Space v face in an online social race

In a throwaway line in an interview the other day, Rupert Murdoch let slip a worry about MySpace, the online social networking site owned by his News Corp. Aren’t newspaper readers drifting off to MySpace? He was asked by the Wall Street Journal. “I wish they were. They ‘re all going to Facebook at the moment,” he replied.

Mr Murdoch was reflecting a common feeling in the febrile world of online social networking. Even a year ago, MySpace’s dizzying growth and popularity among young people had turned it into a social phenomenon. Business Week talked of the MySpace Generation – youngsters who exchanged messages, share photos and lived virtual lives on the site.

Now there is a new kid in town: Mark Zuckerberg, the 23-year-old founder of Facebook. Some wrote him off as an arrogant, hubristic youth last year when he turned down Yahoo’s $1.6bn offer for his business. As Facebook has spread from college kids to adults and draws in media industry admirers, he now seems a very smart young man.

It is a mug’s game predicting which social networking service will endure and which will fade. For a time, Friendster was favourite, before it had technology problems and was overtaken by MySpace; Orkut, Google’s highly-rated venture, became a hit only in Brazil; social networking sites for people at work, such as LinkedIn and ZoomInfo, started slowly but are growing rapidly.

But the fight between MySpace and Facebook is intriguing because they are not only rivals but opposites. MySpace is messy and Facebook is clean; MySpace is a Los Angeles media company and Facebook is a Silicon Valley technology outfit; MySpace aims to entertain while Facebook dubs itself a “social utility”. This is a contest of philosophy as much as number of users.

So here is this mug’s prediction. Although MySpace has four times as many users as Facebook at the moment, I think Mr Murdoch is right to worry. As Google showed by beating Yahoo and others with a different kind of search engine, elegant technology that gives people something they need is a very powerful thing.

MySpace is a free-for-all. You can adopt whatever identity you want and be friends with anyone from people who you know to pop starts and even corporate brands. You can decorate your page in bright colours, flirt with and swear at people and generally mix it up. “We look upon MySpace as the Wild West,” says Travis Katz, head of its international business.

That appeals to many and particularly, I guess, to teenagers. Looking at the multi-coloured and flashing pages that many users build on MySpace gives me a headache, as does perusing some of their messages to each other. Nor, however, would I like to live I a purple-painted room and plenty of teenagers choose to do so when their parents allow them.

MySpace increasingly operates like a traditional media company, albeit a youth-oriented one. It tries to offer its 105m users as much entertainment as possible – including a lot of professional content. Users can post their own songs and watch their friends’ videos but they are also offered film clips from Hollywood and songs from well-know bands.

Facebook, by contrast, is a much quieter and more private affair. Launched at the same time as MySpace in 2004, it had different origins: it was built to allow students at Harvard University to interact with others. The site design is simple and restrained and it feels less like entering a big club than a room with only familiar faces in it.

On most social networking sites, users can see the majority of other peoples’ profiles but on Facebook that figure is under 1 per cent. It is less a community than a set of small communities that hardly overlap. “Facebook is a representation of people’s lives. This is your real name and these are your real friends,” says Matt Cohler, its head of strategy.

The other distinctive thing about Facebook is the degree to which it is technologically driven. An algorithm sifts through all the information about things that a user’s friends are doing – whether linking with others or adding applications to their pages – and serves up a sample of their going-on. It is subtly done, as if little social announcements are chattering over the wires.

Perhaps MySpace will evolve into a place for teenagers seeking entertainment while Facebook appeals to adults who have less time to mess about. The latter may well prefer a service that links them to friends and contacts with the minimum of fuss. One-quarter of Facebook users are already aged 24 or over and they also represent the fastest growing segment.

The sites could complement each other, with people turning from MySpace to Facebook as they grow older. Or they could coexist, being used at different times by the same people, depending on what they want.

But I wonder if that is how people will behave. In practice, it requires a big investment of time and effort to keep up with such sites and people will probably choose one over another in the end. Given that, Facebook’s emphasis on utility rather than entertainment is smarter in the long term. It is nice to be entertained but it is more of a wrench to abandon something useful.

Social networking sites flourish when users have a good reason to stick around – and wither when their attention wanes. So Mr Murdoch should worry about loss of momentum at MySpace. Silicon Valley is full of young men who believe they know better than others. Mr Zuckerberg, however, could be right.

Written by John Gapper, john.gapper@ft.com, for the Financial Times, published on Monday June 18, 2007.

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Africa rising. No more the 'hopeless continent'

Two years ago, in the run-up to the Group of 8 summit meeting in Gleneagles, Scotland, the Commission for Africa advocated increased aid as a silver bullet for Africa’s development. According to the host of the summit, Africa was still the “hopeless continent”, a “scar on the conscience of the world.”

Since Gleneagles, economic growth in Africa has averaged over 5 percent annually – a step up from the dismal 1980’s and 1990’s when it managed little over two percent. And the number of conflicts in an exact corollary of the continent’s better economics – down by two-thirds from a peak of 12 in the late 1990’s.

But this improvement is not the result of aid. Much of the extra aid flowing to Africa is not new money; it is money saved on debt relief, and it has been slower in coming and with more strings than expected.

The international agenda has moved on, too. Interest in Africa has cooled as Iraq, Afghanistan and global warming have heated up.

Yet Africa is succeeding – not in spite of the international community’s apathy or unreliability, but because of it. It has forced African countries to become more self-reliant and to take responsibility. It has marked out the reformers from the laggards and the performers from the spectators.

Simple solutions, like more aid, will never work in Africa.

The continent is infinitely complex and increasingly diverse. You will find both homespun successes and entrenched failures.

Africa remains one of the most food-insecure parts of world. Two hundred fifty million Africans live in urban slums today, a figure expected to double by 2020. The continent accounts for nearly two-thirds of global HIV-AIDS cases. Less than one-quarter of those living in sub-Saharan Africa have access to electricity. Agricultural production is now just one-third of Asia’s level, after parity 50 years ago.

The figures are depressing. Yet what is remarkable – and largely ignored – is how Africa is moving forward despite these endemic problems.

I would cite five main reasons for this.

First, there have been two momentous governance shifts in Africa over the past 15 years – democracy and liberal economic reform. Twenty-five years ago, there were just three African democracies: Botswana, Senegal and Mauritius. Today more than 40 African countries hold regular multi-party elections. Some are far from perfect, but in the fight against political complacency and despotism, the right side is winning.

A second reason concerns the emergency of China and other new players, including India, Russia and Brazil, as forces for economic change on the continent.

China’s rising profile in Africa is perhaps the most significant development for the continent since the end of the Cold War. China’s (and Asia’s) industrial pre-eminence means that African development is unlikely to come from high-volume manufacturing. A combination of natural resource exploitation, agricultural self-sufficiency and high-value agro-exports, and the expansion of its unique range of service industries, including tourism, would therefore seem and to be the most likely and rewarding growth path for many African states.

To get there Africans must know what they want - and from beneficiation deals to technology and skills transfer – and can realistically achieve when they enter into foreign investor partnerships.

The arrival of China as a major African player also challenges the supremacy of the Western aid-development model. In 2005, China committed more than $8 billion in lending to Nigeria, Angola and Mozambique – a year when the World Bank spent $2.3 billion in all of Sub-Saharan Africa. Today Chinese companies are winning about half of all state-funded public works contracts in Africa. No wonder China’s trade with Africa has increased in just six years from $10 billion to $55.6 billion last year. All this highlights the importance for Africa of looking for development to where the money is – private capital.

A third reason relates to the end of the apartheid. South Africa’s democracy liberated its citizens and businesses alike. Since 1994, South African annual trade with Africa has increased fivefold to over R7 billion, while the investment stake of South African firms in Africa has increased by an estimated $1 billion per year.

A fourth success factor is that no longer does Africa wait on external sponsors to mediate an end to conflicts. This mold was broken during South Africa’s own transition 15 years ago, and the insistence of all protagonists on local brokerage. Regionally sponsored peace agreements are today the African norm, supported by African peacekeeping and peace-building mechanisms.

Finally, Africa is catching up on globalization. The continent’s share of global capital flows declined fivefold during the post-independence years to a level of just one percent at the start of this decade. But there is positive change. Foreign investment flows to Africa have recently doubled to $19 billion in 2006. Remittances from Africa’s disapora have increased to $8 billion annually, up from around $1 billion 15 years ago.

Fifty years ago, at independence, Ghana was richer than South Korea. At the time, the Asian country was depicted as a hopeless mess. Korea’s record – and Ghana’s recovery from no fewer than five military coups – shows that a good education and work ethic and a sound business environment can dramatically alter a country’s fortunes for the better.

Today, for every African failure there is a steady stream of successes, and for every autocrat, many more democrats. Sound domestic policy always counts more than external assistance in creating the conditions for growth, stability and prosperity.

More and more, that is the African norm. Failure is the deviation.

Nicky Oppenheimer is the chairman of De Beers.

Property in Observatory, Cape Town, South Africa on http://www.hotpropertyincapetown.com

London's residential property is the most expensive in the world

"Over the next five years, we believe the trend of growing wealth and greater wealth concentration will continue" - Liam Bailey

In a survey of prime property across the globe London topped the list leaving jet-setter's favourites like Tokyo, Cannes and St Tropez in the shade with luxury pads in the English capital costing an average £2,300 per square foot.

In the poll of similar properties at the top end of the market in over 70 cities world-wide Monaco was ranked second - fat cats pay an average £2,190 per square foot in the wealthy principality.

New York was placed third, with prime property fetching an average price of £1,600 pounds per square foot, and Hong Kong was fourth, commanding £1,230.

The research unveiled in estate agent Knight Frank and Citi Private Bank's "Wealth Report 2007" points to the growing influence of high net worth individuals - defined as those with more than £5 million in inevitable assets - on the property market across the globe.

Elsewhere in Great Britain and Ireland, Dublin, Birmingham, Edinburgh and Manchester were identified as prime property locations.

They ranked 17, 19, 21 and 22 respectively, with values ranging from £320 to £470 per square foot.

Rapid economic development, together with the creation of new wealthy sections of society, had led to intense competition for the best apartments and villas in secure prime neighbourhoods - and boosted prices, according to the report.

Looking ahead, Liam Bailey, head of residential research at Knight Frank, said prime property would continue to outperform mainstream markets.

"Over the next five years, we believe the trend of growing wealth and greater wealth concentration will continue," he said.

He said up-and-coming key prime property locations included St Petersburg and Moscow in Russia, Delhi and Mumbai in India, as well as Guangzhou and Beijing in China.

Property in Observatory, Cape Town, South Africa on http://www.hotpropertyincapetown.com

Deconstructing Growth in South Africa - 30 May 2007

THE most striking feature of the gross domestic product (GDP) figures released on Tuesday was the growth notched up by the construction industry. The sector's output surged by a stellar 21.3% in real terms, far outcliping all the others.

The figure is quarter-on-quarter, seasonally adjusted and annualised - in other words, it reflects what the construction sector's growth would be for a full year if the first quarter's performance was sustained. (All figures are reflected on that basis, unless otherwise stated.)

The huge construction number came after an already high 16.5% growth rate in the fourth quarter of last year.

Because the construction industry has such a low weighting in GDP - only about 3% - its massive growth added "only" 0.7 percentage points to the 4.7% overall economic growth rate in the first quarter. But that was a welcome addition during a period when many other sectors showed a slowdown in growth.

The impressive growth in construction is proof that the public sector's huge infrastructure spending programme is getting off the ground in a big way. It includes Eskom's investment in new power generating capacity, the Gautrain and other similar projects.

Bottlenecks

It's important to note that the public sector's infrastructure programme has taken up the slack when other sectors such as manufacturing and retail have slowed down. That was intended to be the case.

But the question is whether the public sector hasn't bunched too many projects together, which will result in bottlenecks and unsustainability of growth in the construction sector. The current account deficit will also take strain, as these projects are import intensive.

For years, government spoke about and planned infrastructure spending. But nothing happened and no-one believed that it was going to happen. Eskom, which years ago should have been investing in new generating capacity, is only now coming to the party.

It's a similar situation at Transnet, which for years promised to improve infrastructure without any real action.

Is the 21% real growth rate in construction sustainable? Probably not.

Lack of skills

Shortages of skills as well as materials will lead to bottlenecks in construction. A huge portion of Eskom and Transnet's spending will be on imports, which have to be sourced in markets where there already are shortages. The reason for the shortages of capital goods in foreign markets is because SA isn't the only emerging market embarking on a huge infrastructure spending programme.

But the spending on construction is vital to lift SA's economic growth potential. Without investment in ports, rail, roads and electricity, the economy won't be able to grow at the targeted 6% rate.

However, that doesn't mean there won't be some white elephants constructed, which add to the numbers now but will turn out to have been useless later. All the spending on soccer World Cup stadiums comes to mind; it's doubtful that all of these stadiums will be self-sustaining after the big event.

Another striking aspect of the sectoral breakdown in GDP is the contraction in the mining industry. Perceptions that SA's growth is benefiting from a commodities boom are entirely misplaced, as mining output contracted 7.8% in the first quarter.

What commodities boom?

It's difficult to explain the weak performance of the mining sector. One analyst says the first quarter figures compared with the fourth quarter figures usually dip, because of some leave schedules that should have gone through in December going through in January. This isn't taken into account in the seasonal adjustment. He says it's better to look at the year-on-year rate of change, rather than the quarterly figure.

But the year-on-year rate of growth in mining was a paltry 1.2%, which also flies in the face of the so-called commodities boom. Yet analysts expect a better performance in the quarters ahead, as new mining projects come on stream. Mining has a weighting of less than 6% of GDP.

The most important sector in the economy - finance, real estate and business services - put in a good performance with growth of 5.7%. This is down on the previous quarter, as was expected, given interest rate hikes. But the sector, with a share of almost 20% in the economy, contributed 1.1 percentage points to overall GDP growth.

The trouble with this sector playing such a big role in the economy is that it's highly skills intensive. Its capacity to absorb SA's massive pool of unskilled labour is limited yet it makes a very important contribution to overall economic growth.

SA like developed countries

In this shift away from sectors like manufacturing towards services, SA is a bit like the developed countries in the world. They underwent a process of deindustrialisation, where manufacturing increasingly shifted to the economies offering cheap labour.

One policy response to the shift would be for government to try to boost manufacturing and labour-absorbing sectors. It's hoped that government's long-awaited industrial policy - due for release this week - will do just that.

It must also be said that growth generated by the financial services sector isn't to be sniffed at, because it provides government with some of the revenue from which to pay social grants. In that way, the sector contributes to alleviating poverty.

These are a just few quick observations on the sectoral breakdown of the latest GDP figures.

This article appeared on www.fin24.co.za on 30.05.2007, written by Greta Steyn

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