

The new chip is not yet a product, but it is powerful enough to work on real-world problems. In a demonstration at IBM’s Almaden research center, MIT Technology Review saw one recognize cars, people, and bicycles in video of a road intersection. A nearby laptop that had been programmed to do the same task processed the footage 100 times slower than real time, and it consumed 100,000 times as much power as the IBM chip. IBM researchers are now experimenting with connecting multiple SyNapse chips together, and they hope to build a supercomputer using thousands.

There is a glimpse of the future in this passage and a reminder that quite a bit of work remains; for example, “they [IBM researchers] hope to build a supercomputer…”


In addition to low power consumption, the “breakthrough” gives IBM an opportunity to “create a library of ready-made blocks of code to make the process easier.”

Who is fabricating the chip? According to IBM’s statement in “New IBM SyNapse Chip Could Open Era of Vast Neural Networks,” the 5.4 billion transistor chip is Samsung. The IBM statement says:

The chip was fabricated using Samsung’s 28nm process technology that has a dense on-chip memory and low-leakage transistors.

That seems like a great idea. I wonder if any of the Samsung engineers learned anything from the exercise. Probably not. The dust up between Samsung and some of its other “partners” are probably fictional. Since IBM seems to be all thumbs when it comes to fabbing chips, the Samsung step may be a “we had no options” action.

IBM’s breakthrough is not just a chip. Nope. It seems to be:

a component of a complete end-to-end vertically integrated ecosystem spanning a chip simulator, neuroscience data, supercomputing, neuron specification, programming paradigm, algorithms and applications, and prototype design models. The ecosystem supports all aspects of the programming cycle from design through development, debugging, and deployment.

To speed along understanding of what IBM has figured out:

IBM has designed a novel teaching curriculum for universities, customers, partners, and IBM employees.

I assume this part of IBM’s master plan for generating more revenue and profit.

Several thoughts crossed my mind as I worked through some of the “real” news outfits’ reports about the SyNapse:

  1. How long will it be before IBM’s customers, partners, and employees create a product that generates revenue?
  2. Will the SyNapse eliminate the lengthy training and configuration processes for IBM Watson?
  3. Will Samsung and other customers, partners, and RIFfed IBM employees stand on the shoulders of the giants in IBM’s research centers and make money before IBM can gets its aircraft carrier fleet turned in a new direction?

I don’t want to rain on the very noisy parade, but I think neurosynaptic technology will require considerable time, money, effort, and coding. But if it boosts IBM’s stock price and creates sales opportunities, SyNapse will have played its part in making the revenue line and the net profit line perform a Cobra and blast upward like an SU 35.

While I wait for Watson, I will use Bing, Google, and Yandex for search. Limited and old fashioned technology that sort of works. Watson running on SyNapse, an interesting lab project that has produced some massive content marketing zing.

Stephen E Arnold, August 8, 2014

Quote to Note: Thomson Reuters Sustainable Growth

July 30, 2014

Good news for Thomson Reuters, one of the bellwether outfits for professional publishing and “real” news. The company continues to struggle with flat line revenue. But profits are up. You can read the good news in the Thomson Reuters’ story about Thomson Reuters in “Thomson Reuters Reports Rise in Revenue, Profit.” Nestled comfortably in the story is a quote to note:

“The actions we are taking are building a platform for sustainable growth,” Smith said, “and we will continue to simplify our organization and position resources behind the most promising growth opportunities.”

I will not ask the question, “Is sustainable growth based on flat top line revenue?” I will not ask, “What cost cutting steps are in store for employees in the next six to nine months?”

Thomson Reuters’ frequently rotated executives have been trimming, squeezing, and cutting back for four, maybe five or more years. Other professional publishing companies have been trodding the same path, now becoming well worn. The easy reductions may be difficult to identify. Whatever is next may be like a person forced to dine on a weight loss clinic in Arizona.

One atta boy for Thomson Reuters: Years ago when I did some low level work for them, then top dog Michael Brown and Gene Gartlan paid the bill and were quite professional. I wish to point out that their behavior stands in sharp contrast to that of IDC, a mid tier consulting firm, who took a different approach toward my work. See my Schubmehl surfing write up at I am cheering for Thomson Reuters. IDC? Eh, not so much.

Stephen E Arnold, July 30, 2014

Google and Microsoft Shuffle the Deck

July 18, 2014

Each company is using different card tricks.

I see a common theme in the termination of employees at Microsoft and the management redeal at Google.

I read “Beyond 12,500 Former Nokia Employees, Who Else Is Microsoft Laying Off?” I am okay with a Microsoft watcher point out that not just Nokia staff getting the axe. The comment that caught my attention reveals how serious a problem Microsoft faces. Here’s the passage I noted:

Under the new structure, a number of Windows engineers, primarily dedicated testers, will no longer be needed….Instead, program managers and development engineers will be taking on new responsibilities, such as testing hypotheses. The goal is to make the OS team work more like lean startups than a more regimented and plodding one adhering two- to three-year planning, development, testing cycles.

As I understand this, a company almost four decades into its life cycle wants to be “like lean start ups”. I am not sure if my experience is similar to that of other professionals, but working with fewer people does not equal a start up. In a start up, life is pretty crazy. Need a purchase order? Well, someone has to work up that system. Need to get reimbursed for that trade show party? No problem we’ll get a check cut. Over time, humans get tired of crazy and set up routines, systems, and procedures. The thrill of a start up is going to be difficult to emulate at Microsoft.

That’s the core problem. Microsoft has missed or just plain failed with Internet search, unified experiences across devices, online advertising, enterprise search, and improving is core applications. Adding features that a small percentage of users try is not innovation. Microsoft is no longer a start up and firing people will not make it one. Microsoft is an aircraft carrier that takes a long time to turn, to stop, and redirect. Microsoft has to demonstrate to its stakeholders that it is taking purposeful action. Firing thousands of people makes headlines. It does not create new products, services, or meaningful innovations. IBM has decided that throwing billions of dollars at project that “could” deliver big revenue is almost as wild and wooly.

Now to Google. The company reported its quarterly earnings. Cheerleaders for the company point to growth in ad revenue. The New York Times states:

Google’s revenue for the quarter was $15.96 billion, an increase of 22 percent over the year-ago quarter.

Tucked into the article were several comments I marked as indicators of the friction Google faces:

ITEM: “The price that advertisers pay each time someone clicks on an ad — or “cost per click,” in Google talk — dropped 6 percent from the year-ago quarter, largely because of the shift to increased mobile advertising.”

ITEM: “Mobile, however, is something that Facebook seems to have cracked. The social media giant accounted for almost 16 percent of mobile advertising dollars spent around the world last year, eMarketer estimates, up from 9 percent in 2012. Google dropped to a 41.5 percent share of the mobile ad market last year, down from 49.8 percent in 2012.”

ITEM: ““There’s a little bit of concern in the markets that there’s some drunken spending going on,” said Mark Mahaney, an Internet analyst with RBC Capital Markets.”

The New York Times’ article omitted one point I found interesting:

Excluding its cost of revenue, Google’s core expenses in the second quarter jumped 26 percent from last year. Source:

The Google “core expenses” are creeping up. Amazon has this problem as well. Is there a reason to worry about the online ad giant? Not for me. But the “drunken spending” comments, while clever, have the ring of truth. Then the swift departure of Glass director Babak Parviz (Amir Parviz, Amirparviz, or Parvis) suggests disenchantment somewhere between the self assembly wizard and Goggle management. After a decade of effort, Google has yet to demonstrate that it can create a no advertising revenue stream of significant magnitude for a $60 billion a year company.

Microsoft’s and Google’s recent actions make clear that both companies are trying to adapt to realities of today’s market. Both companies are under increasing pressure to “just make it work.” Three card Monte

Stephen E Arnold, July 18, 2014

Bing Search: Will It Be Forgotten

July 17, 2014

I read “Bing Implements ‘Right to Be Forgotten’ Ruling, Asks Applicants ‘Are You Famous?’” My reaction to is that search is Google. Microsoft wants to be compliant with the European Union. The Register took a different view of the situation. In a story “Forgotten Bing Responds to Search Index ECJ Rule: Hello? Remember Us?” People don’t want to be in the Google index but don’t seem to think about Bing index.

Microsoft wants respect. “Microsoft to Cut Up to 18,0000 Jobs over Next Year.” some of these soon0to-be-RIFed employees may create blogs and other online content. Microsoft executives may want to make some content about itself go away.

The comment by Daniel Ives, an analyst with FRB Capital Markets, explain the situation like this:

“Under the Ballmer era, there were many layers of management and a plethora of expensive initiatives being funded that has thus hurt the strategic and financial position the company is in, especially in light of digesting the Nokia acquisition,” says Ives. “Nadella is using today as an opportunity to make sure that Microsoft is ready and well positioned to embark on its next chapter of growth around mobile and cloud.”

What strikes me is that the observation can apply to Amazon and Google equally well. As these companies expand, generating new revenues and delivering meaningful profit becomes more and more difficult.

Microsoft’s plight may be a harbinger for other firms as well. Search is a bit of a muddle at Microsoft and time may be running out for Bing to become a substantial contributor to Microsoft’s financial position.

Stephen E Arnold, July 17, 2014

HP: Chasing Autonomy Execs the Next Big Thing

June 28, 2014

I read “HP Will Settle 3 Lawsuits Over Its $11 Billion Autonomy Acquisition, Urge Shareholders To Sue Autonomy.” The settlement approach makes sense; otherwise, attorneys would be able to purchase the total output of McLaren and Ferrari before a final decision stumbles from a courtroom.

The write up states:

To recap: less than a year after buying British software maker Autonomy for $11 billion, HP wrote off $8.8 billion and alleged that Autonomy had improperly inflated its revenues and margins, to the tune of $5 billion. HP called it fraud, named a whole bunch of ways it believed Autonomy had done this, and asked for investigations by the authorities.

But the portion of the article that caught my attention was this passage:

The shareholders will agree to drop all claims against HP’s executives and board members, including CEO Meg Whitman, but they will be free to pursue former officials at Autonomy. Plus, the shareholders’ attorneys will “receive fees for helping HP pursue any further claims” Reuters reports.

My take is that HP wants to covert Sir Michael Lynch from the most successful software entrepreneur in England to scapegoat. The only hitch in the git along is that HP bought a company after Board approval.

Fascinating, but the approach may lead to a fundamental breakthrough in computing. That processing power can be applied to HP decision theory problems. Now that Autonomy IDOL is a cloud service, I assume a computer revolution is not too challenging for HP management.

Stephen E Arnold, June 28, 2014

Amazon and Book Publishers: WalMart 101

June 25, 2014

I have been thinking about the reactions to Amazon’s approach to book publishing. I enjoyed the tone, examples, and modest outrage expressed in “New Amazon Terms Amount to ‘Assisted Suicde’ for Book Industry, Experts Claim.” The “claim” is a nice dodge too.

Amazon has a cost problem. Without cutting and pasting the financials, the Bezos machine faces a future with more costs than revenues. Now one can gild the lily in the manner of Wall Street cheerleaders, but the fact is Amazon needs revenue. Expenses keep on rising and one can only hope that hefty profits will characterize the company’s performance over the next nine to 12 months. How does one solve a problem with essentially uncontrollable costs for hardware, software, infrastructures, pesky humans, etc.? Easy. Find ways to generate new money.

Enter squeezing the hapless, ineffectual suppliers. WalMart 101.

The article points out that Amazon is offering book publishers assisted suicide. Perhaps some of these former gatekeepers should opt in. The digital revolution has been underway for a few years. Book publishers want life to be the way it was when owning a book meant the reader was a cut above the general population.

The article states:

The Bookseller’s editor Philip Jones said the ongoing negotiations “indicate a direction of travel that would see [Amazon] take a sizeable control over both a publisher’s inventory and its marketing”, and that “publishers spoken to – and obviously they will only speak on condition of complete anonymity – have every right to be concerned. This is a form of assisted suicide for the book business, driven by the idea that publishers are a sickly lot unable to run even the most basic operations efficiently.”

Perhaps it is a trifle too late? The Gutenberg museum in Strasbourg may want to start development of an exhibit showcasing publishing as it was in the 1990s.

Stephen E Arnold, June 25, 2014

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