Saturday, July 29, 2006

Moore's Law Logic

We all know Moore's law, but very few seem to understand the inevitable logic that it implies. Moore's law states that the number of transistors on a silicon chip doubles every 12 to 18 months. In practice chips are all pretty much the same cost (within an order of magnitude or so), thus we get double the capability every 18 months. The long term consequence of this is that everything becomes digital and every digital device is eventually a single chip.

I will not waste your time you with a comprehensive history. It is sufficient to highlight a couple of trends. The first trend is to digital media, starting with music in the CD and then MP3, then video and books, and now we are on the verge of digital broadcast TV and radio. A second trend is towards the single chip implementation of all electronic devices, starting with watches and calculators in the 70's then consumer electronics like CD players, stereos, radios and TV's. Currently we have just achieved the single chip cell-phone. The trend to digital media helps with the movement to single chip implementations because it is much easier to do an all digital device than one that has both analog and digital circuits.

One device that has so far avoided becoming a single chip implementation is the personal computer. A typical motherboard has about 6 to 8 processing chips, a bunch of memory chips and some driver chips that do nothing more than pass on a strengthened signal from a processing chip. One day all these chips except for the driver chips will coalesce into a single chip, because there will be nothing else better to do with all the available transistors.

So, last week when AMD announced that they were buying ATI, I knew what it was about. AMD has the single chip personal computer on their long term road map, and they need the display drivers and other peripherals that ATI has to complete their vision. AMD has already moved the memory controller onto the processor chip. Next I expect them to announce a low end chip with all the rest of the peripherals integrated. Over time the single chip processor implementation will move up to the mid range and high end. Sometime thereafter, the single chip computer with integrated memory will become first possible and then inevitable.

Saturday, July 22, 2006

The Yahoo Business Model

In the back of my mind I had always understood the Yahoo! Business Model. Yahoo! gets you to sign up for the compelling online services that they provide and in return they sell advertising targeted at you. This was confirmed at the July meeting of the SDForum Business Intelligence SIG where Madhu Vudali, Director of Pricing & Yield Management at Yahoo! Spoke on "Pricing & Yield Management at Yahoo!"

For years, I instinctively resisted signing up for any online services and deliberately avoided using any services like driving directions that would reveal part of my identity, while still making liberal use of anything that did not reveal anything about me except for perhaps a few stocks that I was anonymously interested in. Recently I have been required to sign up for a couple of Yahoo! services so they have my identity, as they do for the half billion other people who are also signed up. As I said before their services are compelling.

Madhu explained the other side of the coin where Yahoo! sells advertising. This is not the auctioned search advertising that Google has become known for, although Yahoo! also does this. This advertising is the banner ads that you see when you use all those compelling services. The ads can be very specifically targeted such as a movie ad that is shown for a few hours on a Thursday and Friday afternoon to a specific demographic.

As Madhu explained, Yahoo! uses the yield management techniques that were pioneered by the airline industry in the 70's. The airlines use yield management to get the most revenue out of every available airplane seat while keeping the airplane full. Yahoo! has a similar problem but on a much larger scale. They have a huge inventory of page views and several dimensions such as age, location and interests on which to segment the viewers and interest the advertisers.

The problem is to extract the maximum revenue out of this mix. Compared to aircraft yield management the inventory is much larger and more squishy and the number of potential products numbers in the multi-millions rather than in the tens of thousands that an airline has.

All in all, it was a very interesting presentation. Unfortunately for anyone who was not there, Madhu's presentation is not available, so this is the best that you are going to do. Sign up for the Business Intelligence SIG mailing list ( and do not miss another meeting.