The latest wrinkle is to describe developer acceptance as the key measurement of open standards. As Clinton and fellow Google evangelists fan out across the realtime stream’s version of the Sunday talk shows, they’re having to argue the borginess of Facebook versus Google. C’mon guys, get serious. Google has the gorilla crown going away.

Think of the breadth and depth of Google’s strategy: own every product category and decorate each with their own metadata. Gmail, done. Apps, done enough. Chrome. OS, Android, Nexus. Now Buzz. What folks who argue against the Google tax don’t understand is that this isn’t going to happen if…. It’s done, banked, in the books, check cashed, burger eaten. Every time a Buzz gets distributed, the addition of key voices from this and previous eras solidifies the new metadata type as the social graph ripples spread.

It doesn’t matter how immature Buzz is compared to other systems; in fact, it just makes the resultant Buzzes on the subject all the more canonical. No matter how long it takes for these systems to converge, each object will have its own metadata stamp. From here on out, Buzz stamps are getting licked and posted in increasingly significant numbers. The big companies behind these moves have learned a lot from the pioneers of RSS and open source, as well as the bigco strategies of Microsoft, IBM, and Oracle/Sun.

But Google has taken all the previous strategies and combined them into one relentless juggernaut: create the data and let the process fall into place around it. It would be cynical to suggest that Google was somehow behind the open standards players who started the ball rolling, but clearly the two groups scratched each other’s backs along the way. Perhaps the key melting pot for this buildout was the Internet Identity Workshop, where key players from Google, Microsoft, and Facebook first got together openly.

Facebook seems to have the most to gain by adoption of the various open standards. It mutes the argument that the social media giant is a closed, proprietary system by pushing the discussion to its Adsense-like Facebook Connect. This in turn fueled the idea that Facebook’s huge developer community makes adopting the Facebook API’s a more logical choice than Google forcing their own set. DeWitt Clinton simply ignored the suggestion.

He also doesn’t touch the suggestion that Dave Winer’s RSS and RSS Cloud be supported. This is a mistake, by the way. Noise from Atom mainstays about how Atom is better architected and more robust aside, the best way to marginalize RSS is to implement it and move on. It will be interesting to watch whether Clinton will continue to stonewall, or pass the ball to someone with more clout and willingness to think strategically and act tactically.

It’s likely Buzz has already survived, riding shotgun with the Nexus One release as Google executes on several different fields simultaneously. The Android code is infuriatingly unstable, but the overriding message is one of rapid innovation and aggressive challenge to Apple’s one-thought invulnerable crown. Nothing suggests that Steve Jobs will slow down or be anything but invigorated by the competition, but Google’s strength in cloud computing will take some catching up for Apple.

In the context of the imminent iPad release, Buzz will have a big new stage to finance the next round of improvements. While FriendFeed fans await more rational filtering and UI tweaks, the biggest bang for Google’s buck will be to double down on the email integration. Scorned as a privacy invasion, the built-in integration of relevant Buzzes lets me keep the noise down by only commenting on threads I want to track. The Clinton debates serve as a handy promotional campaign while we wait for the iPad to make additional forays.

For its part, Facebook would do well to adopt a more open stance on Buzz. With plenty of bona fide standards cred on the line, Facebook has been pretty well locked down since Buzz shipped. Perhaps the strategy is to go the big media route with IPO talk, but the silence over the FriendFeed acquisition is disingenuous, particularly given the founders’ willingness to share and learn from customers and the addicted press. Buzz’s weaknesses highlight why the company bought FriendFeed, and not in a flattering way.

Salesforce remains the wildcard, with Chatter suggesting a subscription model for micromessaging that flies in the face of Marc Andreesen’s conversation with Erick Schonfeld. We’ll know soon, because Chatter has plenty of room to maneuver in the absence of a Microsoft strategy for realtime. The window won’t stay open forever, however. But Benioff has been underestimated for years, and never more so than with Chatter.

So prepare yourself for a few weeks of jawboning about the new reality, as Buzz continues to fire more and more objects into the stream, creating more and more metadata as those objects are consumed, ignored, threaded into Twitter and FriendFeed chats, and in general recalling the late great days when all this stuff was invented, bearhugged, and muzzled. Buzz suggests there’s life in the old strategies, even when the shoe has moved to the other foot.

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Now there was my little girl moving out of sight with her precious cargo, our youngest daughter, on the way to school and beyond. For a second we glanced at each other with a nervous giggle, then drank in a day with new eyes. A day where the world prepares for the coming of the iPad. A day where health care reform was debated and both Democrats and Republicans were coaxed out of hiding.

Whatever you think of the merits of the positions, the debate in Washington was good for both parties. Republicans came prepared, with a clever mixture of partisan politics and pragmatic courage to avoid crossing the line from talking points to personal insults and worse. For their part, the Democrats let Obama carry the ball, getting away with it because of his skill and command of the details but finally showing the passion that fuels their cause if it is to prevail.

The media was less impressive, with Fox Business News the only cable feed that stayed with most of the live coverage. MSNBC and CNN seem to have switched roles in the year-long debate, moving away to talking heads on the former to blather on repetitively before bailing altogether for the Olympics, while capturing more of the underlying dynamics on the latter. I finally gave up switching to stay with the event and watched the rest on the MacBook Air via CSPAN. Next stop, the iPad.

The tech agenda seems similarly polarized, what with Buzz this and Facebook patents that. But I get the strong feeling that no one has yet succeeded in smoking out the real work that needs to be done in the few short weeks before the iPad arrives. There’s a lot of phony outrage about Apple and Google soaking Techmeme, as though big companies with aggressive agendas is something new and more fearsome because of the scale at which net giants operate.

But I keep coming back to my daughter driving off to greet the day. At some point we have to just hand over the keys and strike out in the new day. We shouldn’t be so worried about demagogues in corporate boardrooms when we face them every day in our aggregators from every nook and cranny. Trading one clever pitchman for another does nothing to solve our problems, nor does it speak to the opportunities that lurk.

It seems we haven’t learned what it’s like to be a child in parent’s clothing. We pretend we are adults while doing whatever we can to shift the burden of choices to circumstances, class, timing, and history. We search for signs of strength and chinks in the armor where we can attack and slingshot ahead. We sneer at the callous while coveting their power.

The iPad is so difficult to handicap, say the daily newsbytes: you’re no iPhone, they maintain. But after missing the signals about the iPhone, then Twitter, then realtime, then Nexus One, we shouldn’t mistake the new device’s deficiencies for what will be unleashed over the new platform. Look through the new eyes of the initiate, where the open road holds limitless possibilities.

So much of the social media stream is meant to be routed rather than absorbed, pushed to an expanding circle of tidal pools for decoration with our behavior. Even the latest entrant, Buzz, holds promise in its naive ready-to-be-enhanced template. It’s surprisingly free of constraints at this early stage, ready to be hooked in and out of the stream and shared with other systems more and less tuned to this new public thoroughfare.

Right now we’re floundering in the tyranny of middle age, thinking we know what blogging and tweeting and social graph are all about while at the same time already tiring of the glut of mediocrity and the lack of inspiration. The young and the old know better, flush with an appreciation of the time before them to celebrate or squander. The understanding that whatever words come next are to be laid out like diamonds in a row, subject only to the value they represent or create.

We so quickly calcify our latest inventions in the rush to quantify them, not letting the rhythm and rhyme continue to build. We cash our chips in too early, playing it safe when the world could end at any second. All the while, the detectives caution us that the moment is not profound, that the results are already in or fixed, that we should not hope for too much lest we fall even shorter for dreaming. It’s a shallow way to live, pretty much not at all.

I was talking with an old friend last night, about a musician who I once thought disliked me. No, my friend said, everybody disliked me, especially me. It was a shallow way to live, and I stand guilty as charged then and even now. But that’s no excuse to not understand a series of really good ideas that have been building for a while now. Just think how everything can change when viewed through the lenses of the young and old.

Try predicting the iPad will fail. Explain to me how we don’t want to lean back and paddle calmly through the stream, pausing to sip at a wise post, sample a live event, sit in as our friends debate an issue of the day, enjoy a laugh, serve a customer with intelligence and care, put the whole thing down with a feeling of satisfaction and the delight of looking forward to coming back for more in good time.

Explain to me how this can’t produce a better quality of work, a better kind of listening, a better balance of silence and impact, the chance for real progress instead of flacid soundbytes and endless posturing. Isn’t that a lot to expect from just another shiny new object you say? Sure, but it’s not the technology that I’m betting on, it’s what rides on the cushion of air that I expect to be great. It’s a magic carpet we’re building on, and if we just look at it through the eyes of a brand new day, we’re sure to invent things that will in turn drive the next wave of devices.

On March 9, a new Jimi Hendrix album will ship. The artist lived to release just 3 records, famous for just 4 years. But he took his success and plowed it into a recording studio, where he spent the last year of his life in a constant state of experimentation and exploration. The Hendrix estate estimates they have a decade’s worth of material to release. Today you can buy a digital recorder that does much of what Hendrix’s studio could do for $200 on Craig’s List.

As Saul Hansell says on this week’s Gillmor Gang, “If we’re not willing to make big, bold mistakes, we’re never going to accomplish anything.” Hansell has left the New York Times after 15 years to join the latest incarnation of AOL, what Andrew Keen jokes sounds like a startup, “a huge company that clearly doesn’t know what it wants to be when it grows up.” Hansell takes it as a compliment; Keen says it’s not meant to be.

Living with realtime will be an adventure for some, a terror for others. But for our children, who don’t know enough to be scared, and those of us who can recognize something special even when we don’t understand precisely why, the iPad is a big deal because it looks just like what we imagined the future would be.

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1. Buzz is not FriendFeed. If it were, it would be being used by a vanishingly small minority of social media experts who have no life. Instead, it is being used by millions of privacy-invaded geniuses who apparently either have had the intelligence to understand that they get what they click for (understanding the meaning of Yes, I’m clicking here for a service I am being offered for free) or are just hopelessly trapped in a bigco system where they have no rights and can only just keep clicking in hopes of finding the way out.

2. If Buzz is going to become FriendFeed, only with real friends, then Google has some secret ability to turn an overly complex non-viral site into a massive multiplayer gaming system disguised as an extension to email. Wait, we call that Brizzly. Failing the secret stuff, just following the playbook already laid out in detail by FriendFeed seems guaranteed to produce a community of Scoble hiders, er, muters, at such massive scale that it will take more (hu)man-years of work than went into building all the useless Twitter lists.

3. Buzz is not FriendFeed because project manager Buzz Jackson denies ever looking at FriendFeed because Google is busy getting feedback from users who didn’t know the product existed until 2 weeks ago. That leaves internal testing, which if you accept the premise that small is ugly and huge is beautiful would mandate ignoring the most sophisticated testing suite so far, namely FriendFeed. Of course, it’s total bullshit that Buzz hasn’t looked at FriendFeed. Just not enough, according to MG.

4. This small is ugly theory of disruption suggests that only massive organisms can effect change. Like the iPhone for example, which was such a resource-hungry project that Apple had to slow down the release of the next version of OS/X to build the iPhone OS out. Or that Google had to invest in a browser, an OS, and a cloud app suite in order to catch up and present an alternative that in turn would ratify the superduper phone as the dominant platform around which everything revolves.

Except that the iPhone rode the back of broadband adoption and open source development of Web-based libraries of Javascript that emerged from Microsoft’s failed attempt at locking out a Web-based version of Exchange from cannibalizing Office during the Y2K collaboration wars. The workaround leveraged by Outlook Web Access was Ajax, and it gave the WHATWG the power to stub out IE and propel Firefox forward as a cross-platform alternative OS. Chrome and its OS cousin are simply instantiations of this platform. So small is apparently ugly except when it starts the whole fire in the first place.

5. If FriendFeed is ugly, therefore, it’s because it has no users and therefore has lost its battle for existence. If that were true, then Buzz will have to morph away from being FriendFeed in order to escape the curse of complexity, or the various labels that add up to looking down the nose at sophisticated (or enterprise) users of the infostream. Twitter is random, so mining Twitter is like panning for fools gold. Twitter, meet Benioff.

But if Buzz proves anything so far, it’s that nobody seems to have figured out how to solve all these next-stage problems any better than the FriendFeed designers. OK, who’s done any better? MG hasn’t mentioned anything that comes close to encouraging me to download any other Twitter client, although I just downloaded Seismic for Android while I was looking for Skype and not finding it. Given that we’re on the cusp of craving lists for Buzz, I’m not wasting any more of my ignoring time on Twitter lists, thereby not needing to upgrade Tweetie on my iPhone.

6. Meanwhile on the political front, the battle rages between Dave Winer, the personal savior of us from ourselves and our inability to ignore flashy shiny social media trinkets, and Dave Winer, the author and campaign manager of RSS 3.0 as told to him by PuSH architects Fitzpatrick and Slatkin. So far it’s a dead heat, where our naivete about the pernicious use of open standards by bigcos or those who work there is assuaged by our lack of concern for the 12 sites that use RSSCloud. Far be it from these Silicon Valley geniuses to write some sort of PuSH WordPress patch to pick up these folks. Oh wait….

7. So we wait in some sort of horrible limbo/hell for Buzz to become FriendFeed or Facebook to clone Buzz by inventing its own Gmail and bolting FriendFeed back on. The only problem is that Microsoft already bought Yahoo to do that and might make another such “offer” to Facebook that Zuckerberg might not want to refuse. Never mind the sticky details that Yahoo is still “a separate company” or that MIcrosoft doesn’t need to buy 400 million users. A Silverlight Office would immediately have a huge social graph to bungle privacy with.

8. Remember Twitter? Nope, me neither.

9. Bonus thing to ponder while waiting in limbo/hell: which platform will work best with the iPad, Buzz, FriendFeed, or Silverlight Office? It’s a trick question, because FriendFeed is the only real product at the moment, which is T minus 30 days. Let’s say I’m sitting on my couch (see this week’s Gillmor Gang for couch discussion) and watching the river flow. Dave Winer and Dare Obasanjo float by with anti-Google slime: Winer pointing at a Valleywag smear about Eric Schmidt that I glance at to check the date (today) and then veer off to find a hand sanitizer, and a more thoughtful polemic on Lifehacker from Obasanjo that continues Dare’s theme that Google abuses open. I give this one a 20 second skim and maybe park for further ignoring later.

Next I check email (oh wait, that means any Buzz’s directed erroneously at me as well as FriendFeed discussions I’m tracking privately.) I bounce over to Silverlight Office/Chatter/Yammer and check what’s up at the office, then catch up on New York Times, TechCrunch, Wall Street Journal, sample the interactive liner notes of the new David Sanborn record playing in the background, and keep an eye on news alerts before the White house press briefing direct feed lights up. The flow settles in to a pleasant stroll of stored value interspersed with intermittent propaganda, random news/press releases, and ancient grudge fights about seemingly nothing but really core features of the new iPad OS.

10. FriendFeed is the OS we use to manage Buzz until it is borged. For no other reason that Buzz provides million of constant reasons why we need the social graph filtering and uber-location gestures that inform and cultivate realtime conversations. Nexus One is the closest thing to the iPad for now, and will then become the glue between iPad sessions. Twitter becomes a familiar child actor we watch playing with the kids while we talk politics and sports with cigars and brandy.

Imagine a slider: slide all the way to the left, it’s Buzz. In the middle, it’s Salesforce Chatter, all the way to the right, Silverlight Office. The iPad is your console, your concierge to the new rebooted media services. In this new post-beta world, applications are works in progress, not good or bad, finished or broken. Companies are bought not for features or people but as brushes in an emerging palette. Obasanjo calls Buzz a poorly implemented FriendFeed clone. I read about it in FriendFeed, and the fix in Buzz.

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Interestingly, Benioff’s meta view of what he called Cloud 2 and what we call realtime seemed almost a reverie in contrast to the demos, which illustrated in a few short dives into the Salesforce architecture how deeply Chatter is already embedded in the platform. The messaging around this new Collaboration platform was if anything underplayed next to the reality, that Chatter completely transforms the business process layer.

Salesforce already has decoupled rapid development and deployment from the exigencies of hardware and on-premise software management. Now, with Chatter, customers and developers (read partners) can bootstrap new realtime techniques that take advantage of the flattening of business heirarchies and the tendency for small businesses and startups to distribute work around a fluid workforce where key players wear multiple hats.

It seems almost too simple an insight, that the speed with which Salesforce is innovating is exponentially growing with each new layer of its stack. The so-called collaboration layer launched today is potentially far more than just a competitor to Sharepoint and Lotus Notes, but also the harbinger of new application strategies that may launch new businesses out of their own realtime designs and problem-solving.

In conversation later with Benioff, it’s clear that he sees Salesforce in a strong position to not just compete, but move up and out of the SFA beginnings of the company and into a period of rapid growth. With Google talking aggressively about moving Buzz to the enterprise, the question for customers is how long they can afford to wait for the search giant to catch up to what Benioff already is deploying.

Benioff’s job is to pay close attention to Google’s strategy of using Buzz to drive ubiquity around various emerging open formats and consensus around the value of such consumer data as supportive of enterprise business process flows. He also has to rapidly add Android to his iPhone and Blackberry clients. I came out of today’s low key messaging with a much greater sense of the speed with which Salesforce is putting the foot to the pedal. Letting the demos do the talking is something new for Benioff, and a powerful buy signal.

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Later came the realtime chat, and then Wave, and then Google Realtime Search, all with that annoying realtime updating of the stream that caused so many of us to run for the Easy Hills. This stuff is so hard to understand that we’ve endured months of explanation by Facebook, a buy out of FriendFeed to silence the disturbing noise, and of course Twitter lists. How many times did we think about lists this week, except to note that there are not any in Buzz.

It’s been 4 or 5 days now, and even though Google PR has earned its keep managing the privacy missteps, we haven’t heard apologies from the CEO or founders like Zuckerberg pumped out around Beacon and whatever the next stumble was. What’s weird is I can’t remember much more than some Terms of Service that had to be rolled back. It may seem unfair, but Google has waited long enough to benefit from user fatigue about any of these issues.

Actually, I can’t remember why we care about this at all. It mystifies me that Marc Benioff is investing Salesforce cycles in this social stream, or why Buzz will be followed as soon as possible with an enterprise version. Looking at the Buzz flow, the only useful stuff is about Buzz futures; at some point all the FriendFeed features will be reimplemented and then the conversation will atrophy and move to a professional advertising QVC channel model. You’ll know the resulting content will be professionally produced because the rest of us will be sick of the whole thing.

My favorite part was the Google program manager’s response to a question about the return of Track (we’re always looking for good ideas, whatever that Track thing might be). Buzz really doesn’t need Track at all because there is absolutely no rational architecture to add value to. Basing a social graph on email is like Adobe supporting HTML5. Or trying to decipher which parts of this article are meant to be believed. Let me explain:

Email is the one thing that we actually believe computers can do well. We spend (used to) 75% + of our time processing it, reacting to it, storing it, subpoenaing it, shredding it, waking up in the middle of the night in a panic about it. When IM came along, we treated it like a hobby, something we did while not doing other important things like email. We aren’t sure how well computers do IM, and trust texting more because it’s tied to our phone and credit card.

The rest of the time after email and recess (IM) is spent on so-called browsing. Browsing began as a way of exploring, but email and IM quickly turned it into call and response. Here’s a URL, click on it. Read it until you’ve either absorbed the information or decided you’ve gotten the gist of it. If you like what you read, reward the source of the click direction. If not, look for someone to follow those orders and pay them to keep that away from you while you find better clicks or better people with better clicks.

Better people with better clicks require better pay for access to their clickstreams. Better pay comes in one of two ways, either more money or less time spent figuring out what better means at any moment. Typically, more money comes from going faster and smarter. Smarter comes from knowing what to look for, and faster comes from throwing out what isn’t worth finding before you waste the time finding out there’s nothing there. Smarter is a commodity in technology, but having the intuition to move on is rare.

FriendFeed emerged to harvest the social signals of exclusion, filtering based on the intuition of what parts of what streams added up to something not necessarily expected but likely to appear. Although the market focused on the competition with Twitter, the architects focused on the second order effects of the system. As FriendFeed became more and more efficient, it closed in on the value propositions of email and IM.

When email, IM, and FriendFeed intersect, we are compelled to make strategic decisions about our information flow. The first thing I tried to do with Buzz was send a private message, or in other words, replace email and IM. For now you have to create a private group on one (or none), which means it’s easier to stay with IM and its ephemeral quality or email and its additional decision tree of to’s, cc’s and bcc’s. Net: I’ll wait until they adopt FriendFeed groups and direct messages.

Groups enable a hybrid of public and private that Buzz only suggests but does not yet deliver. By establishing targets for collaboration and registering people, you avoid the constant decision-making about who sees what and in what proximity to others. Realtime conversations can be public or private, absorbing IM for many tasks and creating filtering opportunities based not on keywords but social vetting. Buzz will inevitably adopt FriendFeed tools, starting with a mapping of the social cloud and a Trackable alert mechanism to preserve discovery and harness the wisdom of overlapping friend filters.

Can Google figure out how to perpetuate FriendFeed as a broadly adopted mainstream system. Honestly, who cares? They’ve been running it internally across the company for six months, and unlike Wave have succeeded in integrating it with their Office product without a technical glitch. And if I’m reading the conversation with Sergey Brin correctly, part of the reason they’ve been successful in that integration is because they’re using Buzz. That’s why they’re hot to trot this puppy into the enterprise; they already know it works.

Far from being dead, FriendFeed just got a clean bill of health from Buzz. First, there’s the amazing mobile app and Nexus One integration, which can and will be ported directly to the iPad on Day One. Hybrid HTML 5 and H.264 stream virtualization will combine to create a core class of cross-platform media apps. As Ray Ozzie predicted, we will see rapid convergence across all the major platforms. Blame FriendFeed.

The privacy crisis will be sorted out by comparing the value of the FriendFeed cloud to Twitter lists and Gmail/Greader harvesting. Then the overlapping groups will be meshed together with API-driven import/export utilities that normalize the social dynamics of the competing systems. Parenthetically, this will give Facebook/FriendFeed integration a kick in the ass, with the promised stream splicing and bridging intelligence orchestrated to let the main systems dedupe the flow across the bus. Blame FriendFeed.

And, yes, we will see the return of Track, as we learn to stand on each others’ shoulders and take advantage of the smarts of realtime filtering based not on our Track modeling but the successful Tracking of our peers and their peers. In realtime, news is a commodity, but in reducing the friction of discovery and tying social relevance to the time not wasted on the trivial, we carve out the time to spend more wisely. If Google won’t do Track, maybe Benioff will. And I’ll blame FriendFeed.

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Here’s another couple: Netflix streaming is now available on PlayStation, Wii, and Xbox, over Silverlight on Macs and PCs, and via 48% of its customers in the fourth quarter. The company expects 66% will stream by mid-2011, and added a record 1 million new subscribers Q4 for a total of 12 million. And this: Microsoft has released a Silverlight 4 beta client for Facebook on Windows and OS/X, with background notification, a grid UI for status updates, photo and video uploading and device access, and netbook/tablet support.

Each datapoint by itself suggests valid reasons why Flash will endure for many years on a majority of machines. Huge support among gaming developers, 75% penetration on the Web, and soon a foothold on every major phone but the iPhone/iPad. But taken together, Flash faces forces beyond its ability to cope. Whether it’s Silverlight choking off Flex/Air in the enterprise or Apple and Google scraping the cream of the developer community off the top, Adobe is being squeezed into a corner from which it can only escape by losing control of its platform.

Using HTML 5 as a rallying cry serves Google’s marketing and developer evangelism strategies, but its impact on Flash is minimal until the iPad ships. For iPhone users, it took two upgrades for the marketplace to provide a work-around with H.264, but once that was in place with YouTube it brought Ustream and other players in. At about the same time, FriendFeed enabled realtime streaming chat. Suddenly, integrated realtime streaming experiences could be leveraged to target valuable communities.

Whether it’s a Facebooked version of these technologies over Silverlight or a native iPhone/iPad version via decompiling and H.264 streaming, by March we will have multiple versions of essentially the same content running on PCs, Macs, i*’s, and Nexus One. Coupled with Netflix device expansion, holdout services such as Hulu will have to move quickly to avoid a stream of hemorrhaging customers away from what is no longer a unique offering. Watching how fast book publishers like Macmillan and Amazon have rejiggered their relationships to accommodate the iPad realities, can the networks (other than Disney/Pixar/Apple/ABC) be far behind?

Google released the Nexus One not yet a month ago, and already have provided an over the air update to the OS that enables major new features, most significantly a pinch zoom mechanism that eliminates the lion’s share of the utility gap with Web browsing. Given the higher resolution and therefore real estate of the screen, the N1 becomes an attractive alternative for catching up on the Web first thing in the morning or on the move. Indeed, it also suggests Kindle for Android would be virally received.

Extrapolate from that to the launch of the iPad and rumors that over the air updates and other data may be available when the device ships, it’s not hard to imagine both the appearance of an iPad-like competitor via Google and a dramatic acceleration in iterative leapfrogging of features. In other words, major site/app two-tracking of Flash/HTML streaming versions. If the New York Times is serious about being on the iPad’s gateway screen, a Flash-free version of its site is a minor investment relative to the value of being an incumbent or default service.

Push those dynamics out along the content supply chain and it doesn’t take an Adobe CTO long to figure out Flash tools must be quickly reengineered to accommodate both versions of these new sites and apps. Microsoft is already way ahead with its SIlverlight/IIS Media Server/Visual Studio pipeline, ready to spray H.264 streams into iPad web-based applications and subsequently native apps where the content providers maintain the relationship with customers. As Walt Mossberg said in conversation with Mike Arrington and David Carr on Charlie Rose, customers don’t care about formats.

The open standards argument currently championed by Mozilla, that H.264 is a proprietary technology with a looming cost trigger, is similarly irrelevant to customers, who will never notice where along the road to their browsers the licensing fees are absorbed. Most likely, it will be buried in the additional $5 for each book download that the iPad has moved back into the publisher’s accounts, or the delta between the iPad WiFi version and the fully loaded 3G ($329 to start.) Or we’ll simply pay extra for early release on the iPad, then a bit less on the Gpad, and so on, like the way films are metered out across cable, on demand, DVD/BlueRay.

Even there, the speed with which these models are accomodating the realtime Pads is daunting for Adobe. Even as the Academy ups the number of Best Picture nominees, many of the more independently produced films are already available on Comcast on-demand the same day as DVD. Streaming is quickly becoming the gold standard in the queue, and Flash-based venues are fragmenting across mobile and gaming devices. Oops, there goes that gamer dev advantage.

That’s where Jonathan Schwartz and Twitter figure in. Like Flash, Java has tremendous traction and the ability to act as an attention/gesture recorder for developer and customer behavior in realtime. And like Flash, Java is locked out of the iPhone and iPad. Interestingly, Google has already effectively minimized Java on Android by using Google Web Toolkit to spray Java code through Javascript onto Android devices. By spending big dollars and resources on the V8 engine to accelerate Javascript performance, Google started an arms race with Firefox and finally Microsoft to close the gap.

Inevitably, the dynamics of this new race for the middle, the sweet spot of RIA ubiquity, has more to do with the money to be made at the output end of the pipeline. Microsoft has Xbox and Silverlight, Google has its ad revenue, YouTube dominance, and growing Android Market, and Apple its gold-plated innovation chain and credit card access to the addicted customer base. Adobe? Like Sun, they have the developers, the reach, the realtime updating, everything but the fuel to drive the aggressive customer base that will pay through the nose for rapid progress. They want their iTV.

The Gillmor Gang — Andrew Keen, Danny Sullivan, Kevin Marks, and Robert Scoble — talk smack about Flash. Recorded live Friday, February 5, 2010.

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But what Jonathan did for Sun, and the rest of the industry, was to twist the conventional wisdom of the enterprise into a new shape now being leveraged by a host of successful players. Jonathan somehow got that ubiquity in the consumer space would translate into platform power. The rising tide of the social network has its roots in many of the things Jonathan was saying long before it was popular or even wise politically.

Probably nobody could have pulled off what Jonathan was tasked to do. At Oracle’s absorbathon last week, Larry Ellison reiterated his nothing-new-here cloud bashing while actually affirming the investments Schwartz made in consolidating the best of breed system solutions Oracle will use to go after weakened competitors like SAP who looked the other way as Salesforce expanded.

The rumblings at the end were that Jonathan couldn’t close the IBM deal, forcing McNeally to quick-punt to Ellison. But Ellison’s analysis of the Sun assets shows that most if not all of the value Schwartz claimed in the financial community will be reflected in revenue from Day One, that keeping Java away from IBM will turn out to be a hugely valuable investment, and that a nuanced use of MySQL as a customer-facing sales tool for the SMB market will stave off the growth of any other open source database.

As the smoke clears from this epic consolidation, what’s left are the explosive pairing of Apple and Google in the new mobile architecture, predicted by Schwartz with his relelntless observation that devices go to free. With Oracle/Sun now positioned as the fuel for the virtualization layer of the cloud, the big freakin’ webtone switch of this era, the iPad Era launches a race to spread the gospel of the financial community infrastructure across the micromessage bus and its media partners.

Jonathan Schwartz was brought in to finesse the transition from the Good Old Days to the Good New Days, and he’ll deserve to harvest irreplaceable time with his young family. It will be interesting to see him return, because he has little need to reinvent himself given his early and prescient take on what is now transpiring.

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Dave Winer suggests this in his second of two posts in a row. Of course, Dave alternates between decrying the locked trunk aspects of the system’s design and crying wolf about the end result when all these mistakes end up as a raging success. In fact, Dave may have hit on an unintended truth in all of this debunking. Namely, it’s what’s been left out that really defines the iPad.

Take Flash. Please. When Jobs quarantined it on the iPhone, we all felt it was a tactical thing, more political than technical. Of course, it’s never been technical, even now when it’s kept off the iPad because it is responsible for such a great percentage of crashes in Safari or whatever. Actually, Flash is being kept off the iPlatform because It Sucks. Google’s HTML 5 liturgy is another contiguous example of how to sell the same message, but enquiring minds still want to know why we need a plug-in from a company that makes its real money from Photoshop.

The Adobe guys are terrific engineers who’ve built a wonderful ecosystem off of a hole in the Arctic Circle of computing called cross-platform ubiquity. But what happens when the OS sucks in the functionality of such a play, as Windows did to Symantec with desktop replacements, compression, and various system management utilities? Oh, and security (remember Bill Gates’ parting push to protect us from the network.) Most recently I heard from Symantec in the form of a Facebook giveaway or some such. And Google now produces software, services, browsers, and OS under the same plan. They can afford it; Adobe can’t.

So it comes down to this: if a site hosts Flash, they are making the same choice WordPerfect made in building an OS/2 version instead of a Windows one. This was when Microsoft was finally getting Windows up above the radiation layer of DOS, where WordPerfect had a stranglehold on the word processing market. IBM’s version of the nextgen OS was superior in many technical ways, but Microsoft had more money than God and they threw it at IBM and its DOS legacy stakeholders like Google did with Office a generation later.

There are certainly good arguments to be made for why Flash has legs, but unfortunately for those who make them they’re bucking Apple and its faux competitor Google. When you click on a YouTube icon in the browser, it launches on Flash. When you click on it in iPlatform it launches on HTML5, or rather the only part Flash cares about. YouTube owns most of the video market, so the user experience is that YouTube works everywhere. User bets on YouTube. They don’t care about HTML 5 or Flash, they want to see the movie, thanks goodbye.

Same with multitasking. Music evidently plays in the background with photos. Remember cut and paste on iPhone 1? No. With iPhone OS 3.0 they fixed that. Remember no video streaming? They fixed that. Didn’t have to buy a new one to fix that stuff, only to upgrade the speed and wait out AT&T’s buildout. Multitasking? Who knows whether we’ll even have to wait past the 3G iPad launch or even care, since we do most of our work inside multi-tabbed browsers. In other words, virtualize multitasking on the server side.

No USB. It’s going to be Christmas in July for the peripheral manufacturers plugging into the charging connector. No camera? If my iPhone can send clips to the Ustream site where they are automagically rendered in H.264 for live streaming, then maybe they can make their way into the Pad over WiFi or god forbid Bluetooth. Or a little clip-on at the top of the screen. The MacBook AIr is being componetized while undergoing an OS transplant. Goodbye Flash, no really. They’ll be able to hang on the way Microsoft demoed Silverlight video streaming down to the iPhone. The portability layer moves to the dev tools.

When we look at Google we think Cloud, but what’s really surprising is how we don’t notice how Cloud Apple has become. The magic of streaming has found its home with this device and the ones to quickly follow. Nothing is left out; it’s been moved to the Cloud where the bits are assembled and streamed back down. If there was anything left out of the iPad announcement, it was a better way of communicating how powerful this platform is and is becoming. No wonder developers are already complaining about only having 90 days to write the first wave of software. Contrary to what Dave Winer warns, they’re more afraid of being left out than locked in.

The Gillmor Gang on the iPad, with Nicholas Carr, Doc Searls, Robert Scoble, and Kevin Marks. Recorded live Thursday, January 28, 2009.

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In and of itself, the tApplet does not change the world or even our corner of the world. But just as with the disruption triggered by the iPhone, this new disruption will move beyond the carriers and into the center of the creative core of the netertainment and information industries. In turn, this new wave of video, music, and text will quickly overturn some of the major stakeholders and rewrite how we spend our time at work and play.

It’s hard to think far enough back to remember how we used to use our computer time before realtime stole onto the stage. Back before my MacBook Air, which turned every other computer in the place into an appliance: the MacBook Pro for rendering video, the iMac for Web site design, the PC for nothing. Back when software was something I paid for, music something I shopped for, television something I set a timer for.

The MacBook Air’s disruption was the strategic removal of an internal CD/DVD drive. It declared independence from physical media, and bootstrapped existing devices to serve as feed machines for the rare need to rip a CD or backup a file for sneakernet. USB drives quickly eliminated even that requirement, and the move to cloud services sealed the deal.

Streaming media rushed quickly into the vacuum of tangible media. Once the location of the actual bits was made irrelevant by look-ahead caching, we quickly learned to validate those services which allowed us to share pointers to the material rather than the downloadable enclosures. Identity online became the control point for micropayments, and the incentive for providing behavior and social signals in return for discounts and sponsored bundling. WiFi became the razor, and the streams the blades.

In effect, we are now selling our gestures into the stream hoping to build up enough credit to buy these new devices as they reach the intersection of battery life, broadband, and social filtering. The overt and implicit affinity groups are the nodes in this realtime auction, harvesting the most elegant and intuitive of their tribe to finance access to the streams most relevant and informative of the next day’s work. Like dreams, these affinity surges work through the underlying themes, fears, yearning, and hopes we share.

Literally, what this means is a renaissance of the kind felt in the Sixties, when music, film, and political discourse conspired in a furnace of creativity. Today these devices are mere portals into this next wave, important only because of what they help to make possible. The iPhone’s genius was in combining the elements to produce a device capable of accelerating use of the network in realtime, to signal the arrival, the existence, of valuable things. Virtualized, homogenized into streams, predicatively cached to preserve the illusion of stability, voice activated to teach the network who we are.

Google has emerged as a great validator not just of the cloud model but the inspiration of the Jobs model: that we can imagine our way into the future we can only glimpse at any given moment. With the iPhone it was brain dead obvious that if the idea could be instantiated, the economic forces could be harnessed to improve the experience as more desired it. The more Apple and Google and Amazon succeed, the more they need to compete with their own success to survive and prosper.

Three machines: the Kindle, the Nexus One, the Apple tablet. Each offers something essential to the power of the creatives who will fuel this disruption. The Kindle is simple, cheap, battery frugal. The Nexus One is multi-tasking, cloud-fueled, realtime empowered. The Apple machine bridges the media across the digital shoals, most likely straddling the intersection of the creative arts now floundering in late night wars, 360 deals, and the great archives we’ve lost the right to share. These are the pre-existing conditions, just before another Golden Age is upon us.

The Gillmor Gang — Andrew Keen, Doc Searls, Robert Scoble, Sam Whitmore, Dan Farber, and Kevin Marks — on the Tablet Wars. Recorded live, Friday, January 22, 2010.

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RSS and its podcasting offspring triggered a process of democratization that offered users a way of aggregating news and entertainment under their own control. Most media outlets constrained such access to their programming, but YouTube gave users a way to flout the law and Google a way to look the other way while shows like The Daily Show and copyrighted musical performances were made available over the net. As with Napster, free as in media morphed over time to iTunes, the Kindle, and soon the iTablet.

The disconnect between broadcasting audiences and the economic underpinnings of prime and post-prime time has reached the boiling point. Now that Twitter and its gesture-based Follow architecture has reached a critical mass, audiences can set alerts to notify them of breaking news, analysis, and commentary. If available, these nuggets of information can be played off in realtime and shared with targeted micro-communities while the information is at its most valuable. Unfortunately for local broadcast stations, this destroys a substantial portion of their revenue, much as craigslist eats newspaper classifieds’ lunch.

Follow the money and it’s streaming away from a scheduled architecture to a DVRed and eventually on-demand personalized portal. On the desktop Silverlight is leveraged by Netflix to move that disruptor (see boarded-up Hollywood Video stores) from FedEx to Instant access over the Net. On the iPhone/Nexus platform, Ustream streams realtime events over the cracked-open 3G network. How can the local news compete with an interactive identity wand that lets you download an app in seconds moments after you are told about it via your aggregator filter router?

Once the affiliates said No, the house of cards collapsed. NBC faces the same stupid choice they made when they opted for the middle-of-the-road Leno over the real Carson heir Letterman. By reinstalling Leno after the news, they roll the clock back 7 months (really 6 years) and create a monster called Conan that will destroy what’s left of the Tonight Show heritage. A Fox show will spawn a Late Night Fox show, and suddenly we go from 4 shows to 6. Talk show glut favors a new power alignment around micro-communities, where Letterman and his even funnier followup Ferguson will split the newer audience with Conan and leave Leno with a less and less valuable (and mostly asleep) audience.

Interestingly, CBS has used this opportunity to post Letterman material about the crisis on YouTube, thereby promoting their funnier shows and signaling a move to on-demand. Already CBS makes its Evening News broadcast available on-demand; will the rest of its live shows be far behind? And remember Comcast’s On Demand Online version, which provides all of its on-demand content online at no additional cost. Plug a Mac Mini into your HDMI port and you’re off to the races. This will quickly start making lotso money for the networks with micro-community strategies, which in turn will tip other networks into alignment.

Also note Google’s marketing model for Nexus: no money on advertising local or network, but clickable pitches first in search and soon in Gmail, GApps, Maps, Google Voice, and so on. Hello, future. Same thing will happen in Late Night, where YouTube “breaking news” excerpts will give way to impulse buys (look at how iTunes carved up albums into dollar-a-pop singles) and then to bundling, aka the new networks. With Nexus One and the iPhone converging in disruption of the broadcast model, producers will begin to flow where the incremental pools of money live. These YouTube excerpts not only promote the parent shows but the new bundled streams that alert us.

That’s why Conan told NBC to take a hike: enough already of pandering to Leno’s watered down silent majority. They don’t want him, never did, and besides it’s no longer 11:30 anymore but what time it’s released to the network on-demand that counts. As Twitter sentiment filters across the country and time zones, more and more of us will start choosing which show to rack up based on implicit gestures from our affinities. As advertisers rush to reach these socially-cultivated audiences, the networks (studios?) will more to an on-demand model where shows are made available almost as soon as they pixelate the bleeps. Oh wait, maybe they’ll make bleep-free versions available as adult on-demand.

Once these dynamics settle in, we’ll be voting for not just the new late night schedule but prime time as well, which many of us have already started doing with DVRing House and watching Heroes with the kids, or preferably sampling the on-demand version when alerted. The conventions of 11:30 will not fade, just as waking up to the Today Show will continue to flourish. But inevitably attempts at splitting the baby like NBC tried with Leno and Conan will accelerate the decline of one-size-fits-all broadcasting and reward competitors with a free gift of material with which to market the new realtime platform.

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That leaves product announcements by the vendors themselves, timed to fit around the old event schedule but in fact disrupt the news flow that normally used to be captured in large multi-vendor settings. But these announcements have begun to focus around hardware devices (phones) that require a supply chain, lead time, and partners. Apple used to be mostly successful at keeping the lid on the hardware part of the equation, choosing its suppliers based as much on security as the commodity parts that help maintain a firewall by need-to-know silos.

But where the process has really broken down from an IP perspective is with the partners. And particularly the media, which has a stake in its survival on top of these devices. So we see a clearly endorsed leak that Apple will ship a tablet in March, as a result of meetings with media folks about supporting the platform. Of course they want to support the platform; the Kindle has already iTuned up the book business and YouTube the video pipeline.

It’s equally important for all concerned that Google succeed with Android and Nexus One; today’s rollout confirms how cleverly this is being played with the media. Not the pixel-stained wretches who seemed oddly more impressed than their content will let on. They are of course secretly very happy that a real competition is engaged. Apple the gatekeeper stories have been milked to death, and no one really cares what Motorola or Nokia has up their sleeve. No, the story is Apple v. Google with a twist.

The twist is that it’s actually not a competition but a mutual tag teaming of our social services. The key demo today was the voice control of tweets enabled across server side resolution engines. Every single input field on the Nexus One is voice-enabled. Sure, the voice enabled search linked up to the voice-prompted GPS service finances the new device, assuming it can be integrated into bluetooth for hands-free driving. That used to cost $99 for TomTom. But hands-free tweeting over bluetooth is huge, no matter what the anti-social media morons think.

Nexus One creates a viable pool of users trained on a gesture pattern similar enough to the iPhone to be absorbed with perhaps 5 minutes of use. Voice email as absorbed into the micro-message bus creates a huge transaction-ready set of customers who can trade access to their so-called private streams in return for discounts, special offers, and so on — provided the vendors play by the rules. Those rules are not to violate the user’s sense of propriety in the use of their private communications.

Gmail has succeeded because it established a sense of respect for our private communications while at the same time providing context-sensitive information that could be useful. Those links can be scary if you happen to notice how intelligently they are generated based on parsing of your private thoughts and business communications. Yet we understand that Google understands where the fourth wall is, where they can go right up to but not over.

Now look at the Nexus gesture stream and marvel: not just the text or the audio converted to text, but the time, screen location, zoom level, what objects and information gets shared, ignored, and so on. The map of these behaviors is incredibly rich — like turning our interests and intentions into a rich kind of braille where our fingers approximate what we are thinking in the moments in between transactions. Remember, each device is tagged to a credit card. It turns just about everything we do into a Kindle experience, as long as we feel compensated for visibility into the gesture stream.

Talking in a personal way to a public audience was the disruption that Twitter engendered. The voice-tweet tool gives us a mechanism that will work just as well across micro-communities, whether inside the Chatter firewall or cross-domain in a FriendFeed conversation. And the text processing can be used in several ways, to enhance voice mail as Google Voice and Ribbit do, and most importantly as a filtering mechanism to determine dynamically who sees what in the message stream. This is a huge disruption that Apple will have to scramble to meet, and another reason why the tablet will be so important when it appears.

Nexus One may seem like me-too, just like the iSlate will be called tablet take two. But in fact we’re seeing voice replace the keyboard on the phone, which in turn creates a vacuum on the desk/laptop for the iScreen to fill. Once we trust the conversion of voice to tweets, we’ll use private tweets to replace email. Once we trust the filters to deliver us the most actionable information in our windows of opportunity, we will also select the media services that best leverage the new platform. Once we make those decisions, the content produced for the astronauts will attract the settlers. And that’s a secret the media won’t be able to keep for more than a few seconds.

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Chatter will inevitably go right at the heart of Microsoft’s Sharepoint strategy, which has some serious legs now that the company has wired Visual Studio up to it on the development front and Silverlight on the display side. With Windows Mobile 2010 and Silverlight Mobile still officially unannounced, Chatter has an interesting opportunity for the next three months or so to slipstream alongside Nexus One and Android. This gives Benioff plenty of red meat on the marketing front, but behind the scenes the real target is Twitter.

Chatter was pitched as a Facebook clone, and the more Facebook tweaks their status model the more it begins to look like FriendFeed on steroids. By tagging me in his Erick status update, I received not only Marc’s message but the replies of others in an email thread which pointed me back to a FriendFeedy conversation thread. So far Twitter has resisted harnessing its reply_id capability for conversations, leaving the field wide open for third party clients to (so far) pick up the ball. Robert Scoble was promoting one FriendFeed killer the other day that might go there with a promised UI overhaul, but my bet is on Facebook morphing quicker.

So now we get Facebook and Facebook Connect operating as a stalking horse for establishing an identity map that Chatter can do a LinkedIn party on. For each civilian identity, Chatter offers an extended professional identity with tools to cross-index among enterprises and their internal taxonomies. It’s like taking Twitter lists and harnessing them across affinity groups inside and across companies, leaving Twitter and its clients to carving up the customer end of the transactions. But guess where the carrots lie for those customers? The MinorityReport location-aware enterprises that have realtime deals just waiting to be pitched to those who register for stream offers.

CRM is the logical clearing house for these relationships, as long as care is taken to establish trust and authenticity at the intersection of public and private networks. I’ve often felt Facebook makes too much of the difficulty of transitioning its cloud to the apparently more open Twitter stream. With Chatter, that responsibility shifts to the Facebook Connect channel and the credibility of businesses seeking to engage with the social marketplace.

We’ve already seen the impact of service industries such as food and live entertainment (Yelp, FourSquare, etc.) Next may well be the media companies, once the tools of the trade ship over the next few months. Chatter’s application updates are a huge opportunity for the record companies to stave off a further collapse; same goes for the products formerly known as magazines. Just because the mainstream media is glomming onto Twitter as a realtime DVR index doesn’t mean private streams can’t be nailed up and distributed interactively by newmedia publishers with much higher signal to noise and the yield that comes from mining authority.

Salesforce has consistently outperformed the expectations of its competitors, not so much by some magical formula as by understanding the principles of bootstrapping pioneered by an early group of engineers and standards politcos. Google’s success at decoupling Office from our private lives has now rendered the opportunity to remake the business relationships from the inside out. Chatter can instantiate customer relationships based on what gestures we send to signal streams of our willingness to sip and save.

Chatter is not without challenges; figuring out the intersection of Twitter and Facebook will not come easily. But if Benioff continues to do what he has been doing now for the ten years of the Web Services revolution — correctly marrying a strong sense of what technologies will stick and foster consumer acceptance with the opportunities to disrupt slow moving competitors from his past — he and his company will continue to prosper.

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Jerry Seinfeld’s role inside the HBO show hewed to Curb’s central premise: that the “actors” improvise rather than read scripted lines. The situations are prepared, but not the actual interplay. In so doing, the onus shifts from the writer to the performer. For Larry David, whose persona and comic style is to set up some premise and then toy with his victims the way our cats play with a mole in the bathtub, this produces an expected effect of comic competence but not brilliance.

Comic actors fare reasonably well in this laboratory, especially well when they are playing themselves as do the Seinfeld cast. Comic actors as they are, they find their attitude as “themselves” then riff off of their characters to inform the elements of their essence. Kramer once again rockets through Jerry’s door as if suspended in mid-air, while the others lock in as though ten minutes, not years, have passed. At this point, the experiment is already successful. Now the question: what to do with it?

Slowly the surprising answer emerges with Seinfeld himself, never the most convincing actor as much as the exacting Chief Technology Officer of Comedy. His performance, now as then, on the show within the show is acceptable, a kind of George Burns turn that sets the stage for the action that swirls around him. But then there’s the revelation, as Seinfeld the improviser in the “real” reunion scenes achieves this incredible smile-glint limber comic feel that transcends everything he’s done both on the show and in stand-up. His interrogation of Larry’s endless bullshit is miraculous in its relentless massaging of a revolutionary comic platform.

These scenes, and they emerge subtly over the course of the season’s episodes, are so inspired that they make the job of making the reunion show itself hold up almost trivial. Of course, everything from the sets to the cameos by Newman and the read-through and the sub-plots involving the Curb regulars, it’s all blended together perfectly. But rising above that is Seinfeld with this gleam in his eye as he realizes (in a documentary feature about the filming) that something has been invented that moves ahead rather than just honor the past.

It’s as though The Beatles reformed somehow and it worked, although a good case can be made that Abbey Road was just that. Watching Mick Jagger duet with Bono on a U2 song at the Rock and Roll Hall of Fame concert is another example of this magic, as he transforms a blues balled into something that hangs timeless in midair. Avatar in 3D is yet another gathering of technology and creative force that reaches an unexpected grace in even the simplest moments. So many glimpses beyond the usual in any year are the mark of something fundamental going on.

Despite the noise of those who disparage social media while trying to milk it, the network keeps expanding as if in the aftermath of some Big Bang we are so close to we can’t perceive it directly. Is it really so difficult to recognize how completely realtime devices have altered how we live? The brilliance of Avatar is the underlying message that if we can model how advanced reality will look and feel, we are essentially creating it at that moment. The computing devices used to render those scenes are soon to be reduced to silicon and rendered on hardware directly, thereby making science fiction science fact.

But the thrill of technology in and of itself does not begin to speak to the power of the network. Realtime is just a word to represent the visceral charge we get by seeing the needle dance when we post and someone responds. There’s a joy in collaboration, the moment when something more basic and common to the players infuses the work with a sense of something bigger than ourselves. The nod of oh, you saw that too. The eyes going cold with anger or distant with resignation. The boundaries of friendship torn away to reveal a simple energy where even the tumult is less important than the struggle to retain whatever friendship is or has been.

The idea of the iSlate or whatever the Kindle has unleashed is a good one, perhaps a game-changer for the people who make stuff to read, watch, and listen to. For us as the entertained, it is probably an iterative point along the march to the location-aware router that matches the screen to the environment and the content to the affinity-based priorities of our filters. John Borthwick’s analysis/hunches about the economic factors on the Gillmor Gang is informed with experience, leverage, and an awareness of the ongoing conversation about these issues.

During the show, I usually don’t have time to monitor the chat room, leaving that to scan later. When Mike Arrington switched topics to Avatar, a few grumbles surfaced from those who think movies, politics, or anything but hardcore API talk is a mistake. The question of what the show is or is trying to accomplish has always been difficult to answer, but with the convergence of computer, phone, and tablet now underway, the answer has never been more interesting. Everybody is asking the same question: VCs, app developers, once-relevant leaders of the technology revolution, even Dave Winer. Is this show biz or no biz, it’s getting boiled down to.

Borthwick wears a number of these hats simultaneously, so it’s great fun to ask him the same old questions and see what happens. Is RSS dead? No, it’s just moved into the background. Does it have an economic model? No, Twitter doesn’t have an economic model. How do you establish the authority model that Bit.ly uses to rank relevance and quality output? You’ll need to watch the show or at least that part to get the nuances of his answers. But what comes through in realtime 3D is that some of us are very excited about what these surfaces are enabling. As we wind down to the last hours of this dreadful enthralling year, let’s give thanks to the men and women who struggle to humanize technology and have some fun doing it.

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2009 has been a challenging year, particularly on a human level. Personally, I’ve seen friendships turn to dust as the economic crisis grinds the once-carefree impulses of the realtime Web into marketing and posturing. As someone who writes columns and produces the Gillmor Gang, certainly we all are guilty of these crimes. What I saw as a declaration of the obvious (RSS is dead) continues to roil the conversation, but the damage to a longstanding friendship with Dave Winer seems substantial. Perhaps the friendship that founders on disagreement is not the loss it once might have been.

On the plus side, the massive success of social media and its drivers has rendered moot the criticism that these issues and personalities are not worthy of the enterprise or indeed any serious pursuit of one’s time. As a product of the Sixties, if anything the connection between industry and my passion for technology, the arts, and comedy has become so pervasive that I would be virtually unrecognizable to myself from that era. I have become my father, mother, cop, and judge even as I struggle to make the mortgage and ease my kids into the unknowable future. Tech feels to me like the sessions for some potentially great record, or the noodlings of some robotic drum machine.

I haven’t seen the Lizard movie yet, but from afar it seems more on the side of science fantasy than fiction. I’m sure I’m wrong, but for now I’ll preserve that standoffish pose I took with Twitter and Facebook and the Kindle — knowing full well I’d soon join the stumbling herd but glad to pass the time today pushing more familiar buttons. As the stream floats by, the usual persists: open v. closed, tablet rumors, is realtime real, and so on. OK, I’ll bite:

If Apple really launches a tablet in late January, the growing wisdom is that such a device will roll up Kindle, AppleTV, and iTunes into an on-demand realtime streaming service/platform. Given the machinations of book publishers seeking to break the back of Amazon’s lock on the book stream, coupled with Comcast’s bundling of Web-on-demand with its triple play services, it seems logical that Apple would try and jump in before its competitors become too powerful. As with the mobile space, a tablet would need price supports to take off and hold ground.

The social platforms hold valuable cards (identity, affinity clouds, content gateways) but face commoditization and the threat of fragmentation of the realtime market by threatened incumbents (Murdoch, Microsoft, Google.) Since it’s more difficult to predict success, how about anticipating failure. The list of question marks has grown in 2009, including Nokia, Palm, the record companies, just about everybody too boring to talk about. When Scoble says talking about something is dead means it’s not interesting anymore, he’s wrong about what is being said but right about what interesting means. Namely, interesting as in can this help us survive or medicate us while the clueful move in to take over.

Looked at through this lense, what does Google Wave portend? Is it a rewrite of Gmail/Gchat with extensions into Google Office? Or is it a connecting technology to Android devices and tablets that forms the basis of a hybrid realtime OS with all of the opportunities of impulse transactions? If so, how do the media frames of the recent past fit into that fabric? Movies seem the least efficient just in terms of time cost and lack of repeatability relative to music and realtime news. Books would seem imperiled for similar reasons, but don’t underestimate the grounding aspect of relatively stable pools of information, nor the tendency of periodicals to blend into new forms that are more booklike in effect while preserving the dynamics of social filtering.

This sense of calm underlying the maelstrom that is realtime media is at the heart of what Wave represents, whether it gets there first or iteratively. Once people become addicted to the stream, the economics trend toward systems that allow parachuting in and out without breaking concentration or the appearance of it for the benefit of spouses, bosses, and cops at traffic intersections. Last night a friend told us about getting a ticket for failing to be aware of what was happening in front of him during a turn he was making. How dare the cop think he could get inside our minds and know what we’re thinking or indeed not thinking? The judge told him to shut up and pay the fine.

Will ChromeOS have more of an impact than Nexus One this coming year? I doubt it, not because Chrome won’t gobble mind share in significant if not voluminous quarters, but because Nexus One is so important as a driver of impulse economics. No matter how quickly we see realtime impacting on the economy now, once the Kindle psychology moves into the mainstream Web experience the momentum in terms of dynamic pricing will make search seem like slow motion. The implications of FourSquare are much more about the dynamic provisioning of offers as we (micro-communities) move through time and space than who’s Mayor and who’s in the room.

On the Gillmor Gang we wandered into a discussion (well, the chat seemed more like a meetup at the Place de la Concorde) about personalized aggregation. While some suggested the ReTweet cloud would get there first, I tend to side with the application of gestures to editorial views as I’ve assumed TechMeme has done since Day One. The nature and speed of those gestures may have accelerated, but the power of overlapping clouds of micro-communities has yet to be seriously challenged. That doesn’t mean we’ve actually seen this strategy built out at any consequential level, but Nexus One and whatever Apple is launching will produce a data wave of such economic force as to make Black Friday seem like a steam engine.

Inevitably, the conversation rotates back to the white hat/black hat discussion of the Open Web, with its hardcoded simplification of a much more interesting (Robert) circumstance. Luckily, those back-and-forth “no, you are” debates run out of steam and atrophy, while innovation, humor, and the music of the times draw people together in a feeling of micro-community that not only feels better but is producing a tidal wave of economic equity for its users. The Kindle effect is hidden in its avoidance of the backlight, marrying the calm of reflection with the speed of insight. It will indeed be interesting to see how this builds out. 2010 is already well underway.

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Only one small problem: Twitter killed RSS, not the other way around. Twitter didn’t do RSS some big favor by extracting the vast majority of citations away from Google Reader and its victims in the RSS aggregator wars. Twitter rolled through downtown URLville and right over every social media platform including Facebook with one simple premise. Hi, how you doin’? You are what you tweet. The next big thing since Gmail. Please put down your lunchbox and take a number.

Today URLs flow through Twitter. Ideas ship on Twitter. Software is built on Twitter. Fine: the Open RSS API means we can now write to a standard interface that lets Twitter clients become carriers for blogs, conversations, comments, podcasts, and all sorts of unaffiliated competitors. Except that’s hogwash. The time for bearhugging Twitter to the ground vanished when Facebook realized it had to clone Twitter or lose control of the social graph. Once FriendFeed created a realtime conversational data type, the race was under way to codify Twitter and extend it before Twitter absorbed the capability. Neither has happened yet, but once either company reaches that goal, there is no need for a social revolution.

This is not the IM Wars all over again. This is not Do No Evil 2.0. Twitter has produced a great service that transcends the politics of the moment, just as Gmail eviscerated email as we knew it. What part of Yum, Good do we fail to understand is bad for us? It’s a simple and inviolate contract: you do something useful and I’ll give you my data. How do they make money with that? Don’t care, they’ll think of something. If everybody likes it, you got yourself a lock on the market.

This is why the Gphone materializing is just as good for Apple as Google, and therefore all of us. Competition drives innovation, and it also drives duopolies, as Jason correctly noted on this week’s Gillmor Gang. Twitter has already created a duopoly, by proffering a public model with exceptional filtering characteristics that neatly validates Facebook’s private identity model. The power is not in a single API unification but rather an economic duopoly at the intersection of the two social platforms.

Why is the Gphone powerful? Because it leverages price supports to drive the cost of the device toward zero for the user. Google can afford to lower the smartphone entry point to match the iPhone, and in so doing set up a competitive environment where social applications can flourish equally well across both platforms. Those broadband social applications (using hybrid development tools across ChromeOS and Silverlight) provide a second wave of price supports in the form of marketing and transactional revenue. 1% of everything that moves is plenty of a business model for Twitter, Facebook, Google, Microsoft, and the rest of the global economy to boot.

This doesn’t mean that there’s no room for the little guy, the small developer, the open source aesthetic, the impulse to contribute to the community. It just means that painting these companies as evil or controlling or untrustworthy begins to say more about the motives of those who attack them. Of course Twitter can be disingenuous when they remove services for “technical” reasons only to sell them off to Microsoft and Google for millions of dollars when they rebuild their infrastructure. But did that slow down adoption of the service or the proliferation of third party apps? Is Facebook slowing down as it tramples privacy?

No and no. Twitter continues to build out its dominant social array of overlapping follow clouds. Lists and firewalled retweets may keep Scoble and others busy, but until realtime conversation is enabled, Twitter will be valuable mostly for its ubiquity and trigger mechanism for dynamic filtering. Facebook is testing Twitter posting, which when implemented will become the laboratory for FriendFeed style aggregation and realtime chat. Put simply, Facebook will become the hybrid of both models, forcing Twitter to enable threading to contain the damage to its authority model.

We’re seeing a realtime negotiation between these two leaders of the social revolution, with Benioff, Ozzie, Jobs, and LarrynSergey waiting patiently just off camera. It’s a good time for the Open Twitter API guys to declare victory, but it would be nice if they stopped sliming the socialcos and bigcos who get it just as much.

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In any case, I won’t reveal what was said by Googlers because I want to be invited back next year. Also because they didn’t say anything that contradicts anything they’ve said publicly or that I’ve made up out of whole cloth. In fact, what I can talk about is what I said. Here’s a digest of that stream:

It seems that the WebOS contest for the hearts and minds for developers is settling out as one between ChromeOS and Silverlight. In my mind, ChromeOS is Chrome, and now that it’s on the Mac I care. Chrome therefore subsumes FireFox, Safari, and eventually Android, regardless of what has been said about the difficulty (or not) of having one OS span the desktop and mobile devices. I can’t tell you when Googlers will release Chrome Extensions but a spokesperson pointed out Google has publicly stated the project is open source, which suggests you could look up the answer to this and many questions. Indeed MG has made a career out of doing this.

So when Extensions ship, I will move off of Firefox within minutes, not because I have any extensions other than PowerTwitter but because I wait for enough stability and market force to make moving a conservative bet. And the main thing I’m waiting for above all else is Silverlight compatibility. I can’t say what Googlers said about this, but my thought is that if they can support the crap Adobe AIR hairball, they can support Silverlight. My bet is they will or already do.

I can’t say what Googlers said about HTML 5, but I said it would take 2 or 3 years before it got close to production, that in the meantime Apple and YouTube were forcing a standard around H.264, that Moonlight decompiling strategies coupled with the Silverlight to iPhone bridge demoed (almost) at PDC will provide a sufficient porting path to normalize the difference between iPhone and Android development, and that whatever the (n)on-existent Google phone looks like, it will produce a 2-horse market within a year. I can’t say how Googlers responded to my theory, but if someone were to use this as an argument for the iPhone being in trouble they’d be wrong.

That’s because (as I told the Googlers) nothing about Android or the nPhone mandates that Apple will stand still. Indeed, a strong Google phone or tablet or both frees Apple to ride right through the hole created by competition and drive the carriers further into a reactive postion. You can already see this happening as Apple approves Ustream, Qik, and even downstream video recording apps in swift succession. Once Verizon is filleted by either Google or Apple or both later this new year, it’s a battle for infrastructure to support the new Kindleized mobile marketplace, with the dueling AppStores providing DisneyBucks (Admobs or something like it) as payola for chart position. I kid the old record companies because they’re dead.

Speaking of the Kindle, it’s instructive to note how the book companies are trying the same stall that ultimately killed the record cartel, slowing down the release of some e-titles until they’ve milked the airport crowd. Meanwhile, Comcast is within minutes if not already releasing its on-demand access to premium content, and Netflix over Silverlight is spurring MacMini sales hooked up to sub-$700 1080 HD screens. We’re in mop up mode here, and the less-is-more design model of matching the quality of content with delivery mechanism is tipping the marketplace from downloading to streaming and built-in to bluetooth. As I told the Googlers, the marketplace won’t wait for HTML5, so HTML5 will have to come to them. I can’t say …

As the evening wound down, I talked with several Googlers about data portability and the Google stranglehold in search. I can’t say what they said, but I said I’m not worried about storing all my data in Gmail because it’s a lot safer than on my hardrive or not backed up as it always turns out to be. As to the Facebook issues regarding privacy and the difficulty of protecting digital breadcrumbs from winding up in someone’s unintended stuffing, I doubt the ability to constrain the leaking of private data and instead suggested Google would eventually be held responsible for surfacing inappropriate data at the top of its searches. In fact, what I am looking for are self-service tools that let me submit requests for redacting search results around the publishing of private data.

I can’t say what the Googlers think, but my bet is that this counter filtering will produce a new responsibility for data vendors, placing the onus on the search publishers to be responsible for what private data is made widely available when the appropriate IP owners (parents and individuals) have registered a social DMCA notice. As I told the Googlers, users (us) don’t care where the data is actually stored, only how it is being published and to who. I also predicted this technology will become a valuable part of competitive search offerings.

Perhaps the Googlers will surface some of their opinions on these subjects in the coming days, but even if they remain to be mined from open source archives the general thrust of the conversation is moving forward inevitably, beyond closed v. open and toward a pragmatic mix of both worlds. That’s why Silverlight is so viral in its evolution, moving in the past few months from a radical challenge to a conservative fundamental. Just as with ChromeOS, we still hear caveats and shadings about the disruptive qualities of these WebOS strategies, but simultaneously the boundaries between these two seemingly different paradigms are blurring to the point of disappearing.

The social layer is now the unifying driver of both platforms, and those industries, whether enterprise, media, or mobile, are being pushed into a single fabric. The realtime feedback loop retrieves gestures of interest and lack of it to the filtering server where it is compared to others with similar affinities and discounts applied based on the likelihood of accepting those offers. This builds on the Google Adsense model and its economies of scale around advertiser volume, but the social graph produces rich hubs of affinity which produce greater return. Swarm ranking trumps broader audiences when the tools to harvest more implicit affinities are available directly to the producers of the new products made viable.

But that’s just what I said. The other side of the conversation was at least as interesting. For now, this will have to be like one of Bob Newhart’s famous phone monologues, where you only hear Bob’s side of the call. Like the famous 8 foot invisible rabbit Harvey, after awhile you start to see and hear him just fine, thank you.

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What’s odd about this is that most observers consider FriendFeed a failure, too complicated and user-unfriendly to compete with Twitter or Facebook. If Twitter believed that to be the case, why would they endeavor to kill it? And if it were not a failure? Then Twitter is trying to kill it for a good reason. That reason: FriendFeed exposes the impossible task of owning all access to its users’ data. Does Microsoft or Google or IBM own your email? Does Gmail apply rate limiting to POP3 and IMAP?

So the reason Twitter is killing FriendFeed is because they think they can get away with it. And they will, as far as it goes, as long as the third party vendors orbiting Twitter validate the idea that Twitter owns the data. That, of course, means Facebook has to go along with it. Playing ball with Twitter command and control doesn’t make sense unless Facebook likes the idea of doing the same thing with “their” own stream. Well, maybe so. That leaves two obvious alternatives.

The first is Google Wave, which offers much of the realtime conversational technology FriendFeed rebooted around, minus a way of deploying this stream publicly. The Wave team seems to be somewhat adrift in the conversion of private Waves to public streams, running into scaling issues with Wave bots that don’t seem to effectively handle a publishing process (if I understood the recent briefing correctly.) But if Waves can gain traction around events and become integrated with Gmail as Paul Buchheit recently predicted, then an enterprising Wave developer might write a bot that captures Tweets as they are entered or received by Twitter and siphons them into the Wave repository in near realtime.

Note that this doesn’t presume access to Google’s version of the firehose. As with Microsoft, no one has publicly described the terms of service, including whether either licensee can allow third (or fourth) parties to derive services such as Track from their copy of the stream, or indeed how long they can archive tweets if at all. But that doesn’t preclude a Wave developer from leveraging each user’s polling rights just like any third party Twitter app or, even simpler, warehousing the stream before it enters the Twitter stream. Placing this initiative at the Wave bot developer level also engages an App Store-like critical mass that may prove significant in the early buildout of Wave momentum. Destroying the false premise that Twitter owns the data to begin with is an added bonus. Or it will smoke out some details of the Google/Twitter licensing deal.

The same could be true of Microsoft’s deal for the firehose, but here, as with Google, Twitter may not want to risk flaunting ownership of a stream that can so easily be cloned for its enterprise value. And as easily as you can say RSS is dead, Salesforce Chatter enters the picture. Here’s one player Twitter can’t just laugh off. First of all, it’s not Twitter but Facebook Benioff is cloning, and a future Facebook at that, one where the Everyone status will be built out as a (pardon the expression) public option. This free cross-Web Chatter stream will challenge Facebook’s transitional issues from private to public, given that Salesforce’s cloud can immediately scale up to the allegedly onerous task of providing personalized Track on demand.

It’s likely this pressure can be turned to good use by Facebook, unencumbered as they are by any licensing deal with Twitter. Instead, a Chatter alliance with the Facebook Everyone cloud puts Salesforce in the interesting position of managing a public stream with Google Apps support, which eventually could mean Wave integration. Where this might break first is in media publishing, as Benioff noted at the CrunchUp. Twitter’s leverage over its third party developers could be diluted significantly once Salesforce offers monetization paths for its Force.com developers. So much so that this may call Twitter’s bluff with FriendFeed.

But FriendFeed has always been more of a tactical takedown of Twitter than an actual competitor, a stalking horse for just the kind of attack Twitter seems most afraid of. No wonder the speed with which Twitter is introducing metadata traps to lock down the IP before a significant cloud emerges to challenge its inevitability. Lists, retweets, location — they’re all based on raising the rate limiting hammer to discourage heading for the exits. It’s not that retweets reduce the functionality of the trail of overlapping social circles, it’s that they lock them behind the Wall.

By aligning first with Facebook and adopting Twitter’s look and feel but not its metadata wall, Chatter developers are less threatened by a Twitter embargo in realtime. Benioff doesn’t need Twitter’s realtime conversation if he can build out Facebook’s, by retaining Facebook Connect control of the private stream while accelerating the Everyone status cloud and co-mingling it with Chatter + public notification and Wave bot integration. Add Silverlight to iPhone streaming to Moonlight recompiling, and developers have a powerful porting path that will quickly populate the Chatter Store.

Strange bedfellows indeed, but that’s the risk Twitter is taking in cutting off FriendFeed’s oxygen. Crushing a weak opponent’s windpipe does little to consolidate your advantages, but it leaves an indelible impression in those potential partners who are calculating a complex algorithm of time to market, stream access, platform elasticity, and user trust. But when you add a platform (Salesforce) which has continued to stay ahead of expectations while mining the social wave, the balance of power shifts dramatically. When you see Seesmic CEO Loic LeMeur walk out on stage at the Microsoft PDC with a Silverlight demo he bootstrapped in 2 weeks, ditto.

I don’t expect anyone from Twitter to answer the simple question of when will Twitter give FriendFeed the same access they provide other third party client vendors. For now, it’s frustrating to not see the flow of Twitter messages in realtime, but over time we’ll build tools on top of FriendFeed to take such embargoed messages private. Once inside FriendFeed, the realtime conversations that result are just the kind of high value threads Chatter will support, Wave will accelerate, and Silverlight will transport. Keep up the good work, Twitter.

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STEVE GILLMOR: By hook or by crook, you own considerable — I wouldn’t call them clients as much as platforms —that intersect in a really interesting way around the real-time space.

ROBBIE BACH: Sure. Sure.

STEVE GILLMOR: I mean, for example, on the iPhone, the iPhone 3.0 software enables a bunch of real-time capabilities like Bluetooth in the back seat of a car, you know, things like that which may be no-brainers, but because of Apple’s –

ROBBIE BACH: They’re still harbingers of future things –

STEVE GILLMOR: Exactly. And the same way that Xbox 360 basically opened up the notion that — I mean, I have an eight-year-old daughter.

ROBBIE BACH: They grow up fast.

STEVE GILLMOR: Yeah. And a 15-year-old. The 15-year-old video conferences constantly.

ROBBIE BACH: Sure. Sure.

STEVE GILLMOR: The eight-year-old, she’s on all these different platforms that are disguised as whatever the — you know –

ROBBIE BACH: She’s on some Disney thing, she’s on –

STEVE GILLMOR: Yeah, exactly. But what she’s really doing is she’s doing –

ROBBIE BACH: It’s real-time.

STEVE GILLMOR: She’s on the phone with her friend and they’re both on the same site and they’re interacting with each other.

ROBBIE BACH: Right.

STEVE GILLMOR: So she’s — didn’t take her long to figure out that while the technology is catching up, that she could basically just simulate this herself with a couple of –

ROBBIE BACH: Right. My daughter does the same thing. My daughter does the same thing.

STEVE GILLMOR: So that is an enormous platform, and my particular interest in the end is going to be how that synchs up with the enterprise space because what’s on person’s game is another person’s –

ROBBIE BACH: Enterprise technology.

STEVE GILLMOR: — social platform.

ROBBIE BACH: That’s right.

STEVE GILLMOR: Which is another person’s CRM.

ROBBIE BACH: And it works both ways, too. Sometimes stuff starts in the enterprise, sometimes it starts in consumer. But in either case, it migrates — things migrate with some regularity back and forth across that divide.

STEVE GILLMOR: So last positioning point is I think there’s a lack of understanding about what Microsoft’s goals are.

ROBBIE BACH: I think that’s true.

STEVE GILLMOR: You know, of what is — I mean, the overarching strategy, of course, we understand, but how do you manage this transition to an on-demand cloud environment?

ROBBIE BACH: Yeah.

STEVE GILLMOR: And where –

ROBBIE BACH: How does the business model work?

STEVE GILLMOR: And where does the rubber really meet the road?

ROBBIE BACH: Sure.

STEVE GILLMOR: And you seem to be astride a number of the areas where there’s significant ROI that’s coming.

ROBBIE BACH: Sure. Sure. Some of which are here. But the clearly — well, so let me just step back. First, let me just make sure we’re clear on what the Entertainment and Devices does, and then we’ll spend two minutes on strategy, and then we can dive deep.

So Entertainment and Devices on one hand is a portfolio of businesses in a way, because I have all of the company’s gaming assets in the division, our music and video assets are predominately here, not 100 percent, but pretty darn close.

STEVE GILLMOR: And by music you mean Zune?

ROBBIE BACH: You’ve got Zune. Yeah, music would be Zune, video would be Media Center and Media Room. You still have — Media Player is a platform technology of Windows, so they don’t license music, there’s not marketplace for it, those kinds of things. And then MSN does some video work, but again, not their primary focus.

We also are responsible for the mobile phone work that the company does, Windows Mobile and associated things. And then there’s a fourth business that people don’t actually have a lot of visibility to, but which is an important part of the division, which is our mice and keyboard business and our embedded software business. And ironically, actually, our Mac Office business, those are all in the division.

Final thing that’s in E&D is we’re responsible for all retail sales for the company. So the sales force in my division — if you buy something at Best Buy, doesn’t matter what it is, that’s Microsoft related, my sales force has brokered that relationship, managed that –

STEVE GILLMOR: Is there some store initiative?

ROBBIE BACH: There’s a store initiative as well, although I don’t manage that, and that’s a conscious choice. They would be one of my best customers. So my job is to make sure that I supply them with great Microsoft product and that Microsoft’s experience shines the best in their store, and of course that’s obviously their job as well. So that’s sort of what the division does.

Now, if you asked us sort of what’s the strategy, I could go through each of the businesses has a little bit of their own flavor on things in terms of what they’re doing for the specific segments that they’re in. But if you looked across all the businesses, we focus on this concept which we inelegantly so far call three screens and a cloud, which is not a magical phrase. But when I think about what’s happening in entertainment in particular, I think over time people are going to want to think a lot less about where their media is, they’re going to want to worry a lot less about how it’s backed up. They’re going to want to be able to access it from whatever device they want and whatever screen they want. And I actually think they’ll want unique experiences that are enabled because they’re on multiple screens and because that’s all connected through a cloud set of services.

Now, if you asked a consumer, “Do you want a cloud entertainment experience?” They would say, “No, that actually doesn’t sound very appealing.” So that part of it may not be articulated yet. But when you paint a scenario for people, they say, “Oh, yeah, I want that. And, in fact, they participate in what are effectively cheap man’s versions of cloud experiences today. American Idol is just a cheap man’s version of a cloud experience today. It’s a duct tape cloud, right? There actually really isn’t a cloud, but they use a cell phone network to vote on things and take that, add five years, put some technology around it, and I can tell you I can have a really exciting entertainment experience around that that’s way richer than American Idol and is way more interactive and uses cloud technology to help enable and power it.

STEVE GILLMOR: Is that what you’re doing?

ROBBIE BACH: Well, if you looked at the long-term vision of where we want to get to, sure. I mean, the long-term vision where we want to get to, you kind of have to go in stages. The first thing we want to do is we want to enable people to have access for multiple screens to the same set of services that they want. So take Zune as an example. We have Zune on the PC today and we have Zune on Zune devices. We just announced at E3 that Zune will be on Xbox.

And so the Zune video services will be available across all three of those screens. Ultimately, we had music on two of those, it’s just a priority question, we’ll move that to Xbox at some point not defined. But we’ll expand that across those screens. So that’s just an example of the types of things we want to enable.

On the reverse side, you take Xbox Live, which has been phenomenally successful on the TV screen, we do pretty well with it on Windows, although the business model is actually quite different, and so it’s just a question of time before somebody says, “Okay, so how do we think about the Xbox Live experience on a mobile phone or on a portable device?”

So the first phase of this is thinking through how our services play out to people in a three-screen world where the cloud is a provisioning area. Then you can go one step further and say, no, that’s actually just the first step. That sort of says take existing experiences and migrate them to a cloud environment. What if we did something different, which is we said, oh, we want to create an entertainment experience and we assume the cloud exists? Then assume the consumer has access to all three screens or two of the screens or a favorite screen, what would that experience look like?

And that, to me, you know, that may be five, six, seven years away, but it’s a very interesting possibility. And because what it does is it not only changes the technology delivery, which people may or may not care about, but in particular, it changes the actual form of the entertainment. It actually changes the experience for the person getting involved in the entertainment. That, to me, is very exciting.

Anyway, that’s the broad brush.

STEVE GILLMOR: That’s what you’re doing?

ROBBIE BACH: That’s the broad brush on the strategy. And we’re early in the process of understanding that, but Xbox Live has 20 million members. So it’s not like we don’t have good traction in a number of these places.

STEVE GILLMOR: So real time. Does it mean anything to you?

ROBBIE BACH: Real-time as a phrase, you know, part of me will say, well, so tell me what you think it means to you. I can look at it and say, “Do we think that there are real-time experiences that we’re going to enable through our cloud-based services?” And the answer is absolutely yes. You can argue today we have real-time — it’s mostly peer-to-peer, but real-time experiences today on Xbox Live.

STEVE GILLMOR: Right.

ROBBIE BACH: Right?

STEVE GILLMOR: Kind of pioneered it, actually.

ROBBIE BACH: Yeah, absolutely. So you’d say, well, that’s a real-time experience. Now, somebody else could come in and say, no, let me define real-time in the gaming space slightly differently for you.

To me, real-time means everything’s served from a server. And this is not peer-to-peer, in fact, in the most extreme case, you could say there is no client and we’re just going to have a server-led gaming experience.

Me, I think that’s actually quite a long ways away, personally. I could tell you about the physics of that, I actually think it’s quite hard, and I think the business economics of it are very, very difficult because it doesn’t actually scale very well.

STEVE GILLMOR: So what are you saying? That basically Google is not going to get there?

ROBBIE BACH: Well, I’m not going to make any posit about what Google’s doing. They’re actually not the guys who have proposed this. There are some other guys who have actually showed some of this at the game developer conference. They showed some concepts, Steve Pearlman and those guys have showed some stuff.

And there’s interesting technology. There are places where — and they may achieve some breakthroughs that make it happen earlier than I think. But when we look at it, we say, okay, all of these things are possible, let’s go through the stages of development of where we’re at and just recognize where we are today and where we might end up. And doing a server-based delivery just because you can, if it degrades the consumer experience, why would you do it?

You have this funny technology advancement going on in the space where people would say, well, gosh, things are moving to the cloud. And I say, verily, yes, some set of things absolutely are and should move to the cloud. But at the same time, I would tell you, client power is getting cheaper and cheaper and cheaper, and more and more available on more and more devices.

And so you have this very interesting dynamic where the phone has never been more powerful as client, right? And you can only see that increasing. You know, in a year’s time, you’ll be able to do Xbox 1.0 graphics on a phone. So you’d say, okay, now, why would I render that on the cloud?

And there might be reasons why you’d do it. But you’d also have to ask yourself, gosh, what’s the experience like and how do I produce the best experience?

STEVE GILLMOR: So what do you see as the advantages of the cloud in terms of what you’re working on?

ROBBIE BACH: Well, for us — for us, the cloud does a number of things. First of all, it enables us to create community. Right? I mean, the biggest thing — people ask why is Xbox Live successful. Why do we have 20 million members on Xbox Live? And a good percentage of those people who pay us real money for a subscription every year. And some of it is about multi-player gaming, I will grant you. But a significant portion of it is about those people saying, “Hey, this is where I meet my friends. This is where we do things together.”

And if you don’t have a cloud set of services behind that, that gets actually quite hard. How do we do the types of things we’re doing now where you and your friends will be able to watch a movie together and not be in the same room? That requires a set of cloud-based services behind it to enable that to happen in a rich and effective way. And, oh, by the way, talk and see each other at the same time. That’s a pretty interesting experience and a pretty interesting trick. And that all happens through the work that we’re able to do on Xbox Live.

So to me, the biggest thing that the cloud does in the immediate term is it gives us a social environment. It gives us the ability for people to do things together.

STEVE GILLMOR: All right. So that naturally brings us to this new real-time phenomenon that some people think started with Twitter, but others think that Twitter is just an example of something.

ROBBIE BACH: Sure.

STEVE GILLMOR: What’s your take on that stuff.

ROBBIE BACH: Well, I think it’s just part of the socialization experience. I mean, we announced at E3 that on Xbox Live we’re going to have a client for both Twitter and Facebook and MySpace-type integration. We think that’s actually a nice part of the environment.

I don’t really know what the business model — I don’t really understand the business model. I’m not an expert on it, so there may be a business model there, I haven’t seen it yet. So we’ll see how it plays out. But certain as their demand for people to have that kind of rich interaction and real-time communications experience, and the answer is yes.

Now, how long-lived that is, how pervasive it is, how wide does it go? You know, you’ve seen Facebook, My Space go pretty wide. I think Twitter and these — what I would call almost a blend between text messaging and blogging, right? You know, there’s certainly strong appeal to that now, we’ll see how that plays out over time.

For us, it’s just part of the trend I said about earlier, which is about socialization. And so we want to enable people who are Xbox Live customers to have that be part of their experience.

STEVE GILLMOR: So one of the things I talked to Ray about and also to Brian was the notion of this kind of real-time technology finding a home at the center of the desktop. Now, since you’re basically dealing with multiple platforms and providing shared experiences I guess is the way to put it, across these different — do you see that as –

ROBBIE BACH: What do you mean by “the center of the desktop”?

STEVE GILLMOR: Well, you know, right now what would you say is the center of Office?

ROBBIE BACH: Outlook.

STEVE GILLMOR: Outlook, right.

ROBBIE BACH: No question.

STEVE GILLMOR: Okay. So that’s e-mail –

ROBBIE BACH: Calendar, contacts.

STEVE GILLMOR: Right. And Messenger isn’t one of those.

ROBBIE BACH: That actually depends on — this is where Office Communicator is an important element. That will depend on who you are. So around here and around a lot of companies, Office Communicator is the way people talk in meetings. For better or for worse.

STEVE GILLMOR: So is there an intersection point between Communicator and what you’re doing?

ROBBIE BACH: I suppose there is, although little of what I do you would call productivity work. There’s a few exceptions in the division, but generally speaking, the things we do are sort of the flip side. We’re sort of the leisure and entertainment part of what we do.

Now, having said that, the principles of those things absolutely do carry across.

STEVE GILLMOR: Give me an example.

ROBBIE BACH: Well, take an example on Xbox Live. People do a ton — you’d be stunned and how much text chatting they do across the Xbox Live network. Actually, a lot. And I mean, it’s millions of messages. And how is that different than two people in a meeting of 14 sending an Office Communicator message to each other saying, “Gosh, I wish this meeting would end”? I mean, it’s just part of the social fabric that we’re creating.

I mean, many times what I think on both sides we’re doing, because work and play are both parts of the social fabric, on many parts what we’re doing is creating fabric in socialization, using technology to create new fabric for socialization. And Twitter is part of that, Communicator is part of that, text messaging is part of that, Facebook is part of that, e-mail is part of that, video conferencing is part of that.

You know, we sell a camera for your Xbox. You’d be amazed at the types of activity that generates on Xbox Live of people who want to see other people while they play their game. And we demonstrated this camera technology at E3. That’s another part of the social fabric. You’re now going to create a whole new set of ways for people to interact and experience things in a social setting.

STEVE GILLMOR: And once you have the camera, then you might start to use it in other contexts.

ROBBIE BACH: You very well might want to use it in other contexts. Now, the camera for us in the case of Project Natal the camera for us has a number of different aspects. First, there’s just the fact that you have visual input and you can actually see other people. So that’s interesting in and of itself. But it goes one step beyond that which is not only is the camera the way for communications to happen, but it’s the way for the interaction with the device to happen. So now it becomes the user interface, if you will.

STEVE GILLMOR: The mouse.

ROBBIE BACH: It becomes the mouse, the keyboard, in the case of gaming, the controller for whatever you want to do. Now, that’s a very interesting concept. And of course people’s immediate reaction after that was, first of all, from a gaming perspective, they went, “Wow.” So it just kind of, you see the demos, and the demos aren’t made up, they’re real. We actually had people go and say, “No, that wasn’t made up on stage, go do it.” And you had people go do it and they go, oh, well, I thought it was cool, but I thought it was gimmicky. Now I see it actually works and I just walked in and did it.

So the demo parts are all cool, but the second reaction people get it, so, what does this mean for the PC? And maybe not at E3, but after E3 we had people say, “What does this mean for the office?”

And you say, well, just think of the possibilities. And there are some interesting possibilities. But it’s nothing like what we would do on Xbox, I don’t think. Xbox is a 10-foot experience in front of the big screen where hand motion and activity make sense. I mean, if I’m sitting here standing at my desk six inches away from the screen doing this, it’s not clear that that’s going to be value added versus just using my hand on a mouse and making the screen drive.

So the scenarios, I think, will end up being different. You know, so what we’ll go do is we’ll go do some testing. We’ll go say, hey, let’s put some creative people on the experience side of this. The technology part we’ll keep making progress on, but let’s think about the user experience. What actually would somebody use that camera for? What would be the ways in which you can do interesting things beyond video conferencing, for which you don’t need a 3D camera. So we’ll go and explore that and we’ll see where that plays out.

STEVE GILLMOR: So when you started doing the sort of real-time interaction on Xbox, I mean, was that something that you discovered during the process of thinking about other things?

ROBBIE BACH: No.

STEVE GILLMOR: Or was that the goal from the beginning?

ROBBIE BACH: That was the goal from the beginning. It’s one of the things that I’m most proud of in the Xbox space is from the first concept meetings, we said this is going to be an online environment. And at first, that was a technological statement. So we had to figure out, okay, what technology do we have to have, and somebody’s got to do a bunch of networking, there’s some networking software, and we’ve got to think about whether — you’ll laugh at this, but we had to decide whether we had a modem or not. You know, 2000, 2001 was about the time when that transition was happening, and the fact that we took the modem out was hugely controversial. Sort of a funny historical fact.

STEVE GILLMOR: And the right thing to do.

ROBBIE BACH: And the right thing to do, and it was the right decision, as it turned out. But we were criticized for it. You go back and read the articles, people said, oh, no, not enough people have broadband, you’ve got to have a modem. Well, for the experience we wanted to have, having a modem wouldn’t have mattered. Right? You couldn’t have had a good enough experience anyway, so why bother? It wasn’t worth the cost.

From the beginning, we said Xbox Live has a set of things, principles, that we’re going to abide by. One of those was every game will be voice enabled. You don’t have an option. If you want your game to run on Xbox Live, you have to support voice. And we had a lot of people say, wow that’s crazy. It’s going to take up system resources. Yeah, well, if you want to have a real-time experience between you and I, we’d better at least be able to talk to each other, right? I mean, you can’t have a social gaming experience if you can’t talk to each other. And by the way, independent of the fact that people send a lot of text messages on Xbox Live, it’s darn hard to type with the controller. It’s not an ideal experience. So the fact that voice was there from the beginning kind of changed the way people thought about things.

So I think from the beginning, you know, sometimes we stumble into things. Sometimes things evolve in a fortuitous way and you find a way.

STEVE GILLMOR: Like what?

ROBBIE BACH: Well, I think they happen in a number of places. But even in things — if I go back historically to think about Word and Excel and some of the things we talked about there and some of the experience, would I have said that that would have led to SharePoint? No. We didn’t start with Office and say, oh, gosh, sometime this will be a server — at least I didn’t — maybe there was somebody else who did. When I was working on the group, we didn’t think of that as a logical evolution. But when we saw what was happening with networking and communications and people’s desire to have real time and intranets, we said, oh, wow, SharePoint, now SharePoint’s a big part of that business. So sometimes things evolve that way. Sometimes something like Xbox Live is more intentional.

STEVE GILLMOR: So mobile. How’s that going to start to resonate off of the other things you’re doing?

ROBBIE BACH: Well, if you think about it, mobile has kind of a multitude of roles for us here inside the company. First of all, phones are becoming a platform by themselves. So they’re another computing platform, we’re going to play, we think, an important role in that computing platform.

Secondly, they turn out to be an important screen, the role of which is only just becoming apparent to people and might be slightly different than then PC screen and the TV screen because of form factor and where you are and environment and those types of things. But there’s a bunch of things people are going to want to get on their phone. And so for us, it’s another distribution point, if you will, for services. So it’s sort of a business by itself, which is called selling into what’s going to be a big market for smart phones, and then there’s a second key component which is, hey, it’s central to what we’re doing in terms of our three screens and cloud strategy.

And our job is to make sure that our services integrate well and sing well across all three of those local experiences on the TV, predominately with Xbox today, on the PC with the PC and on a phone. And we have to make sure that we do a great job delivering that. And I think the secret for us is in the software and the service delivery. That’s where we’re going to do our best work.

STEVE GILLMOR: Well, Zune seems to be sort of an odd man out there.

ROBBIE BACH: Well, no, not really. I think the thing you realize with Zune is you have to think about Zune in a couple of different ways. You have to think of Zune as both a vertical, portable music experience. And if you look up Zune HD, it’s a great experience, it connects to our services, it’s a first-class citizen. I just think of it — it’s another portable screen, it just happens to be a very specialized portable screen because it really does music and video and it’s not a phone and we don’t have any plans for it to be a phone.

So that’s Zune in a vertical sense. But you’re also seeing us move the Zune experience horizontally. So we now see it on the PC, you see it on the Zune device, you see it on Xbox, you’ll see that experience elsewhere. And increasingly, we think of music and video as being experiences that show up on all the different screens. And you should think of Zune as our brand for delivering that music and video across all the different screens.

STEVE GILLMOR: So it’ll integrate with the phone.

ROBBIE BACH: Yeah, we don’t have anything to announce and haven’t announced anything.

STEVE GILLMOR: Sure.

ROBBIE BACH: We know there are other screens where Zune isn’t yet. So there’s more things we can do.

STEVE GILLMOR: So can you break down percentage of time on each of these things that you spend?

ROBBIE BACH: That I spend? I probably spend most of my time today working in the phone environment. And interestingly, a fair amount of my time on the PC environment. Both of those. But a little less on — actually, meaningfully less on Xbox than I used to because Don Mattrick now runs that business. And he actually has more experience in the gaming space than I do by a factor of two. And so independent of the fact that I ran that for six or seven years, he’s doing a great job. The Xbox business has probably been in the best shape it’s been in ever. And he continues to run that. So I spend a little less of my time on Xbox and a little bit more of my time on mobile and on the PC screen.

STEVE GILLMOR: So what are you doing on the mobile space?

ROBBIE BACH: Well, so there’s sort of short-term and medium-term things, and then obviously long-term. Long term, we already sort of talked about, and I’ll only talk about that philosophically anyway.

STEVE GILLMOR: Sure, I understand.

ROBBIE BACH: But in the short to medium term, you know, the next deliverable is Windows Mobile 6.5 and the rollout of our brand around Windows phones. So that’ll come this fall. And then obviously there’s future work beyond that to continue to advance the work we’re doing there. There’s a set of services we’ve announced a marketplace for Windows Mobile 6.5 and My Phone, which is a cloud-based service that enables you to both have your phone backed up as well as exchange and move data around between your phone and your PC in an easy and natural way.

STEVE GILLMOR: Does that use Mesh?

ROBBIE BACH: Yeah, it does. It does. So you’ll see us start to integrate all of those technologies. I mean, this is the place where we have real capability because it’s not just the Windows Mobile team that’s doing work, it’s the Mesh team that’s doing work, it’s the Silverlight team that’s doing work, it’s the Azure team that’s doing work.

And you mentioned earlier that you don’t think people really understand the full import of our strategy. I mean, some of that is because there’s a lot of parts to the strategy, and sometimes we don’t do a good job of stepping back and communicating the richness of everything that’s there. And sometimes it’s just the fact that we’re constantly enhancing it. It’s not like we ship a product that’s called “real time” and suddenly it all just shows up there.

STEVE GILLMOR: Sure.

ROBBIE BACH: Right? Azure comes at last year’s PDC and we announce Azure. Okay, so people get that. And then there’s My Phone gets announced at Mobile World Congress. A different event, certainly connected, you know, Mesh is at a different place, Silverlight is at Mix. So you have all these components that are sort of part of their own space, but which we are absolutely knitting together.

STEVE GILLMOR: Yeah. Talk about Silverlight. How does that intersect with what you’re –

ROBBIE BACH: Well, Silverlight, for us, has a number of different and interesting aspects to it. First of all, as a business model enabler in the advertising space, it’s certainly a way that people are using to produce ads in the online world, whether that’s on the PC or on a mobile phone or on Xbox or on any other type of device. So that’s one aspect to it.

It also turns out to be part of our development platform, just more generally. So beyond advertising, which you can think of as, quote unquote, a simple app. You can take that into much richer space with a richer set of applications, and you’ll see that spread across the product line and across the screens that we’re doing. So to me, Silverlight is one of those central components to what we have to do.

STEVE GILLMOR: So gaming space. How is that?

ROBBIE BACH: You should — you know, we haven’t announced anything and I think you’ll see us make progress in the gaming space. Today, the environment we typically use for gaming is XNA, which is a great technology and continues to go well and over time we’ll have to make sure we make it clear how that fits in with the Silverlight vision.

STEVE GILLMOR: So what I’m hearing here is you’ve sort of had so much success in the Xbox space that you basically sort of kicked yourself upstairs and that’s what I’m hearing.

ROBBIE BACH: Sure.

STEVE GILLMOR: And there’s obviously great opportunity and also some challenges in the mobile space.

ROBBIE BACH: Yeah, that’s fair. That’s fair.

STEVE GILLMOR: So tell me about the challenges.

ROBBIE BACH: Well, I think the challenges are fairly straightforward, there’s just a lot of competition. Tremendous opportunity for a lot of people.

STEVE GILLMOR: What’s your take on the Pre?

ROBBIE BACH: You know, I think it’s interesting. I think you have to ask yourself, okay, so where does it truly differentiate itself in a way in which it stands out from the other guys? And because of their market position, they’re going to truly have to stand out. And so we’ll see how that plays out. You know, they’ve made an interesting play around having touch and a keyboard. So we’ll see whether that plays out and whether that’s big enough of a differentiator.

I think the challenge they’re going to have is it’s what I would call a vertical experience that doesn’t have consistent depth in all of the verticals. We’ll see how their music and video story plays out as a consumer device because they’ve sort of decided they would be dependent on iTunes. We’ll see how long Apple allows them to do that. We’ll see how that plays out.

STEVE GILLMOR: A couple weeks maybe.

ROBBIE BACH: Yeah. That would have been my reaction. I’m not close enough to the situation to really understand it, but without that, they don’t really have a music and video play, which I think is tough in today’s phone market. I think it gets harder and harder to be credible in that space.

So I think it’s one of those interesting things where if the product had come out two years ago when Palm’s market position was a little bit different, you might have a different reaction than you do today. We’re just going to have to see how it plays out. Might play out well for them. It’s probably a good bet for them to place given where they are in the market. But I think it’s far from a sure thing just given how much competition there is.

STEVE GILLMOR: Android.

ROBBIE BACH: Android, in some ways, sort of in a similar place. I think they’ve got some interesting things going on. People are certainly going to experiment with it. That’s not a big surprise. And so you’ll see some phones this fall, you’ve already seen a couple, you’ll see a few more.

The question with Android is going to become is this a vertical play from Google or is it a horizontal play.

STEVE GILLMOR: How do you mean?

ROBBIE BACH: Well, as a vertical play, I mean, it’s a Google phone. I don’t mean they own the phone literally, but I mean it has a prescribed set of Google services on it, it’s a Google experience from end to end and they’re going to incubate that and care for it.

STEVE GILLMOR: Isn’t that what Windows Mobile is?

ROBBIE BACH: No, actually, today Windows Mobile is much more of a horizontal play. We don’t actually — when you look at a Windows Mobile phone through Verizon, as an example today, or AT&T, they have a lot of their own services on there. It’s not pre-subscribed. It’s not a lot of requirements, and actually we service a broad breadth of hardware.

Google has been sort of saying there’s going to be a Google experience and a broad breadth of hardware, so that’ll be interesting to see how that plays out. They’re also going to have to decide how deep they want to get on each of the experiences and how well they want to fine tune them. I would describe the early Android phones as having some nice characteristics, but not as deep as it’s going to need to be across all these different experiences, and they’re going to have to decide how to do that. And they’re going to have to decide how they make money at it.

Today, it’s a little unclear what the actual business model is. They don’t actually require you to use their search. And search, by the way, is pretty tough to monetize at least today. I think that’ll change over time, but it’s still tough to monetize today. So I think we’re going to have to see how that plays out. They’re certainly a worthy competitor.

STEVE GILLMOR: So you can touch on the iPhone if you like, but we’re back to Windows Mobile. So what are we going to see?

ROBBIE BACH: What we need to do in Windows Mobile and what we are doing with Windows Mobile is sort of a two-pronged thing. First, you have to see what I’ll call user experience innovation from us. And we’ll start a little bit of that with what we’re doing in 6.5. There are some very nice advancements in 6.5 along those lines. And then you’ll see more in the future on that front because certainly the user experience is critical on these devices. And because they’ve gotten so rich technically, you can do rich user experiences now.

And today, our user experience isn’t quite as rich as we’d like, and I think 6.5 will take that one step up and then you’ll see more from us in the future. And then the second aspect of it is really understanding what services we want to deliver on the phone and how those integrate into the user experience that I just talked about. And marketplace and My Phone are the first two examples of that, and you’ll see more work from us in that space.

STEVE GILLMOR: Okay.

ROBBIE BACH: And the important thing I’ll just point out about that to tie to the topic we started on is at some level, people will choose phones based on just the hardware design, that’s certainly true. Some level, they’ll choose it based on the core experience of the device and the phone itself. And ultimately, people are going to start choosing phones based on the services they get access to and what that service experience is like.

STEVE GILLMOR: Right. Which is the social kind of –

ROBBIE BACH: It’s the social experience I talked about. It’s the, oh, I can get this on my TV screen, on my PC screen, and on my phone screen. It’s a, if you will, next level of functionality and capability that people are going to come to expect. And they don’t expect that today and I think as you go out 12 months to 18 months, 24 months, you know, three or four years, that’s going to start to become part of the expectation. And now the requirements and capabilities you need as a supplier of technology in that space change.

And, you know, I would say that Microsoft’s capabilities there, that development, helps us and puts us in a much better position to compete.

STEVE GILLMOR: So you’ve got large scale right now in terms of Windows Mobile?

ROBBIE BACH: Yes.

STEVE GILLMOR: And significant deficiencies in terms of experience.

ROBBIE BACH: Yeah. We need — this past year was almost 20 million phones. So we feel good about that scale.

STEVE GILLMOR: Sure.

ROBBIE BACH: And there are some parts of the experience that we think are awesome. We think as a business user, our mail experience with Outlook and Exchange, we think that’s world-class and that continues to be world-class.

If you looked at us as a consumer device, that’s probably the place where we need to make the most progress and the place we’re investing the most energy.

STEVE GILLMOR: You know, the browser experience is –

ROBBIE BACH: Agreed. And that — 6.5 has a huge improvement in the browser experience. I’ll stand by the 6.5 experience on browser in a very nice way. I think that’ll actually be a big step up.

STEVE GILLMOR: How do you see the interaction with Azure?

ROBBIE BACH: On the mobile side, or just overall?

STEVE GILLMOR: Overall, but –

ROBBIE BACH: Well, I think if you look across what we want to do with Azure, Azure creates whole new scenarios of things people can do. And it enables things to be processed in the cloud or in a cooperative way between the cloud and the client that we wouldn’t have been able to assume before. That does create some really interesting new scenarios.

Now, you’ve got to decide — in all these things, you have to decide which things you want to be processed in the cloud and which things you want to be processed locally and divide that up in a logical way. And that will actually be the art of creating a great end-to-end experience.

STEVE GILLMOR: Well, I mean, to you point, one of the things that I thought was most interesting about the Google Wave demo, I don’t know if you saw that or not, was this — I always forget the word for it, but it wasn’t a spell check as much as it was actually using a bot to go in and scrape the text and send it to the server and perform, you know, a look-up in terms of context as opposed to — so that –

ROBBIE BACH: Almost like grammar checking.

STEVE GILLMOR: Yeah, that’s the word.

ROBBIE BACH: Right.

STEVE GILLMOR: Okay. It wasn’t almost, it was grammar checking. And what’s interesting is that I can remember for maybe ten years the statement that that was not going to happen off the server, it wasn’t going to be a function of the cloud. And I’m not saying that this put the lie to that, but I think in general –

ROBBIE BACH: Why was it better because of the cloud?

STEVE GILLMOR: I guess — I don’t think it was better. I think that it was identical.

ROBBIE BACH: So this is — I think this is the interesting debate on this balance between client and cloud. And like when we talk about what we do, we’ll always tell you we think there’s going to be rich client work, because we believe that. And at the same time, we believe the cloud is incredibly important. So what I would say in response to that is neat technically, so it proves some things that you can do it technically, but ask yourself the question: I should want to use that vehicle and take up the bandwidth for that vehicle and the battery life off the phone for that vehicles for things where I can only do it with the cloud or I can do it uniquely better with the cloud or there’s some customer benefit to doing it with the cloud.

And for the things that I can do locally just as well that I can do faster locally without taking up the bandwidth and without sucking battery life, I should do those locally. And to me, the secret of all these experiences is the balance between those things. And people come to real time or cloud computing or however you want to think about this with a, oh, everything is going to go to the cloud. I just think that’s wrong. I really do. I think there will be many things that go to the cloud, there will be many things that stay locally, and the secret will be the balance between those things and thinking through each scenario and each technological advancement will be key to making that successful.

STEVE GILLMOR: You know, put another way, latency is in the eye of the beholder. You know, if you don’t feel latency, then it’s an acceptable experience.

ROBBIE BACH: Well, I’m dialing the bar slightly higher. I want the experience to be better than acceptable because if it’s acceptable and more expensive, I want to do it locally, right? And there is cost to using the cloud. Right? There’s cost to the operator, there’s cost to the cloud operator as well.

STEVE GILLMOR: Sure.

ROBBIE BACH: Right. So you only want to do that in a case in which you’re demonstrating value and the customer — somehow there’s going to be compensation for the use of the resource.

I think there’s some perception that people just say, well, there’s going to be these big server farms, so it’s all free.

STEVE GILLMOR: Well, maybe to them.

ROBBIE BACH: Well, that’s sort of my point. That’s sort of my point. And so when I think about this, I think about cloud computing and real-time computing as being this awesome additional tool in the tool case that I didn’t have before. And now what I want to do in experience, I don’t have to say, okay, what can I squeeze onto the phone? I can say, okay, what’s the best optimal use of resources between the phone and the service in the cloud and come up with the right answer. Grammar checking may not be the right answer, right? Maybe it is, I don’t know. Maybe there’s some reason why that’s particularly efficient or better.

But I can certainly think of other scenarios where you might say, hey, there are some things we actually do want to process in the cloud. Maybe there are things we want to do in the background, there are things where we want to store and forward, there’s logic we want in the cloud so that it knows what to do with things when I’m doing a certain thing on my phone.

I always pick the silliest, easiest one, which is not technologically complicated, but still not done right as far as I know anyplace, which is what happens with photos I take on my phone, right? Today, most of those photos never see the light of day off of the device. Part of that is a function of the quality of the photos. But even if you have a phone that takes good photos, most people don’t know how to get it off the phone and if they do, they don’t know how to get it anyplace else. Right?

Now, why wouldn’t a cloud-based service know that you took a picture, take it, know where you want to put it on the PC, know who you want to distribute that picture to? It’s not complicated, it’s not rocket science, it’s not particularly creative.

STEVE GILLMOR: It’s Mesh basically.

ROBBIE BACH: Correct. And the ability to do that — that, to me, is one where I say, okay, now I know why — the cloud I know is uniquely capable of helping me in that case. And today you can say, well, the poor man’s version of the cloud should be automatic wi-fi detection when you’re near your PC, and it should transfer photos that are on your phone to the PC. Nobody’s even done that very effective as far as I know. That’s the poor man’s version of the disintermediated cloud.

So I just look at it and say, wow, there’s lots of scenarios that we haven’t explored yet. And some of them will be valuable and value-added and we should drive hard on those, and some of those will be nice and neat and, yeah, it’s cool that you can do that. But that may not be the best thing for the experience. We just have to decide which one is which. That’s the magic of this and the technology is cool and that’s magical in its own way. But the guys who are going to succeed, as we’ve demonstrated with Xbox Live, as you’d say Apple demonstrated with iPod, is the guy who gets the experience right. I mean, that’s where the magic comes.

So interesting topic, it’s a cool area.

STEVE GILLMOR: Yeah. It appears to be sort of Popular Mechanics, but I think it’s a lot deeper than that.

ROBBIE BACH: Oh, it’s way deeper than that. It’s way deeper than that. The problem is — what I would say to you is I think there’s an element of it that is still sort of pop fiction or tech science and that’s all fine. We always have that, and it’s good because it sort of pushes the art form forward.

STEVE GILLMOR: Sure.

ROBBIE BACH: And then there’s a part of it that says, okay, that’s really cool, I’m glad you can do that, now tell me why that’s important. Let’s go and discuss the things that people are going to want to pay more for. Most of what Xbox Live does isn’t new technologically. We did it better, one could argue, but multi-player gaming wasn’t new. It’s been on the PC for actually a fair amount of time.

But the Xbox Live team figured out the right things to do and the right things to focus on and put it in a way in which the consumer said, oh, now I get why this is relevant to me because it’s not a nerdy, hey, I found somebody else on that network, I was able to figure out some way to connect to them and we can play a game if everything’s lined up properly, which is sort of the science part of it.

Instead, it was, I go online and Xbox immediately tells me that my seven friends are online, it tells me what game they’re playing, and tells me when I have appointments with them. Oh, well, that’s not science fiction. That’s actually useful.

STEVE GILLMOR: Play dates.

ROBBIE BACH: Yeah. And that’s the part that when I –

STEVE GILLMOR: And if you have kids, you understand how important those are.

ROBBIE BACH: Yeah, exactly. And when I look at our talent, I think we have a lot of deep technical talent, so that’s actually great. But at some level for what I do, because most of it’s consumer-facing, a lot of the talent expertise is about experienced talent and bringing that to the technology.

Something like Xbox Live started as raw technology and then some people did some experience work around it, and now you see what we literally, inelegantly I would argue, call the new Xbox experience is actually a really nice social experience with Avatars and places you go meet friends. And who would have thunk?

I will tell you, when I played my first Xbox Live game, I would not have imagined we’d be where we are today, that’s for sure. That’s for sure.

STEVE GILLMOR: Well, there have been some other things like Second Life that made it easy to improve.

ROBBIE BACH: Well, and Second Life to me is the perfect example. You have to — very cool, very interesting in its own way, interesting technologically, but is it big?

STEVE GILLMOR: No.

ROBBIE BACH: No. No. It’s not. And it’s not big because ultimately the experience doesn’t get you to a place where, A, a lot of people want to do it, and it doesn’t take you to someplace that you just go say the third time you’ve done it, oh, it’s still wicked cool and there’s still more things I want to do. I mean, it’s not much different — with no disrespect — it’s not much different than Dungeons and Dragons done in a little bit of a different way. And there are people who love that, so there’s a committed audience to it, but it’s not a broad phenomenon. And that’s the difference between something like that and MySpace or Facebook or Twitter where they manage to get beyond the science part and into the broad experience.

STEVE GILLMOR: Yeah, absolutely.

ROBBIE BACH: That’s exciting.

Crunch Network: TechCrunch obsessively profiling and reviewing new Internet products and companies

I went to Scoble’s blog on the recommendation of some retweet and found myself watching a realtime updating Twitter list of Tech Smart Guys or something of that nature. Scoble evidently has spent considerable time compiling these lists, running into limits like 500 geniuses on any one list. There are problems with lists, I’ve heard, but none more pronounced than the question of why one would like to produce multiple Twitter home pages to navigate between when the Home page is already useless.

I’ve certainly read numerous explanations of why lists get around the Follow problem by allowing you to create imaginary follow lists (hat tip to the late great FriendFeed’s imaginary friends concept.) Indeed, without Track all Follows are imaginary in that you are stuck waiting around for people to randomly say something interesting on a freakin’ Web page. These are the same Web pages we ran away from when RSS gave us the opportunity to request updates of blog posts when they were published.

But RSS has no social metadata to speak of, and no business model to keep the pipeline flowing. And if RSS detractors are to be believed, the technology never got significant adoption anyway. In fact, RSS scraped the cream of the attentionrati off the top of the Web page model and forced publishers into a race for space in a diminishing window of consumption time. Thus micro-messages were invented as a hybrid of the 10-second spot and texting crowd. Besides, most RSS posts wrapped 1 or 2 seconds of information in a stream of self-promotion — like this one.

It turns out that we missed the good ole Web pages more than we thought, because as information junkies we actually enjoy noise as much as signal. The noise surrounding an RSS item is stripped of the kinds of metadata cues that help us understand not just what is being fed us but by whom and for what reason. Jumping briefly to the so-called present, Twitter’s new house retweet destroys the messy noise surrounding multiple cascading citations that emanates the acrid smell of smoke and lurking fire.

RSS makes Twitter look positively Studio 54-ish with its Bianca, Grace, and Andy avatars flashing down the non-updating page. RSS tells you nothing about what sub-group of the A-List subscribes, nothing about what the cloud thinks about the stream to date, nothing about anything other than what you already knew when you subscribed in the first place. And Twitter lists are an updated version of the same lousy deal, taken out of the famous River of News or email-style reader and dumped back on the freakin’ Web page.

How do these Web pages work again? Lessee, if I get bored I can click on a link and go to some other page. Or I can hit the back button and — oh wait, there is no Back because the list opens another tab or page instance. At least I’m not just sitting here waiting for some factoid to scroll down on Scoble’s auto-updating list widget, or worse yet clicking on the new all-improved click me something’s happening text on Twitter Web pages.

If RSS sucks (there is no back button at all because you can’t address RSS items by URL except through a reader) and lists suck because they also strip away social cues, then why are we so happy to be back in Web page land and its sea of comments, ads, come-ons, opt-outs, identity honey pots, etc. We’re not; we’re looking for some safe haven which respects the noise for its social acuity while allowing group dynamics to accrue. Put simpler, give me clues as to what people I care about think about what’s going on Now.

That is the reason realtime is important: not the aggregate value of the stream, not the authority mapping of lists or retweets or location, not the personal garden of Facebook, the professional business district of LinkedIn. Realtime is important because we are still wired up to make decisions with the most amount of information at the last possible second.

Is Twitter realtime? No, because it doesn’t support Track which allows people to alert people in realtime. If we are more or less confident that we will be alerted when something game-changing has or will happen, we don’t need to sit around watching Web pages not update. Track is social alerts, and Twitter has disabled it for a very long time. Can Microsoft or Google provide alerts under the terms of their firehose deals? We don’t know nothing except to assume that the terms of the deals prohibit us knowing that answer.

But for Track to work it needs an unencumbered micro-bus where anyone can jump in in realtime and engage with any node or group of nodes. A dynamic list if you must. That’s why FriendFeed got its hose cut off when Facebook bought them. If there’s no apparent latency between Twitter and a third party (we are the second party) then there is no perceived value add for either service. Result: an effectively unencumbered micro-bus where gestures can be transmitted and received in realtime. This is the only real stream filtering possible.

Stop and think about that for a micro-second. If semantic analysis, location constraint, and relevance farming are the primary tools for filtering, the results will inevitably fall apart in competition with social mining of affinities. Adding hashtags and other codes serves only to provide SEO-like gamers the tools to tarnish the value of the system. Traditional journalists fall back on the priesthood of editorial liturgy, which is endlessly vulnerable to new and exciting voices. Witness the Beatles and the Nixon administration. One generation’s insolence becomes the next’s anthem.

Do we have any reason to expect Facebook will harness realtime any more than Twitter has failed? Could happen, but more likely is something coming up from below. Foursquare has a whiff of this insolence, but depending on going out every night to get “on the map” skews the sample in ways Twitter avoided. There are new streamreaders checking in every day, but who will become the Mayor of Realtime is not so much the question as if it’s anybody at all.

Ever since RSS took hold, we’ve had an ongoing joke that the winner will be the first application to most quickly confirm that nothing is going on. Google Reader held that title for years, then gave way to the onslaught of the micro-bus and url shorteners. Now every startup and platform is busy reinventing the same dumb wheel, spinning and twisting to avoid looking like they’re building the Next Big Ping Server.

In fact, that is the business model for every single service out there. Scrape away all the shiny promises and what you’re being pitched is something that does not include unencumbered Track. That’s because if it’s open (anybody can ping anybody in realtime) then anyone can mean a competitor. If you get multiple competitors working off the same backbone, then the carriers become the owners of the NBPS.

That’s why who controls mobile controls the micro-bus, because mobile is where business gets away with micropayments. They’ve got this SIM chip with your name on it, tied to a credit card, and when the credit runs dry, you’re done. If the carriers own the NBPS, then what does Twitter or Facebook or even Google have to offer you if you run out of credit?

Working backwards, unless you’re independently wealthy, your network access is controlled by whatever entity pays you enough to cover rent, food, medicine, and phone. What starts to become clear is that a microcommunity has a small but real chance of looking like a small business, which in turn can establish its own currency and create enough wealth to put up its own ping server/identity hub. That would be great if every single social media play wasn’t trying to get in the middle between you and access to your phone.

So far, Facebook has done the best job of being our Ping Server buddy, but they’ve made a huge mess of understanding how to unbundle the news stream. Every time I talk to a Facebook executive, they say how difficult it is to do this without threatening the privacy of their existing customers. So what you’re saying is that it makes no sense to offer a service just like Twitter except that we’ll guarantee no rate limiting or metadata quarantining or list camp.

That would be because why? There’s no money in the stream? [Wrong buzzer sound] People don’t want to aggregate power by banding together in microcommunities where the group owns the keys to the ping server? [Buzzer] Grandma will get confused. We’re doing fine thanks. We’re working hard to get there, here’s a lollipop in the meantime.

Bottom line: we’re never going to get there, just like Twitter will never restore Track. We’ll go through wave after wave of third party hacks on these fundamentals, with each vendor performing the ball and three cups trick explaining how it provides what we want without giving us control over how we configure the engine. Again, these companies do not want to give us access to our own social identity for fear that we are in fact competitors looking to own the ping server.

This is an immutable fact: we absolutely do want to own the ping server and enable Track. We just don’t want to front the money for the server. Interestingly, cloud computing means we don’t have to. The app we’re building runs on several clouds, in fact — App Engine, Amazon, and Facebook/FriendFeed — with Rackspace and Azure coming online as well. Each of these clouds has its own terms and conditions, but in aggregate they provide an unencumbered simulcrum of Track and gestural integrity.

But why believe me or Dave Winer or anybody who promises an open federated architecture where identity will flow freely across silos? You shouldn’t. Like everybody in realtime, we’re hoping you just make a choice because things are moving so quickly you want to cut your losses on what you’re missing. The truth is that realtime is no different than any other preceding era. No matter how deliberative you might be, following time-tested rules of journalistic process and tenured argument, you still have to make that last leap into the unknown where you put your chips on red or black. Those who suggest this is not a job for amateurs are just trying to own the ping server.

Finally, much is made of the devious lock-in of the url shortener, that it inserts another layer of possible breakage, that it’s a stealth ping server. All that is true, especially that it is another ping server. But in a realtime world, if one piece breaks, you route around it. If Twitter goes down, we move to FriendBook. What begins to scale is not the individual service but the fail-over system of competitive nodes. Blaming the url shortener is like realtime for all the bullshit written every second on the net, professional or otherwise.

Url shorteners exist because the url is the real payload of the micro-bus. The rest of the 140 characters are metadata about the link; if there’s no link then the url defaults to the page you’re currently on. Urls are a trigger for the next realtime fork, the moment when we deliver our most valuable contribution. Of all the gin joints in the world, you had to walk into this one.

Url shorteners go by many different names: Bit.ly, FriendFeed, Silverlight, Java, Wave, Techmeme, YouTube, Url shorteners are ping servers. We want to run Track on them to alert us in realtime. Behind every link is a url shortener. What’s valuable is recording the moment when they expand into something. Those who honor that implicit contract with users will prosper.

Crunch Network: TechCrunch obsessively profiling and reviewing new Internet products and companies

The New York Times’ Saul Hansell provided context at the telecom level, while ex-monopoly telecom BT’s JP Rangaswami placed his and BT’s bet on the future of open platforms such as Android. JP’s partner in crime at BT and subsidiary Ribbit, Kevin Marks, supported Arrington’s vision of a game-changer in voice, while Robert Scoble was happy to defend the iPhone with faint praise just so he could have something to argue about with Arrington. He also elicits some new CrunchPad details from Mike.

Of course, my perspective is the true correct one, that the iPhone will continue to dominate as Android devices demolish RIM, partner virtually with Windows Mobile over the Silverlight bridge to carve up the volume play, and batter the telecoms into submission so that Apple can ride through the big gaping hole and launch the iBook. A great conversation that will continue.

Crunch Network: TechCrunch obsessively profiling and reviewing new Internet products and companies

[Video of the second half of the conversation embedded below]

We began our chat with Bob asking me about a video I shot with then-Sun CEO Jonathan Schwartz:

BOB MUGLIA: I want to tell you that your Open Source ponytail is one of the funniest things I have ever seen. It really — it was hysterical.

STEVE GILLMOR: Yes, well, I’m afraid it may have driven Jonathan out of the business, but –

BOB MUGLIA: I actually think that he did that himself.

STEVE GILLMOR: I think so, but, you know –

BOB MUGLIA: You don’t think it was –

STEVE GILLMOR: He’s a friend, so it was a little difficult, but — a lot of people inside Sun would come up to me privately and say, you know, that was really wonderful.

BOB MUGLIA: But never publicly, I’m sure. I’m sure. Yeah, no, it was very funny. It was very funny. It’s been fascinating watching, so we’ll see where things go.

STEVE GILLMOR: What’s been fascinating about it?

BOB MUGLIA: Oh, just — it’ll be interesting to watch what happens with — you know, assuming the acquisition of Sun by Oracle goes through, what really winds up happening there. The hardware business is an interesting business for Oracle to be taking on, and if they really ultimately do take it on, it’s hard to know — and Larry’s said a couple of times that they will, but it’ll be interesting to see where it goes.

STEVE GILLMOR: Yeah, he also said the cloud computing is a joke. Last time I looked, Sun is — they’re doing a lot of stuff in that area.

BOB MUGLIA: Yeah, they have a lot of investments, certainly. I mean, the challenge is, when you look at these hardware architectures, SPARC is below critical mass, in terms of an investment stream, to be able to maintain viable, on a long-term basis, and I think almost all the customers know that, and so there will need to be a transition off of that, in one sense or another, and it will be interesting to see how they do that.

But I mean, it’s sort of just I think generally part of the dynamic. I mean, this is actually one of the more interesting times right now. Cisco entering the server market’s been very interesting.

STEVE GILLMOR: How does that impact on what you’re –

BOB MUGLIA: Well, mostly in the context that it really has galvanized HP as changing their view about Cisco much more as a competitor than as a partner, and in that context it helps. I was just down at HP yesterday and — I meet with Cisco, I meet with HP, I meet with all these guys, right, they’re all partners of ours, and there’s just — I mean, I think there’s a great opportunity for us to do more and more together, with companies — with the other vendors in the marketplace because they see — whenever you see new people coming into the server market, I mean, you could sit back and see Oracle coming into their server market. We’ll see if that’s actually the case in the end. Sun does have an X86 business.

And so whenever you see new players coming in, it changes the relationships between the existing folks that are there. And the server market has been pretty dynamic in terms of new folks coming into it, with Cisco, you know, we’ve seen Sun come in. You see new entries — Verari and I guess it’s Rackable/SGI. So, seeing some new entrants in there, and some of those guys are doing some really, really, really interesting stuff. Rackable in particular has done some fantastic work on containers. A lot of these guys, they’re all doing container work, so there’s been a lot of good things that have happened across the board.

But it’s fun to see — and when you talk about clouds, there will be a connection between those sets of things. I mean, I guess our sort of high order view is that we see that there’s a continuing shift and the world’s a — the economies are sort of on everybody’s mind right now, and no one’s really sure when we’ll see the pullout and how steep the pullout will be. Another reason to not be on video at the beginning, so I can have my cup of coffee in the morning. Thanks.

And yet one of the fundamentals that I’ve heard again and again from IT managers is that they definitely view technology as part of the solution, not part of the problem, and so there will be continued investment in this. It’s not clear how fast things will come back. It’s been a pretty dismal first quarter. We’ll see how second quarter comes out. I mean, I see having the server market down 26 points year over year, after growing about seven points in the previous first quarter. So, it’s a pretty — over 30 percent drop, year over year, is pretty –

STEVE GILLMOR: You expected that, do you think?

BOB MUGLIA: We were planning for a drop. It’s probably steeper than we had anticipated. What we found is, is that we have not dropped that much. I mean, we did better than that in the first quarter, so we’re actually — we’re gaining — that just — when the market’s doing that, that means we’re gaining share.

But it’s — it hit everybody very hard. Everything off course began in the fourth quarter of last year, and then it got very steep. And the question on everybody’s mind is when do things start to pull out. But I think the one thing I do hear again and again from IT is that they do plan to continue to invest, and continue to look at ways that they can come out of where we’re at with differentiation. So, people are looking forward as much — they’re looking to save money, which works well for us, because we have a very strong message associated with how our platform can save companies money, compared to Oracle and IBM, and even in a lot of senses compared to Open Source, because we provide a more complete solution with us and our partners, for a good cost.

But then there’s probably more interesting the side of what set of innovations can people take, and what set of investments can people make, so that their systems are well positioned to enable companies to differentiate when they come out. You know, and at the same token, we see all the — with the generation of people coming in to companies that are much more technology-savvy, we see great opportunity for IT to change its role from where today IT has always and historically always focused on building solution for less technically-savvy end users, now you have people who can do an awful lot, and there’s a multiplier effect.

So if IT can provide — think about moving from providing solutions to providing frameworks that the businesses are able to build into complete solutions, and putting it in the hands of end users, I mean, that’s a fairly big deal.

You know, and the third thing that I’d sort of say that’s kind of interesting right now is it’s probably one of the most interesting times ever, in terms of how technologies are going to change the way people work with information. Because we now see vast amounts of information being able to be stored in memory, and Moore’s Law has moved to the point where you can take what used to only fit on disk, and now fit the whole thing in memory. I mean, you see it with these things, but you see it also inside IT systems as well, with solid state disks appearing. And the characteristics of solid state disks are just fundamentally totally different than rotating media, and so the way databases are going to work are totally changed.

But perhaps even more dramatic is that you can now put entire databases in memory, and all of a sudden, everything about it changes, I mean, about the way you’re able to work with information, and you get 100 — you get somewhere between 100X and 1,000X performance improvement, and that’s — we see performance improvement coming through Moore’s Law, but that’s 15, 16, 17 years of Moore’s Law, performance improvement, happening in a single product cycle.

I’ve never seen anything like that, I mean, not in the 20-some-odd years I’ve been here, I’ve never seen anything where — we always see Moore’s Law give us 35 — on average, 35 or 40 percent a year of roughly performance improvement that we get in the underlying systems, which lets us do more and more. All of a sudden, at least for data-intensive things, you get this 100X improvement in one generation. It’s kind of interesting what you can do with it.

STEVE GILLMOR: So how does that — you said two areas here, efficiently the servers, and then also this new Azure thing. How does that particular data point impact on –

BOB MUGLIA: Well, it’s going to change — I mean, I think what that will have a massive impact on is the way people work with information. Because it only actually matters when you’re working with lots and lots of information. I mean, if you were trying to do a numerical calculation on a table that was only 100K in size, it doesn’t really matter, because that fit in memory yesterday. But if you’re trying to work with business information that was multiple gigabytes in size, or even terabytes in size, all of a sudden now you can start doing things a bit differently.

And a very specific thing that you’ll see is in the BI space, people being able to build in-memory BI systems. And what we’ll be doing next year is coincident with Office 14, shipping next year. We’ll ship a version of SQL Server with an add-in into Excel that empowers end users to basically take massive amounts of business data and put it inside Excel and work with it.

And I mean, I’ve got a demo I’ve done a number of times where you take 100 million rows of data — I mean, in comparison to Excel, used to only be limited to 64,000 rows. Today it’s limited to 1 or 2 million rows. But if you try and do a sort on 2 million rows it’s going to take an hour. With this new technology, we can take 100 million rows or even more, on a laptop, on a $1,000 laptop, and do microsecond-level sorts. I mean, the sorts are almost instantaneous, and views, and queries and everything else against it.

So all of a sudden, end users will be able to do things with business information that they just never could do before. It’s pretty interesting that — I mean, no one’s really sure how broad of an impact that will have, but I think it’s kind of phenomenal to think about a query that used to take minutes or hours on a backend IT system, that took months for IT to set up, now being able to be put together in a few minutes by an end user as they build their spreadsheet and their pivot table, and then have results come back in just a couple seconds. You know, the questions that can be answered that couldn’t be answered before, whether that’s scientific investigation, whether that’s drug research, whether that’s analysis of marketing data, whatever it might be.

So those are the sorts of things — because there’s so much information in these systems today, one of the things that our systems are doing is they’re generating vast, vast, vast amount of information — logging transactions, logging things. And most of that’s getting stored. I mean, it’s largely stored, because storage doesn’t cost that much, but what does cost a lot is being able to actually — and is awkward — is being able to get that data, and putting it in a form that’s useful for people. And this will change that.

And I think that will accelerate, by the way, I think that will very much help to accelerate — whenever we come out of this, whether it’s later this year or early next year, whatever it might be, whenever we come out of this, I think it will accelerate.

STEVE GILLMOR: So how does this change your understanding of the business that you’re in, I mean, specifically?

BOB MUGLIA: Well, all of this, I think, it just speaks to the substantive opportunity that we have. I mean, our fundamental thing has always been to put — to take things that are hard and make them easy for people, to take things that are expensive and available to a few and make them less expensive and available to many. And the business models that we fundamentally have, and the way we structure what we do, have always been built around that. And I’ve said a number of times, I mean, our playbook, our core playbook at Microsoft and the one I live by every day is, you know, understand your customers, build a great product, price it cost effectively, sell it in volume and work with partners to build the complete solution.

And that model, I think, plays well both in terms of the economic times we’re in, as well as some of these transformative changes that are happening. And so we’re in a world where the business that I’m in, you know, 12, 13 billion was what we have — customers today spend about 80 to 90 billion on this software that — the space that we’re in. So, we’re 15 percent, 15, 18 percent of the market.

There’s a substantive — as these shifts happen, as industry standard technology becomes more and more viable for solving these sets of problems that it couldn’t solve before — we’re going to see scale-up, amazing scale-up, X86 systems, and of course with four cores, six cores, eight cores, 12 cores, whatever you might have on a single system, these machines are so powerful now and they’re mature, and our software is maturing to the point where business problems that people wouldn’t have us solve in the past, they will now have us solve. We have a substantive opportunity to continue to gain inside the space that we’ve traditionally played.

And then that’s one whole set of things. The other whole set of things that I think is really interesting is if you look at total IT spend, and you break up — you can just be sort of simplistic. I’ll just make life simple and say IT spends about $3 trillion a year globally, and of that $3 trillion, $1.5 trillion is communications. So, we’re not in that space. That’s the Telcos and everything else. The other is in business systems in one form or another, and that includes everything. If you start breaking it up, software spend is a few hundred billion a year — not a small number, but a few hundred billion. Application development is about $400 billion a year, something like that, people writing apps. We’re really not in that business. I mean, you’ve got your Accentures and your (inaudible). Those guys are in that business. We work with our partners to do those things, and of course a lot of that spend is internal. People spend (inaudible), a bunch of it is outsourced.

But the actual single biggest number of that $1.5 trillion is about $600 billion, which is spent in operations, and running systems and maintaining existing systems. Everybody knows that IT spends about 70 percent of their dollars on running existing systems, and only about 30 percent on new development. And so whether it’s new development and operations against those, or old legacy systems that they need to maintain, there’s this vast amount of spend that’s associated with people cost for running these systems.

And to transition to services and the cloud, to me, if you really ask what is the cloud about, it’s taking that $600 billion number, and helping IT cut $100 billion off of it, $200 billion off of it, $300 billion off of it, something like that, allowing them to open up that spending, and enable it to do new things. In a perfect world, if they could cut it — I mean, I’ll just say, suppose they could cut that $600 billion in half, spend $300 billion on maintaining existing systems, and throw $300 billion into new investments, it’s a good tradeoff from a business perspective, because the return on investment could be so much higher, associated with that.

You know, that really is what the cloud, to me, is all about, is how you take and save IT money, and enable them to reinvest it in other things. Whether that’s private clouds that they’re building internally within their own organizations, making them more efficient, associated with the way they run their systems, whether it’s using a public cloud like Azure to help drive those sorts of things, it’s driving those — or the other thing that I think is interesting is cloud services, finished services that people can buy that will lower their cost, whether it’s systems like messaging or collaboration, SharePoint Exchange, where we can supply — we can run those services for our customers, and save them money by doing that, because we run it at scale, we run it at best practice. We have ways that we can cut our own operations cost and pass a substantive amount of that on to our customers.

Whether it’s doing those sorts of things, or whether it’s helping them to save money in the new applications they built, which is really more what Azure is about, is about custom apps and ISP-based apps, and those sorts of things are really — that’s where I see massive opportunities, taking — let’s put it this way. It’s like taking the marketplace and changing the view that we have of our marketplace from being, say, an $80 billion worldwide spend and what is our share of that, relative to now $600 billion. Now to be fair, my business doesn’t cover all that $600 billion. Some of it is Stephen’s business, some of it’s other parts of Stephen Elop’s business, some of it is other parts of Microsoft. Some of it we’re not in at all, I mean, because custom apps, et cetera, there’s a substantive amount of that, and we’re not in vertical apps by and large, with the exception maybe of health care.

But if you look at it, there’s a much bigger pie. The net of it is there’s a much bigger pie to look at, and again, it’s all about how to save customers money and let them return that investment into, and spend it on other things.

STEVE GILLMOR: So how is that going, getting people aware of and — what’s the timing of Azure? Obviously it’s supposed to ship in November.

BOB MUGLIA: Yeah, we’ll be releasing it this year. I mean, we’re on track for public availability this year. Things are going well. The one thing I will say about all the cloud stuff, and it’s just — I can’t emphasize this enough — is how early all of it is. I mean, the amount of global IT spend on all cloud services worldwide, I doubt — I mean, it’s definitely under $1 billion. I mean, it’s a small, small number on a global basis, when you consider — I got $1.5 trillion, let’s put it in that perspective, or even any perspective you want to take. Even if you compare it to my businesses, it’s a small percentage, it’s still very nascent and early. And I think like anything else, what we’ll see is we’re in a period right now of great enthusiasm, and as people begin to implement these systems, some of the nascence of the systems will become apparent, and it will take people some time to be able to adopt them.

And then over time, as the systems do mature, the savings will begin to appear. I mean, I don’t view this as a one or a two sort of year journey. I mean, I view this as more of a five to 10 year journey. But that’s really the way I have to think, because the truth of the matter is, from a product development and R&D perspective, let’s sort of put it this way: my R&D is — for the revenue from my business, the R&D is already done, over the next two to three years. The R&D is basically done right now. I mean, when there’s (2008 R2 ?), I mean, there’s a few things that are still coming that will have some impact in what we’re doing, but fundamentally, that work was done last year, and the work I’m working on right now, my teams are working on right now, are two to five years out that we’re doing, and in the case of the cloud sorts of things, that stuff is in the early stages of its maturity, so the impact in terms of the business, and that translates to customers, right? Customer usage and everything else is probably five to 10 years out. So, I think people have a slightly invalid horizon on the cloud, in terms of how fast it’s going to hit, but I don’t think it changes the long-term impact that it will have.

It’s one of those classic things where people often over-anticipate the short-term impact and under-anticipate the long-term impact, and I think that could be the case here.

STEVE GILLMOR: So I mean, your units and your businesses mushroomed substantially over the last, what, 15 years?

BOB MUGLIA: Well, yeah. I mean, if you go back — when you start — I often say that I joined Microsoft 21 years ago. I was the first program manager on SQL Server, and at the time, we could handle precisely zero percent of customer business applications, so now we’re at a much higher percentage than that, and so we’ve been able to go. As — we followed — I always go with the flow, right? You never want to be swimming upstream. It’s really tiring to do that. So, what is the technology flow? The core technology flow is following what Moore’s Law has done and the move to industry standard computing. So, we followed that.

If you look back — my first — I remember it very well. My first server that I had was an OS2 in my office, because I was a program manager/developer back then, and I was writing some code, and it was in 1988 on SQL Server, and I mean, I had this IBM PS2, if you recall the PS2, and it was a 386 system. So, it had 32-bit. OS2 didn’t take advantage of 32-bit back then. It was a 16-bit system, but I mean, if you look at that, and you look at that computer as a state of the art industry standard server — someone might have said a compact server was state of the art back then — but nonetheless, the idea that a 386 was — with, I don’t know, I think it had two megabytes of memory in it at the time, something like that, maybe four — that that machine was state of the art, you compare that to where we are today, that’s the trend that’s enabled all these other things. So, –

STEVE GILLMOR: Right, but inside Microsoft, I mean, the servers was considered to be a reach.

BOB MUGLIA: Fifteen years ago.

STEVE GILLMOR: Yeah, so what happened?

BOB MUGLIA: We kept working at it. I mean, it’s really — I mean, what happened is basically — I mean, it’s really following the playbook and following the industry. What happened is the industry matured, and the availability of high-end — of low-cost and yet very powerful and very reliable computers enabled a generation of software to take advantage of that. And it’s just a constant application of the playbook. It’s just a constant saying, okay, it’s 1998 right now. What can you do with a server in 1998? What are our customers trying to do? Well, in 1998, our operating system that we had out was NT4. I look back at NT4, it had a lot of problems, but at the time it was actually a fairly major leap forward, and it was really our first generation of Windows Server, Windows NT Server it was called back then, that really allowed customer to solve a whole set of business problems.

So — and all of a sudden you start having people do things. Roll forward, 2000. Okay, Windows 2000, (inaudible) directory, et cetera. That was where customers were, distributed systems, et cetera. 2003, well, people will look back on 2003 as being the release of Windows Server that really broke through into the mainstream. I mean, that was the release where the operating system became very viable, highly reliable, it worked really well. People could solve a broad set of business problems. I mean, I’d say prior to that, there were enough issues that it wasn’t what it would call truly and completely mainstream in terms of the usage. With 2003, it — 2003 is still the most popular server operating system ever shipped. 2008 will replace that over a period of time, but 2003 has a few more years of existence.

So that was that breakthrough, and then since then, it’s really been a constant application of focusing on what customers care about. I mean, when we think about the server business, the way I fundamentally run the business is I think about what we call workloads, which is really how customers view business problems they have. That’s what a workload is. It’s I have a business problem, I need to build a — I need to run my network, I need to have — I need to be able to have an application server. I need to run a database system. I need to run a messaging system. I need to run terminal services for users and task workers. Those are all examples of business areas, problems customers face.

So we say, hey, what can we do to build the best system? If you go back to, say, 2003 — I took over Windows Server in I believe 2004, 2005. If you go back to 2003, generally speaking, the world viewed that this operating system called Linux was going to take over the server world, and make Windows sort of irrelevant. What’s happened there is we said, look, there were a set of views of Linux that customers had that there was education needed on, but fundamentally I came from a perspective that customers make rational business decisions, and they will choose Linux and Linux-based solutions if that better suits their business needs, and they will choose Windows if we can provide a better value and better suit their business needs.

There was a belief that Linux was free. That was the one thing that people had to be educated on, because for what most customers do, it’s not free, because people built by service agreements, and I mean, there’s an ecosystem that has to exist around it. Nothing is really free. So, it turns out cost is not that substantively different. We always — you know, we’re willing to drive our prices down. It’s part of our playbook to drive our prices down to get share. So, the cost difference wasn’t that big a deal, and really it came down to a value proposition and what customers could do.

And so we did this workload analysis in, say, 2004, so — and we went through and we said, okay, of all the workloads, and we tracked about 35 of them for servers — we said of all the workloads, where is Windows strong, and where is Linux strong? It turns out, you know, Linux is strong predominantly in three workloads, where it has real strength. That’s not to say — it has existence in all workloads, but it’s really strong in three — HPC, Web, and security.

There are different issues associated with each one of those. Security largely was a perception issue with Windows, particularly because we were coming off some nasty viruses way back then. Frankly, we don’t have a solution based on security at the moment, although we’re building it up, that makes — that truly competes there. But if you look at HPC and Web, what you discover is that we didn’t have a product in HPC. So, if you wanted to build a scientific computing — technical computing system — you pretty much needed to go to Linux because there weren’t any solutions in Windows. Hard to beat something –

STEVE GILLMOR: Or Solaris or –

BOB MUGLIA: Or Solaris, or — but it turns out though that if you look at the market, it’s about 90 percent Linux, right. It’s so dominant — you’re right, Solaris and the various versions of UNIX also had — and back in 2003, they had a larger share. Linux has continued to suck more and more of that up, over the period of time, but it was all UNIX and/or Linux, with Linux predominating. So, we didn’t even have product there, and in the case of Web we did the analysis, and honestly, Apache and Linux were a better product than we had. So, customers were making good business decisions, because they had a better solution on the Linux platform than we had.

So, the way we focused on being successful is to say, okay, let’s look at every single workload, and look at what customers need, and let’s just make sure we build a better product, and price it effectively, and give customers a better solution. And what we find time and time again is, guess what? When we do that, customers choose Windows, and when we don’t, customers choose a competitive solution. And I mean, I think this is pretty sort of 101 Business. I don’t think there’s anything new to it in any place. The only difference, I would say, is that the IT audience is probably a more — they are probably have the time to do more research on their purchasing than, say — consumers are perhaps more influenced by marketing and a set of other things, whereas IT is probably more influenced by — they actually run tests, they bring things in, I mean, they do a whole set of things, particularly larger IT.

And so in that context, it just reinsures that in fact they’re once again making solutions that are appropriate for their business. And so if you look at those things, we’re gaining share now in HPC, slowly, from a tiny base, a tiny little base, but we’re gaining share because we have a very competitive product there. We continue to just sort of struggle along on Web, but what I learned there is we built a competitive product — great learning in this one — we built a competitive product in IS7 and Server 2008. We went, hey, we had a bad — we had not such a good product, now we got a very competitive product, we should be in great shape.

Turned out our channel was a mess, our pricing was a catastrophe. I mean, we had so many other problems in the marketplace, because you actually have to provide a full end-to-end solution for your customers. So, this last year or so, we’ve been working through those and have been chopping them down, and getting our pricing right for hosters and everything else. In fact, we have more of that stuff — we have a lot of things coming in July and beyond on that. Just to fix — it’s just mistakes that we’d made for years and years that we just have to fix, and so we’re fixing those things, and I think we’ll start that engine –

STEVE GILLMOR: I know you don’t want to talk too much about the mistakes, but like what?

BOB MUGLIA: Oh, I’m glad to talk about the mistakes. You know, when we did the — when we did the original version of — we have a kind of licensing we provide SPLA, solution-provider licensing, and — or service provider licensing agreement. And it’s a licensing agreement we have for hosters, predominantly, and when we did the original versions of those, we set our pricing very conservative, because we did not really understand the market very well. And frankly, we just never went back and looked at it. So, when you looked at the pricing, it was a lot less expensive for customers to buy Windows Server on premises, and deploy them within their own IT shop than it is for hosters to acquire the equivalent technology. So, our pricing just wasn’t competitive.

And then we had some crazy things in our licensing that were just super confusing, about — it has to do with the fact that our on-premises licensing consists of buying servers, and then client access licenses for usage. So, we tried to put those two things together in one price, and we wrote a license that nobody on the planet could possibly understand when you needed to buy this way high price version, and when you need to buy this low price version. I mean, I couldn’t understand it.

So it just creates all sorts of impedance and friction in being able to make the right things happen. So, we’re changing all of those sets of things.

STEVE GILLMOR: How do you do that?

BOB MUGLIA: Just change our licensing, and then we go back to –

STEVE GILLMOR: So it’s clearer?

BOB MUGLIA: Yeah, basically what we’re doing is making it very clear that in this hosting space, that you can buy the lower cost license if you’re just — if you’re hosting an external Web server that’s facing the Internet. If you’re trying to run a business internally on these servers, then you need to buy the higher price license, because it sort of bundles Cowles in. But that clarity was just not there. It was called “authenticated” previously.

Well, Web sites are authenticated too, right, I mean — and so when did a customer need to buy an authenticated version versus not? So now it’s — the licensing is focused on outsourced — whether you’re using this for outsourcing purposes, okay, or whether you’re using this to host a general purpose Internet Web site.

STEVE GILLMOR: So what’s the value proposition vis-à-vis the LAMP stack?

BOB MUGLIA: The primary value proposition is the ability to take the full set of Microsoft tools and everything, and get a solution together much, much quicker, and to be able to do so in a way that’s more maintainable over a long period of time. I mean, ultimately if people can use LAMP to put together a solution faster and more effectively than .NET and Windows, we’re not going to win. The one thing we have really going for us is a very, very strong set of developer tools, and a very strong developer proposition.

The interesting thing about LAMP is, is that LAMP has — is very simple, so it’s quite often easy to do something quickly to start with. As time goes on and people want to do more and more with LAMP, it becomes more complicated, and our tools — we seek to make it easy for people to do something quickly, but also focus on making it easy for them to continue to enhance it and make things better over time.

STEVE GILLMOR: You just talked about essentially what Scott Guthrie has been doing in the development space, to kind of have rapid Web development sitting on top of the services which could be today on premises and tomorrow in the cloud, or some sort of hybrid combination.

BOB MUGLIA: Yeah, that’s right. I mean, our real goal is to build a development — an application platform that makes developers more productive than anything else on the planet, make it simpler and easier to build applications, and whether that’s being used for customers internally to run their own business applications, or with their own internal systems to run external facing Web sites, or whether that’s in the cloud, running on a public cloud such as Windows Azure, we want those to be very compatible for people, and make it easy for people to build these applications, and make it easy for people to start with an application in-house, and be able to transition it in the cloud, or vice-versa.

STEVE GILLMOR: So do you think that developers are going to take to Azure — or put it this way — what reasons are they going to first approach Azure?

BOB MUGLIA: The biggest reason that people will approach Azure is because it’s Windows, it’s Windows Server. And if you’re a developer that’s familiar with .NET, if you’re a developer that’s familiar with building on the Windows platform, and you have application investments in there, we’re working to enable developers to build that in a public cloud, with Windows Azure. The one thing that Windows Azure brings that’s very important beyond that is it is a place where we are invoking and helping to simplify the next generation scale-out programming model.

I mean, today most business applications, most Web sites, have not been built in a way that makes them easy to scale out as needs increase, and there’s a set of services that a platform, an application platform and development tools, can provide to make that much simpler. That’s what we’re doing with the combination of Azure and Visual Studio. In a lot of senses, it’s what Microsoft does. I mean, if you go back 15 — 15, 20 years ago, it was really hard to write a Windows GUI application. We created Visual Basic to make it easy.

Today, it is possible to write a scale-out application, and companies like Microsoft and Google and Yahoo! and a few others are doing that effectively, but the skill set that’s required to do so is limited, and it’s hard. We’re going to focus on making that easy, easy to write scale-out applications with Windows Azure and Visual Studio.

STEVE GILLMOR: Silverlight I think is an interesting development, for a number of reasons — not only externally, in terms of its bringing rich Internet applications across platform solution, but also internally in terms of the impact that it’s having on — or potential impact that it might be having on product groups inside. You want to talk a little bit about what you see is going on there, or not –

BOB MUGLIA: Yeah, sure, I’m glad to. I mean, Silverlight to me is one of the most exciting things that’s happening certainly in my organization, and I think at Microsoft as a whole. I mean, what we’ve done is we’ve taken all of the learning that we’ve amassed over the years, in terms of building high-productive development solutions, and the learning that we did in terms of how to build a very rich graphical user interface, and compacted it into this little tiny runtime of this four megabyte runtime, that enables this incredibly powerful set of solutions from within the browser, and with Silverlight 3 outside the browser as well, in a cross-platform sort of way.

So enabling people to build solutions that run on the Macintosh, and run on Windows, and then through our relationship with the Moonlight team and Open Source, to be able to run on Linux as well. It’s been kind of fun to help Miguel and his team as they’ve been driving an Open Source implementation of Silverlight, in the form of Moonlight.

STEVE GILLMOR: You think it’s acceptable to have something that trails by anywhere from six months to a year?

BOB MUGLIA: I think it is, especially because what you’re seeing is you’re seeing an Open Source piece of development that’s created, that will allow for Silverlight to move into all sorts of places where we can’t — we can’t see. And I mean, I just met with Miguel out in Boston, oh I guess two and a half weeks ago, and I actually think the period of time is decreasing, and he’s doing a great job of lowering the delta between those two things. And frankly, we’re working hard to help him, too. I mean, there’s a lot of things that Microsoft is doing to help the Open Source community keep up and do things.

I mean, one of the key things we did is for all of the controls that we’re releasing in the Silverlight environment, we’re releasing those with a license that allows them to run in an — we’re providing the source code under an Open Source license and allowing them to run in Moonlight. So, massive, massive amounts of the investment that’s going into the core framework for Silverlight is already written in an Open Source way that Miguel and his team can just make wrong on Moonlight.

But I mean, the thing that’s interesting Silverlight — Silverlight has had acceptance and has generated a very strong amount of leadership in a couple of spaces. You know, sort of the first space where we’ve seen leadership has been in the video space and high definition video, where really it’s a combination of the Silverlight runtime player, the runtime environment, together with the work that’s been done in the server space with smooth streaming, to really redefine the way video is done over the Web. And I’d say I think the impact of this is going to be very dramatic for end users over the next few years, where we’ll begin to see incredibly high quality, over-the-top experiences being delivered directly from a wide variety of Web sites, to end users, on their devices — on their PCs, on whatever device they’re using to surf the Internet — with effectively HD pixel-perfect quality, and the kind of user experience that you’d expect.

I mean, one of the things that I find incredible is this new smooth streaming technology. You know, we now have live smooth streaming working, so that you can have a server — one server feeding the entire Internet from a live video stream, and have that experience being broadcast out in HD, with full record capabilities. Everything is all there. So, if you want to go replay a scene, you can go back — instantly go back to that scene, and then go forward, and it’s all — it works exactly like you’d want it to work, and the only thing is, is you’re sort of looking at this and go, well, what’s the big deal? It works the way you’d want it to work, and then you realize that it just doesn’t work that way anywhere else.

If you’ve ever been — you’ve ever watched Internet on the video, you know, you want to go forward to a frame forward, you see buffering, buffering, buffering. You know, it takes forever. This is instantaneous, and the other aspect of it is, that the design, and this is really work the server team did, that’s part of Scott Guthrie’s group, the IIS team, what they did is they leveraged the entire — the entire HTTP/CDN networks that people already have. So, the CDN vendors, the content delivery vendors, they don’t have to build a separate architecture to support this smooth streaming.

So the servers that exist to do Web caching, standard Web caching on the Internet, that are being used for Web pages, can be used for video. So, to me, that’s one of the exciting things that Silverlight opens up. You know, there are others, as we being to see very rich 3D, high graphics quality applications being built as well.

STEVE GILLMOR: Well, and the big question, of course, is, you know, from the political perspective, pardon the expression, how do you get — will there be a Silverlight Office, something like that?

BOB MUGLIA: What I think you’ll see over time is major parts of Microsoft applications beginning to incorporate Silverlight into their experience. I mean, as — if you look at, for example, the Web companions that Office is doing, they do use Silverlight in a variety of instances. So, we’re seeing that being used there. We’ll begin to see Bing and MSN and our online properties begin to adopt Silverlight inside the set of things that they do. We already see some of that in a limited form in Windows Live.

If you look at my business, which is less consumer-focused, and we focus really on business customers, we are building interfaces that are Web-based interfaces for our business servers, using Silverlight. I mean, it’s become pretty universal that the kind of experience we can provide, in this case, a system administrator, is much, much better, we can write it much faster, by using Silverlight. And as we begin to launch new services — we have a management service we’ll be launching next year that’s System Center Online, that enables people to manage desktops through a cloud-based service — the entire user interface for that, from a management perspective, is all done in Silverlight.

And by the way, it’s incredible — it’s impressive because it’s very fast, and extremely responsive, from an end user perspective. The kinds of apps that can be built using Silverlight have really — they feel like native Windows applications. They have that level of responsiveness to them, and then they’re very rich, and yet they’re browser-delivered.

STEVE GILLMOR: You know, the Netflix implementation brings a whole business to the Mac. I mean, that’s a big deal.

BOB MUGLIA: Right. No, that’s exactly — Netflix has been a key customer of ours that has taken and utilized the high definition capabilities that Silverlight delivers, and enabled them to build a very rich experience, not just on Windows, but also in a cross-platform way.

STEVE GILLMOR: I’m sort of backing into a discussion about what we’re trying to do in this so-called real-time space. Do you have any sense that real-time is something that’s emerging, or is it just –

BOB MUGLIA: You mean real-time communications and collaborations? Is that what you’re saying? Well, I mean, I think it’s very obvious that it’s emerging in a lot of different forms, and I think it’s still — it’s such an emerging space that the exact ways in which it’s going to be changing over time are fairly unclear. I mean, we see tons of interest in tweeting and Twitter and what’s gone on there. We’ve built a pretty strong business around real-time communications within our Office business, for business customers, and that is one of our strong growth opportunities.

The interest people have in taking the combination of textual-based real-time, together with voice and video real-time, whether it be conferencing or one-on-one communications, and bringing all of those things together into new experiences — you know, an interesting one for me in this, in a business space, is there’s been these emergence of very high-end video systems, whether it’s telepresence or Halo, and the idea that businesses will have these high-end video rooms that can then connect to end users and work with people that don’t have that level of equipment available, but can have a phenomenally great experience from their PC, from the phone and from the camera and the microphone that they have on their PC, and interact together with those things.

I mean, we recently did a demonstration of that, showing a high-end HP Halo room connecting with a UC system, where people using standard equipment that’s just available as a part of their standard PC, can participate in these telepresence systems. I mean, that’s the kind of thing that is an example of the sort of thing that we’ll see, and I think that will emerge much more in the consumer space, too.

STEVE GILLMOR: You know, the real question for me is whether Microsoft can move aggressively into this space as a sort of center of the desktop type of application. I mean, you’ve got e-mail, you’ve got Messenger, you have a bunch of separate not-particularly-integrated tools, and along comes this sort of mainstream message bus that people are starting to use for a combination of marketing and promotion and internal communications. There are things like Yammer, there are a bunch of ways to take this apparently trivial application and turn it into something that will provide a real business value.

BOB MUGLIA: Well, there’s no question. Like I say, it’s something that’s emerging and is having a massive impact in the way people communicate and work together. I’ll say, though, I mean, I think if you look at communication systems, and usage within business, I mean, Microsoft has had a massive impact with new systems like SharePoint. I mean, the usage of — SharePoint has absolutely exploded within businesses, and has rapidly become the standard.

STEVE GILLMOR: Why do you think that is? I mean, SharePoint, when it started, seemed like a WebDav extension, basically. It didn’t seem like much of anything.

BOB MUGLIA: Because of the versatility of what you can do with SharePoint. I mean, the reality is, it’s a classic Microsoft thing where we put tools in the hands of end users, where they could build a collaborative solution for their team or their environment, and have that together in literally just a few minutes, and very instantly allow people to work together more effectively. And at the same time, SharePoint allows for broad business solutions to be built. I mean, you see two sorts of usages of SharePoint very broadly inside business — one is for broad team collaboration where you have — in Microsoft, there are literally hundreds of thousands of team sites that have sprung up on SharePoint, and that process, where companies begin implementing SharePoint, and these sites mushroom up within the organization, that’s what people find again and again.

And at the same token, people use SharePoint — businesses use SharePoint — as a standardized portal for how business information is shared out. So, whether it’s business data, or whether it’s information about HR or financial things for companies, SharePoint has become the standard way that businesses expose that data to their end users. And you know, it’s this combination of a viral spreading within the organization and the end users, together with the ability for companies to implement it more broadly, that have, I think, made SharePoint so popular.

STEVE GILLMOR: So you think that — I hate to use the term “tweeting” or “Twitter” to sort of summarize something that I think is a lot bigger than that, but do you see that as being integrated through SharePoint?

BOB MUGLIA: I think you’ll see features of that nature going into SharePoint, I mean, over time. I mean, you’ll see much more the ability for people to have these real-time communications, and in these cases these little tweets where they’re creating threads that have short — have a whole set of short comments.

STEVE GILLMOR: And if you take Silverlight and add that to that?

BOB MUGLIA: Well, what Silverlight is, is an enabler. I mean, the way to think of Silverlight is, is it takes what you can do with the Web today and makes it richer, and it does so in a way that’s very broadly available, and is — and can be built very quickly and very effectively. So, I mean, the kind of experience — you can get a certain kind of experience today with the Web browser. With Silverlight, you can get a totally different class of experience, and there’s a lot of value to that class of experience, relative to the way it enhances the way people work with information. And I mean, I think that’s true in the consumer space; I think it’s also true in business.

STEVE GILLMOR: But why are you Silverlight?

BOB MUGLIA: Because I own the developer team, and my team builds platforms, and whether that’s server-based platforms, in the form of Windows Server or SQL Server, or whether that’s the set of developer tools in Visual Studio. In this case, Silverlight is built by the same team that builds .NET, and also builds our Web server. That’s Scott Guthrie’s team, and frankly Scott just does an awesome job of moving his team forward, and really deeply understanding what developers need, and then building solutions that meet those needs.

STEVE GILLMOR: Well I think we’re seeing this — in the last Mix I think it was, and the PDC announcements about APIs and so on, that were being released first for Silverlight, and then followed up with WPF.

BOB MUGLIA: There are a few cases of that. I mean, part of it is WPF is on a release cycle that works with the broader .NET framework, so it’s not quite as fast a release cycle as Silverlight has. We’re trying to keep Silverlight on roughly a yearly cadence, so we’re driving it very, very fast. We’re very close to releasing Silverlight 3, and you’ll begin to see Silverlight 4 before the end of the year. I mean, we’ve been actively working on the next release.

So we literally have two different teams. We have a team working on releasing 3, we’ve got a team that’s already begun on 4, and then they’ll sort of swap and move forward. So, we’re focusing on doing things fast.

STEVE GILLMOR: What are we going to see in Silverlight 4?

BOB MUGLIA: Well, what you’ll see is more improvements along the lines of what we have today, so continuing to make the video experiences better. You’ll see us broaden what you can do with Silverlight in terms of international support and things. I mean, one of — if you talk to people who are trying to build business applications and reach broad sets of consumers, and they want to reach consumers in China and India and Thailand and everywhere else, so being able to easily support a broad set of languages, I mean, the way I sort of view it is Silverlight 3 is the mature, broad platform people can use to implement things with, and we think that that’s where we’ll see very strong application adoption. Silverlight 4 rounds it out. It takes the next step forward and continues that process.

STEVE GILLMOR: What do you think about HTML 5 and the strategies that Google has employed?

BOB MUGLIA: Well I think HTML is — I mean, I’ve always been a very strong believer in standard space browsers and continuing to advance that. HTML 5, it has to get stabilized, I’ll start by saying that, because first of all, there’s no clear definition for HTML 5 right now, but what the world needs a very strong HTML 5 that does get standardized, and we’re going to be investing through our IE team in building a world-class implementation against that. The real key here is because it’s a standard space process, because it’s a process where you’ve got a whole set of browsers that’s building it, the speed at which that innovation happens is somewhat slower than what you can do with something like Silverlight.

STEVE GILLMOR: All right. I don’t mean to end on this note, but I think that Silverlight has this interesting kind of positioning inside Microsoft that is starting to have the appearance of essentially the input to a Web operating system, and that seems to be within Microsoft’s agenda on some level.

BOB MUGLIA: Well, what’s very much in our agenda is to enable people to solve problems that they can’t solve before. To me, the perfect example of that is this Web streaming, where the idea of being able to do over-the-top, HD quality Web streaming, live, delayed, everything, all instantaneous, instantaneous user response — to be able to solve problems like that faster, and get those to market quickly, I mean, that’s to me the kind of thing that Silverlight’s all about.

You know, you’re right in the context that it is a broad platform, and the platform is going to continue to increase in its scope, but you know, the goal here really is to make it easy for people to build solutions that they can’t build today, and to deliver value to their customers, whether that’s business customers or consumers. And I think we’re doing a pretty good job of it with Silverlight. There’s things you can do in Silverlight you can’t do anywhere else. We’re going to continue to advance that lead that we have, and Scott is driving that team very fast to continue to do that innovation.

The key thing that we’ve done with this environment is you’ve got 6, 8 million professional developers that know .NET, and we’re being able to take those developers forward and give them access to customers that they’ve never had before, and that’s why I think it’s pretty exciting.

STEVE GILLMOR: I think that what Azure’s going to do is to sort of make it acceptable for Silverlight to become something that’s reasonably open, and yet aggressive in this real-time space.

BOB MUGLIA: I think the two will work together. You’re right, you’re right. Of course, you can use — I mean, the thing I’d say is you can use a server — first of all, Silverlight doesn’t actually require a Windows server on the other end. I mean, you can actually use a Linux Web server on the other end, it turns out, but of course you can go to any hoster and host — get a Windows server hosted there, or a Web site hosted there, and incorporate Silverlight into your account. So, it’s not just Azure. I mean, that’s one thing people sometimes get confused about is, is that you’ve got — there are literally thousands of hosting providers in the world, and we don’t see those guys going away. We want to help them be more and more successful.

My goal with Azure is to not take their business away, my goal with Azure is to help expand the business overall. You know, I look — in some ways, the reason we do Azure more than anything else, as it turns out, in order for us to make our platform a great hosted platform, we got to host it ourselves. You just don’t get the learning unless you host it yourself. So, when all said and done, we may have 10 or 20 percent of the marketplace for hosted Web things, but the majority of our customers will run still on thousands of different — from thousands of different hosters around the world.

So I agree with you, the idea that as the hosting environment becomes more common, that it does open up opportunities for apps built on Silverlight, but it’s more than just Azure.

STEVE GILLMOR: Yeah, no, I think that’s exactly what will happen. We’ve been working on this project that we’re building on Silverlight, and at a certain point, it becomes sort of second nature to sort of in planning, think about how we can take advantage of the Silverlight platform, as opposed to thinking about it in terms of either a Web application or a native Windows application. It really –

BOB MUGLIA: It becomes very natural.

STEVE GILLMOR: You stop really thinking about that in that way.

BOB MUGLIA: One of the things you’ll see as we advance Silverlight is continuing to advance the frameworks to simplify the common interactions between a server and a rich client. I mean, with Silverlight, you have a rich client, right, and you’ve got a lot of computational power, everything available there. So, whether it’s getting data down to the client or invoking rules, whatever it might be, making that simpler, and this is the sort of stuff — it turns out that if you look at the amount of time people spend building business apps, or apps of any kind, consumer-based apps, et cetera, there’s a set of problems everybody has to do again and again and again and again. And you know, the kind of stuff Scott and his team are doing is saying, okay, these are the ones we’ll just build into the framework and make real easy for people, and so that’s what you’ll continue to see as we continue to evolve Silverlight.

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A few weeks ago, I traveled to Las Vegas to attend IBM’s Information On Demand conference, and took the opportunity to sit down with Big Blue’s Steve Mills, Senior Vice President and Group Executive of the IBM Software Group. In English that adds up to Steve being The Man at the helm of IBM’s embrace of Web Services, with the software group accounting for one quarter of IBM’s $100 billion business. While others have partied down on Web 2.0 and its various social themes in perhaps a more outward facing way, it turns out IBM is very focused in the same areas, albeit with an eye toward leveraging its deep relationships with the enterprise.

If raw information accounts for the lion’s share of useful data, IBM’s investment in analytics and “mining the nuggets” suggests the company’s history of eating its own dog food with early realtime technologies like Notes and Sametime will bear fruit as IBM begins to share its best practices with customers. But what of the TwitterSphere, the social media stream of micromessages — does IBM see what they call sentiment analysis as a different animal than the internal data that runs corporate systems? Mills says yes, citing IT and regulatory concerns about closely held data leaking across the firewall.

But when I cite competitors such as Salesforce who are rapidly harnessing social relatime data with their CRM and SFA applications, Mills says IBM is doing the same thing with its Lotus Connections technology when customers ask for it. “You have to allow these scenarios to exist if the company wants that scenario,” Mills says, noting that some companies would rather enable what they can’t stop and take advantage of the wave without being overwhelmed by it.

Mills says about half the IBM population microblogs today, using incremental additions to Sametime built not on open source but what Mills delineates as open standards. He sees microblogging as a way of triggering people finding people, with swarming around topics and events producing positive collisions. When I suggest he and his troops are real adopters of realtime, he suggests the word “fanatics.” This is a long-time IBM strategy of amortizing its development (and acquistion in the case of Lotus) costs with internal usage, then rolling the results of that experience out to its army of customers.

Mills was not sure companies would be ready for this free-wheeling technology in the face of regulations and data governance, but was pleasantly surprised when it took off like a rocket. “Businesses were more ready for it than we had thought,” and Mills sees a fairly profound shift as RealTime takes hold. “What’s acceptable to people today is probably something beyond anything they thought they would be doing ten years ago.”

As avid users of the stuff, IBM’s view is that the speed of the stream is not so much to be coped with as to allow the interactions to occur. “There is tremendous value if your company has a culture of problem solving…. There are cultures that are very internally competitive… that don’t want to share,” Mills debates. And he knows where Big Blue comes down on this, saying there’s no company in the world more prolific in its use of collaborative technologies.

IBM continues to invest in predictive analytics across structured and unstructured data, and IOD attendance was strong as companies began to flesh their IT muscles as the recession appears to be abating. The efficiencies of information management hold up well in tough economic times, and IOD featured many sessions and demonstrations of SPSS and earlier acquisition Cognos working together to reduce municipal costs by predicting crime and fraud and shifting resources to combat those drains on budgets.

For Mills, the experiment begun 10 years ago formerly known as Web Services has been wildly successful. The mix of service oriented architectures (SOA), Web 2.0, social media, ubiquitous bandwidth, and low cost microprocessor technology allow us to instrument and analyze the world around us as we’ve never done before. Is it good for IBM too? Mills says IT has always made its own market. “This is the most adaptive tool that mankind’s every created…. Who would have thought this would have been a $1.2 trillion industry?” That could double in size in 10 years, he predicts, as operating and capital expense from other unrelated areas get converted over into IT.

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As social media clouds become more resilient, we are trusting them more. Twitter lists are a robust signal that the company has moved from keeping up to encoding the value of its network. We won’t see many new stars as lists proliferate, but rather a better sense of how to model the new media forms that micromessages enable. Boiled down to vertical niches, lists are the instantiation of a way of looking at the Web, a kind of Yahoo 2.0 based on people aggregation rather than sites or topics.

But what value do these lists have in raw form? It feels like a Wikipedia page, where you learn not to click on hyperlinked words for fear of getting lost in ever-cascading tangents based on ever-more generic topics. Instead, you rely on the intelligence of whoever constructed the page, scanning for clues as to authority, serendipity, social characteristics worth capturing for yourself. Two problems: the list architecture is splayed all over the place, and we have no tools for harvesting the value.

Of course, we’re just seconds away from the onslaught of third party takes on the subject. Surely we’ll see interesting aggregations of the Top 100, the best, brightest, sexiest, etc. We’ll recognize the familiar names and ratify their positions in the new marketplace. It’s a marketplace that will have its own hierarchy, its own Oprah, its own politicians, police, and underworld. And with all that will emerge its own underground economy.

What is the Private Web? It’s the private place only we know about (or think we do.) It’s the place where our deepest fears and instincts combine to produce the hunches that drive our lives. As a parent of a teenager, I’ve seen my hunches evolve to reflect the rapid pace of social media and my daughter’s use of it. Twitter is nowhere on her radar, Facebook serves as a gas station where she pauses for fill ups, and video chat and IM are interrupted only for food, homework, and periodic audiences for the purpose of fundraising for road trips.

All of the most important parts of her life are conducted on the Private Web. This is not a good or a bad thing; it’s just what it is. I can sense her world but only by inference — more by the difficulty in understanding parts of it than any rational tool such as asking questions or withholding permission until information is volunteered. I feel like Steve Wonder, blind but with some heightened power of perception that slowly carves out information from the resiliency of the difficulty of it.

Take this exchange:

When are you going out?

In a bit.

[some narrowing to an hour, say 4]

Who are you meeting?

Uhh, Amy and mumble and whatever. [co-conspirator, someone I don't know, and no mention of whoever I want to know about, usually boys]

So when will you be coming home?

I don’t know I’ve done my homework [usually not] and it’s [whatever day it is] and I just want to have fun with my friends, Dad. Jeez. [Obfuscation of the length of the excursion to allow for audibles at the line of scrimmage to do all the stuff I should be concerned about]

Lengthy negotiation based on the hunches I’ve collected.

What’s important to understand is that my daughter already knows exactly what she wants to do and has modeled it to the best of her ability to predict the future, online and through the social media framework. Facebook tells her where the opportunities lie, texting confirms or augments those clues, voice is only used to ratify plans once the permission map has been drwan and pre-tested for potential disruption. These kids are really good at this stuff, and we are learning more from them than they from us.

Some conclusions gleaned from observations of the Private Web:

• It’s not about Twitter, it’s about what Twitter has triggered.
• Realtime is the best way to get what you want, before defensive measures can be deployed.
• Friends are important, and particularly a deep bench. If one friend becomes overexposed, you switch to a backup.
• Texting is the prime channel, then video, followed distantly by email and IM.

To unpack, last in first out. Texting is tied to a hard coded identity, credit card, device. This provides two-way leverage, where the parent (boss) can monitor and require timely feedback, while the child (you) can meter out pseudo-information to keep you happy while navigating largely unseen on the digital network. It is much easier to project a sense of action, reliability, and strategic positioning via social media when you can downplay the value of moving physically through space and time. Foursquare will hit a wall once adults (companies) discover the existence of these breadcrumbs. Foursquare will counter by virtualizing location.

Just as location will become more editorially enhanced, so too will the role of the team in social hierarchies. It’s much more useful to have interchangeable friends or partners, so that the parent (company) knows there will be some coherent continuity regardless of conditions on the ground. People profess to value collaboration, but the strongest connections in the social graph are between groups of overlapping friends who in aggregate add up to a rational team but don’t require hardcoded roles. Put in nightcrawling terms, it’s “OK, I helped you out last night, tonight you’re my wingman.”

Realtime, of course, just plain wins. You may get away with almost a few times, but once people are onto you, they’ll start serving the ball to the weakest point. Realtime is inexorable because our sense of timing adapts to each generation of realtime and soon gets frustrated with how slow it is. How many times have you interrupted someone’s argument because you know what they’re going to say? How many times have you skimmed a post or even a tweet for some clue that it’s worth whatever miniscule time you’re now tuned to? That’s why video is right there after texting, because a picture is still worth a thousand words. “If looks could kill…”

And first but not least, Twitter is so not the point but what it has created is. The key to the Private Web is notification, not the actual content. The social signals that enable or disable connections are the new PageRank. It’s not a link but the ability to see the metadata that describes a link’s immediate value that’s valuable. My daughter uses speed to get off the phone or out of range before I can pin her down for the next number to reach her at. The data is sitting there in plain sight but where it is is obscured. Understanding her social graph in realtime is what we want to know and what she wants to obscure.

The Private Web operates on deeper emotions and instincts than we are accustomed to acknowledging. Where do I want to go? Who do I want to be? In the case of my daughter, how do I get to be who I want to be? The keys to the Private Web are shared, not at a location but via implicit and dynamic permissions to access the stream in realtime. Those who signal their understanding of this deeper value pool will implicitly advertise their value, and encourage us to request permission to share with them. Those deeper conversations will contain higher value as we trust those who share them to keep them private to the group who values them.

Twitter may not support conversations very well, but it provides clues to where the Private Web exists. These conversations live in the cracks between the public stream and direct messages, hidden either by obscurity or purpose. As they become more useful, the tendency will be to make them public, but in doing so they will lose that unique quality of trust and value. Instead, these private conversations will grow, until everyone is participating.

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We’ll soon see how well these cards are being played, but for now the one fundamental fact is that, as with Noah, there are two of everything. Twitter and Facebook. Google and Microsoft. Scoble and Scoble (the one at the top of the thread and the one at the bottom.) This is very important because it undercuts the rationale for throwing FUD at the BigCos by turning us all into Missouri. If there are two locked trunks (varying degrees perhaps or not, doesn’t matter) then we can make up our minds for ourselves. The result: a valid user contract.

The reason a valid user contract is important is that it shifts the argument from who’s doing what to whom to what are we agreeing to do with our data. We may have argued over the value of Track on an individual basis, but this week’s announcements underline its value in aggregate. The hostility over the embargo of realtime search eased when FriendFeed opened things back up with realtime conversation; now the Facebook acquisition is being used to restart the notion of exclusion. But it has much less force once we notice that, just as with the Fail Whale, FriendFeed will continue until it morphs into a Facebook hybrid. We will continue to have a choice, and will validate those, preferably two, who continue to scratch the aggregate itch.

Viewed through the lense of the power of two, big memes like scalability and market force take on a different hue. What does it matter to me how good Windows 7 is in the abstract, as a revenue splash for Microsoft or as a funding mechanism for whatever the company is trying to do in the WebOS era? Not a lot, but certainly much less than in the context of OS/X, WebKit, iPhone, Android, etc. In context, Windows 7 drives the motion of the two forward. It means that Google Voice drives Apple to drive AT&T to open the door, while driving the Android ecosystem to firm up its AppStore and bake out its alternate proposition. It’s like what Tim Berners-Lee is doing, playing the US and UK governments off each other in a race to document transparency.

This counter-surge disruption draws its power from the elasticity of the network and the cloud computing model. Next to this inexorable self-correcting dynamic, the politics of both FUD and silence fail miserably. If the sound sucks on a Startup School webcast from Berkeley, wait a half hour and the chorus of Fails prompts a fix. If you have to leave to drive to the event, get someone to patch the feed into Ustream so you can monitor from the car. If the car doesn’t play iPhone app audio, get a car that does it right. These micro-decisions in ones and twos make a small ripple; in a cascading social wave, you get Twitter and FriendFeed and Facebook and Google and Microsoft. And in that world, you get a new media model.

The mistake (if that’s what it is and not the fuel for progress) that’s made in identifying any one node as directly competitive with another is that the least important aspect becomes the defining metric of success. In fact, FriendFeed is wildly successful because it does not compare directly with Twitter or Facebook in scale or “user friendliness” but rather creates the ability to do things in the context of those successes. If Twitter lists make some of those FriendFeed processes possible in the larger platform, it only accelerates the value proposition of the aggregate tools. The barrier to entry is in finding complementary roles for new players beyond the first two or three.

Evean Williams’comment about there being room for both Twitter and Facebook may have been good politics, but it also reflects the larger reality of the power of two. Minus Twitter, Facebook remains trapped in its internal domain, without the escape route opened by Adsense to allow Google to achieve scale to create pressure on Microsoft. Without Facebook, Twitter has no vehicle for moving into the larger company’s private (and enterprise) market. FriendFeed is as much the structural backbone for Twitter as it is for Facebook, and Williams’ comments about not seeing two-way synchronization as particularly useful between the two clouds was the least perceptive comment he made at Web 2.0. In fact, the power of two will mandate full sync whether he likes it or not.

Forget the noise about FriendFeed and its founders being elites or two engineering-focused or whatever Silicon Valley spam you hear. If you’re looking for signals about where this thing is moving, look to the voices that are making the turbine spin. It says nothing about the various entities that make up the technology environment, negative or positive, to deride any one node. Commercial, social, open, pay-per-view, whatever. The most disruptive thing I saw on stage at Web 2.0 came from ComCast’s Brian Roberts, with the beta on-demand service that erases the boundary of the TV and the computer. This has gone wll beyond the politics of exclusion, the swiftboating of any individual, company, ideology, format, or layer of the stack. That won’t stop the sniping, but nobody really cares.

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