Forget Generation Y, Z or X. It’s Generation M. Mobile.

Companies that made their mark in technology for the Web and PC industries are out of date and out of style.

Look at any kid between 8 to 18 using a mobile device (I won’t call it a phone since that’s like calling a car a horseless carriage). Bart Simpson may be the perfect example, despite the fact that Bart is technically over 25 years old he hasn’t aged a bit on TV.

Through research and observation I’ve seen the number one use for kids ands mobile is games. Numero dos? texting. A recent study said teen girls text about 50 to 100 times per day. And what’s coming my faithful readers:  shopping. It’s here.

If you ask many who grew up with rotary phones or fax machines as the machina du jour they often scratch their head at why anyone would want to use a 3 x 5 inch screen to watch a movie, video, photo, game, or shop.

This is where habit and laziness show up. It’s not a generational thing as much as it’s a habit thing.

And the habit of the 8 to 18 year old is mobile. 100%.

The only time they sit down is to play a console like XBOX 360 or PS3, maybe a few TV shows on the LCD TV.

In 1994 when I did some of the first forecasts for the Web when there was no “Web industry”, no online ads, no Web video, no Web audio, no “ecommerce”, not much except for some research sites, FTP and Gopher, many scratched their heads and said the Web was the new CB Radio.

A few Amazon, Yahoo, Facebook and Googles later the Web did indeed turn into an “industry”. It’s still turning.

But mobile is now in its early years. Apple has the first lead in understanding the need for mobile data of all types. Google is trying to catch up with Android. The mobile carriers are wondering whether to play the software, commerce or hardware side or all three.

Everything is boiling down to a 3 x 5 screen with finger controls.

And in that 3 x 5 space is going to pass 95% of the world’s commerce at some point. As most commerce is “offline” (by which I mean “away from the PC”) the rest of commerce will be done “in person”. The see, touch, buy, take it home kind.

But that commerce will be enhanced by mobile services. One reason I founded Taleee is to bring the world’s opinion to the purchase to help buyers save money and time.

There will be many mobile services that will augment our everyday lives for shopping, health, education, government and more.

There are 4 billion mobile devices in the world today. That means over half of the world’s population uses one. And it’s only going to increase.

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Neighborhoods waited for us bicycling entrepreneurs to zoom in and toss with precision the world to their porch. I could hit a porch from 50 yards with an accuracy that John Elway may admire.

My route had about 75 homes, up and down hills, curves, houses large and small. The newspaper was the Riverside Press-Enterprise and was fairly hefty. The first Sunday morning I soon discovered that when, after having folded all the inserts and comics into the paper, that each weighed more than double the normal paper during the week.

Having put my carrier bag on the rack at the rear of the bike it immediately made my front wheel pop up off the ground — too much weight at the back, probably 60 pounds worth of newspapers. And Sunday was the only day I delivered in the morning, up before sunrise and pedaling around in the dark. How many kids would do that these days? Or parents would let them?

One of the highlights of delivering the Sunday paper was finishing the route and it still being early in the morning, about 7am. The reward was a ride over to the local Winchell’s donut shop where fresh baked donuts baked their sugary scent into the air. There’s nothing like the smell of fresh-baked donuts.

Recalling my intro to the news biz got me thinking about how news has and hasn’t changed. Here’s a quick comparison:

Old way: editors sit around a table with reporters and assign stories
New way: editors IM or text reporters and assign stories and may not even know them face to face at all

Old way: kids fold and deliver papers to homes via bicycle
new way: News is just delivered online.

Old way: tree pulp is mashed, bleached, pressed, dried, cut, delivered in 1-ton rolls to newspapers to load into their massive printing presses
New way: html

Old way: news was always a day old since by the time it was selected, assigned, written, edited, printed and delivered it just took time
New way: instant news as it happens play by play

Old way: place-based news: New York, Los Angeles, London, etc.
New way: global

Old way: one source per town
New way: the world is your town

Old way: all the news that fits
New way: no fitting required

One of the biggest things the old way gave kids like me was an entrepreneurial start. You had to go out, work, do, meet customers, collect payments. Do the math.

And for that I am forever thankful we had a world where I got a start as an entrepreneur at age 9.

I remember when Friendster was the social network that could do no wrong. Then MySpace was the cool place to be. Now Facebook is the social network of the day, claiming almost 500 million users or 7% of the world’s population. That’s a lot. 28% of Facebook users are from the U.S., meaning that it’s a global service (not just one country). This is important when launching a general search engine.

Here’s the Facebook usage by country chart:

500 million is a large number. But not all of them use the service. Regardless of the exact number of users the bottom line is Facebook is popular. The 6-year old company has raised a ton of capital and is used by grandmas, grandkids and people in between. What began as a cool way to hookup at Harvard has turned into a new kind of directory: people and their interests.
The people web.

It is this people web that is beating Google, Yahoo, Microsoft, and others who think the web is only about broadcasting information to people rather than connecting people to information and each other. In 1995 I first met Jerry Yang, the founder of Yahoo. I discussed with him and his executive team the media revenue models and how Yahoo was in many ways like broadcast TV. It published content for an audience to consume. This is largely what sites such as Twitter do also, a one-way information flow.

AOL in its early days was a “people web” also: chat was its #1 use before it lost its way.

The big question is what’s next for Facebook and can it win long term?

As it becomes more mainstream Facebook is now at the point where its popularity is a strength and a weakness. I’ve seen this many times before with companies who get the spotlight and then fade. Facebook has been adding features such as status updates, mobile applications, location services and more in order to absorb where the social web is going. It also has the issue of user privacy that’s becoming a problem for some very vocal users. The service itself could use a lot more features, etc.

But the big item most people seemed to have missed is that Facebook is actually a real threat to Google not as a social network but more than that: Facebook as search engine.

Imagine that Facebook decides to launch its own web search engine and make it the default on every Facebook page. Facebook already serves more pages than 260 BILLION page views per month, more than Google or any other site. In the time it took you to read this Facebook has served more than 7 million page views. 50 percent of users log on any given day, 35 million users update status, and users share more than 1 billion pieces of content (web links, news, blog posts, videos, photos, music and more) – every day.

Now that it’s passed Google in page views the next target may be Google search.

With over 30,000 web servers humming day and night and more being added, Facebook could now have the scale and processing power needed to be able to dethrone Google in web search.

The 3-point strategy for how Facebook Could Challenge Google in web search:

1)      Facebook users have already share billions of web links and do so all the time. In effect, this is a “social page rank” algorithm that makes creating a search index of the web a natural step. And since 200 million people login and use Facebook daily it’s a much more timely real-time search than a plain search engine’s slower weekly or monthly crawl.

2)      Facebook knows its users’ interests, friends, age, sex, educational level, affiliations, workplace, and more – all valuable in creating services such as dating, job hunting, banking, gaming and more. Google lacks that overall knowledge of its users who type in a box and leave Google’s site for the web. That’s why Google launched Google Buzz. But Buzz is way behind Facebook on many levels, mainly users.

3)      Facebook opened up its platform to developers with the Facebook API program. This spawned companies such as Zynga (#1 video gaming) and also paved the way for Facebook Connect, a single sign-on service being used by hundreds of thousands of websites now. Having an API like this creates a multiplier effect expanding Facebook as a platform into all parts of the web. This web “awareness” is another key to search.

All Facebook has to do now is commit to the idea of launching a web search engine and do it. If it does then it’s the only real threat Google has in global search so far. And it could very well win.

Why?
Channels like HBO and others got the attention of viewers. They wanted HBO.

But the real tipping point was much earlier. The real tipping points are the early signs, like mist rising from a lake. The butterfly wings that cause the hurricane later on.

In the online advertising industry I’ve seen several butterfly wing moments, starting with the Web before there were any ads.

Free link exchanges and then banner ads were introduced.

Banner ads are sold on what’s known as a CPM basis. Cost per thousand.
This was the first wave of Web ads. How many eyeballs did you reach? More like the TV model, viewership and audience size mattered. TVs assume someone is watching. It’s how TV continues to be sold, even cable carriage.

Let’s see how paid search ads evolved and then go from there. In 1998 a friend of mine, Bill Gross (founder of idealab) met up with me to show me something new he invented. We sat down in the lobby of a hotel and he opened his laptop computer and on the screen was his pay for click search engine idea. Advertisers pay more for the top click.

He asked my thoughts on it and I said it looked like a good idea. I shared some suggestions. Paid search (the old goto.com) was born. Paid search today is a $25 billion industry and what every search engine relies on for most of its revenue. It is the lion share of Google’s revenue by far.

Now 12 years later I think search is evolving again to an even better model: I’ll call it the Jerry Maguire model: show me the money.

What exactly is the Jerry Maguire paid search model? In online industry terms it’s CPA, cost per action. In other words, in a search an advertiser would only pay if the user actually does a completed action such as buy a product.

Now this idea isn’t entirely new. CPA has existed in the affiliate marketing world. But the model is new if you consider what if ALL ADVERTISING worked this way.

The advertiser only pays when a product gets sold. Another name for this is performance marketing. But I like the Jerry Maguire tag better.

I recently met up with a colleague in the ecommerce and ad space, Eric Best. Eric was one of the early guys at Amazon. He is now CEO of ecommerce services provider Mercent. Mercent has about 130 customers including PETCO and REI.

Mercent helps a retailer optimize their sales across many websites. As an optimizer Eric delivers to Amazon, search and others. He is seeing a few trends: even large search engines are embracing the CPA approach.
Part of this is Google’s acquisition of DoubleClick and its affiliate network that clearly opened Google’s eyes to pure performance advertising. (By the way, Google had to pay Bill Gross a sizeable sum for taking his paid search bidding model).

Also, click fraud is making advertisers leery of the cost per click model. The Maguire method makes that go away and it works with every industry, some better than others.

Leads (cars, homes, mortgages, credit cards, any sort of membership).
The advertiser pays only when the user provides their contact information. When I helped build the largest independent classifieds service on the Web leads is one area we used to generate revenue from car dealers.

Sales is the other main Maguire method. If the user buys a product then the referrer gets a portion of the sales price. Again, affiliate marketing is full of these but paid search isn’t (yet). Pay per click still dominates paid search.

In the big picture some of the larger advertisers on search engines have been using the CPA approach for years. For example, eBay pays hundreds of millions per year to search engines for new user registrations.

For each new sign up on eBay the search engine gets paid $x. The optimization is usually handled by independent keyword optimizers who arbitrage the wholesale cost on the search engine and sell it to eBay based on sign ups. Middlemen. Cheaper for eBay and more efficient. eBay pays on CPA while the middlemen pay on clicks and pocket the arbitrage.

This is how CPA advertising works today and it is limited to the Web and some mobile.

But I envision a future for advertising in every medium: TV, radio, print, billboards, direct mail, yellow pages, and more that is 100% based on sales and results rather than audience reached.

In other words, advertisers would only pay for actual predetermined results for every campaign.

No more CPM.

No more CPC.

No more general purpose non-accountable advertising.

It doesn’t matter if you reach 7 billion people on the planet as an advertiser if that ad doesn’t yield sales that not only pay for the ad but keep the company growing.

Advertising and marketing is going to enter a new phase and advertisers will be chanting: “show me the results”.

Or, as Cuba Gooding Jr. would say: “the kwon”.

http://en.wikipedia.org/wiki/Jerry_Maguire

Been a busy week in Silicon Valley and I wanted to catch you up on what’s going on and provide my spin on it—

Google launched its wannabe Facebook and Twitter killer: Buzz. It takes advantage of the 187 million Gmail users worldwide to jumpstart itself into a “social network”.

Having been in the Web industry since 1994 I’ve seen a lot of attempts by companies to copy others. Bottom line here: Google Buzz is actually pretty good. It will do two things:

1)   Stop Twitter from growing as fast at it wanted to

2)   Stop Facebook from being the only “conversation/friend hub” for over 300 million people online using Facebook

Meanwhile, my friend Mark Pincus (founder of Zynga, the leading social gaming company on Facebook and other sites) agreed to acquire a smaller social gaming company called ‘Serious Business’. Good name for a gaming company. Zynga now counts several hundred million users playing a raft of its games. Some of the more popular are Mafia Wars, Farmville, etc. Zynga has raised more than $200 million in venture capital so far. The irony is Mark founded one of the first social networks, Tribe.net, which never really took off… now Zynga has ridden Facebook’s phenomenal growth to become the leader in social gaming.

Google acquired social search startup Aardvark (vark.com) for $50 million. These are the guys who published a research paper about social search last week. They used to work at Google and now get to return albeit $50 million richer. How’s that for incentive bonus to leave Google, start your own thing, and then sell it to Google? Aardvark lets you ask your friends questions and tries to find the best person to answer it. Sounds kind of annoying to me. Imagine getting asked all these questions by friends? This looks more like a defensive move by Google rather than a killer application they needed. I tend to email friends a question direct rather than try and let a service do that for me without any context.

It was the king of social just 2 years ago but now MySpace is Lost In Space as its CEO was let go after 9 months on the job. Problem? No growth in past 9 months. MySpace seems to have lost its soul, its mission, to me as Facebook stole its thunder and passed it by. In the US grandmas and grandkids use Facebook. MySpace is not that widespread, probably because it looks like a disaster, the design and layouts are a mess. Not sure fired CEO Owen Van Netta is 100% to blame here. MySpace blew its chance in 2007/8 to really clean up the site and make it more useful. Best shot it has now is to try and appeal to kids 12-18 since how many kids want to be on Facebook with their grandmas?

Two things:

1) mobile

2) acquire

Economically I think 2010 could be a much stronger year than 2009. And 2009 was a fairly strong year if you look at the stock markets worldwide and some companies that paved the way. Let’s take a look.

Glass is half full if NASDAQ is any indicator. That’s how far the stock index is up this year, up 45%. In China the glass is even fuller, with the Shanghai index up 79% year to date. London is up 23%. Hong Kong 49%. Japan, 19%.

Who’s leading the charge? What’s their outlook for 2010?

Apple – Apple makes stuff people want to use that makes their lives more productive. It’s that simple. I’ve been in tech since 1984 and sold the first Apple computers back when nobody had a computer, or a reason for one. The centerpiece of Apple is the iPhone, essentially a mobile computer in your pocket. The platform and abundance of apps make iPhone a breakthrough product.

The weakness in Apple’s approach though is signing exclusive deals with one carrier per country. It leaves an opening for a rival to come in with a wannbe iPhone (like Android) and try and satisfy the wider market.

Imagine if Dell said you could only access the Web using one particular ISP. How many Dell PCs would it sell? Now imagine if Apple allowed any carrier to sell its phone, it would have sold 10 times more iPhones and locked out any competitor.

Apple is leaving a gap that Google will try and fill. Apple needs to make iPhone available to all carriers and lock in the market completely.

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Google – Google search has become the default for many people. It has become synonymous with search. Every other area Google has tried to become the market leader it has failed so far. It ends up acquiring market leaders such as YouTube (which still isn’t a great business to be in, video streaming is expensive). Google’s strength relies on search and the more it moves away from search the more rivals can come in and compete. Google Docs, etc. are small weapons against the Microsoft Office giant and necessary. As is Gmail for enterprise, another stab at Microsoft email solution Exchange.

But imagine if Google thought more like Wikipedia and became open source for everything. Not open source as in ‘adopt my open standard’ monkey drip.

What Google needs to do in 2010: Buy anything that moves in search, mobile and advertising. The venture firms aren’t investing so Google has a great shelf full of snappy startups to look at.

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Yahoo – Yahoo was the Google of 2000. Market cap over $150 billion, great name, cool vibe. Fun place to work. The ‘could do no wrong’ company. And then it slowly lost its lead, like putting on body fat by eating one candy bar a day and forgetting how you got fit.

Yahoo’s 10% of what it was then. The user base is still large but the “need to use” factor is low. Yahoo wasted a decade not acquiring anything that moved in Web, mobile and ads. Google even shopped itself to Yahoo very early on as the team didn’t want to build a company vs. a technology.

Yahoo in 2010 needs to buy startups and companies to help it scale and regain footing, especially in mobile, ads and commerce areas. It needs an aggressive deal team to swoop in and buy, buy, buy while things are cheap. Towards the end of 2010 startup valuations and deals will probably be more expensive. Buy early.

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Microsoft – The challenge for Microsoft is one of bureaucracy. How can a whale move like a shark? Too many people stirring the soup and not enough getting done. The problem is what I call the “residual” one. Once a company becomes a market leader in any area it sits back and thinks sales will continue forever, like an annuity. Upgrades to the installed base. And for 14 years that’s what happened, since Windows 95 and Office 95. That era is over and the new one is network based solutions. Streamlined, essential functions, not bloatware.

Microsoft in 2010: Bing is a good move and I’ve been using it some of the time. It has superior results in some areas vs. rivals. However, the search game is changing and Microsoft needs more of a “game changer” in the field to dislodge Google. Some of that are deals such as Yahoo, Facebook, etc. But, again, Microsoft needs to buy and be in every network area and scale search by a huge factor. Secret weapon: cash. Has to break out and truly go global in opportunity.

Facebook – the key for it in 2010 is going to be how does it shift from being “nice to have” to “need to have?” The firm claims 350 million registered users but how many could live without Facebook if it went away? What is the “utility” factor for Facebook? What is the “must use” factor? Light reading still, nothing to compel the average person to login. Surely it’s not to play raise a pig?

Ditto for Twitter. Company has lots of press but what is the “need to use” factor? Media companies love it and the self promotion angle is popular. Twitter’s goal is 1 billion users and it’s about 3% there…Even Google doesn’t have 1 billion users after 11 years and billions of dollars spent. Twitter still feels nebulous, unsure of its genus/species. What does it do for an encore after being on Oprah?
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Above and beyond any of the above, I think we’re going to see innovation from smaller companies on stage in 2010 and the bigger names in tech will be swooping in to get their edge…!

But if you consider that the group assembling is actually powering much of the world’s economy, to the tune of $3 trillion in annual industry sales. Who is that group? Retail. The top 250 retailers, in fact, generate $3+ trillion in annual sales (source: Deloitte). And when you stop to think about it, your humble little town relies on this global industry from the shops to the jobs.

The world is a consumer economy, from Soweto to Shanghai, New York to Nairobi. Lots of industries have Summits. Countries do also. Davos, G8. United Nations. Heck, even music has the Grammys and VMAs. But from my perspective it would behoove the world’s leaders to really pay attention to what retailers are doing. As retail goes, so goes economies. As economies go, so go public opinion.

The Shop.org Summit is the retail industry’s annual get together to discuss what’s what, what’s hot and not, how to make customers happy, and basically keep the consumer economy moving in good, bad and Clint Eastwood times (as in ugly). For as ugly as ugly gets, fact is people need (and want) to shop. Yes, budgets are tight. But clothing, food, transport, goods of all kinds are what makes the world go round. It’s not “consumerism”, more like plain old consumer, from green to lean and mean.

Some of the more interesting sessions on tap for Shop.org’s Summit include:

-The kickoff Bootcamp Monday Sept 21 that talks about social media (is social media really paying off?)

-think consumers are all about saving pennies? consider Gilt and other buying clubs…looks interesting

-no longer bricks and mortar versus clicks…retailers are now multi-channel and I want to hear what thay have to say, if it’s working (or is Amazon eating their lunch?)

-mobile commerce…there’s about 1 billion mobile phones in the world, new uses for the phone include payments and shopping, comparison pricing (when does it hit primetime?)

-can eBay be a factor in the next wave of commerce? (its CEO will talk about trends, but I’d like to hear how eBay competes in the next decade)

These are just some of many, including an expo floor where retailers and vendors look to sell each other their own goods and services.

$3 trillion is up for grabs and how this group decides will effect consumers everywhere.  Viva Las Vegas.