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A few minutes after she delivered a speech at our Structure 08 conference in San Francisco, I caught up with Microsoft’s corporate VP of global foundation services, Debra Chrapaty, for a video chat. I think a more appropriate title for her would be Mr. Softie’s Internet Infrastructure Czar. I found her very knowledgeable, engaging and open with her opinions. “We have some new innovations up our sleeve that are going to knock the socks of anything anyone is doing, including our friends down south,” she told me. She didn’t name Google, of course, but we all know who she was talking about.

Her candor was one of the reasons I wanted decided to share the video with you guys. The common theme of the conversation: Microsoft is spending liberally to build out its Internet infrastructure, including upgrading its backbone network and scaling out its data center infrastructure by adding new technologies.

When I asked her exactly how much Microsoft was spending on it, she dodged the question, saying just that it was a big number. This much we do know: Two years ago, the company was spending close to $2 billion on its infrastructure; it has since undertaken the development of six data centers, with parts of two networks already online.

Facts About Microsoft-Owned Data Centers

Adding 10,000 servers a month

New data centers being planned/under construction are equivalent of over 15 US football fields of data center space.

Plans to cut of 30% to 40% in data-center power costs company-wide over the next two years.

Current network backbone runs at about 100 gigabits per second, but soon Microsoft plans to bump it to 500 Gigabits. I think this could be big for Level 3, long time partner of Microsoft.

Building out its own CDN (Edge) network - 99 nodes on a 100 gigabit per second backbone.

For Microsoft, total data grows ten times every three years. The data in near future will soon approach 100s of petabytes. This includes data from all of their online services.

Source: Microsoft, GigaOM

Location Status Quincy, Washington Opened April 2007, construction continues San Antonio, Texas Under Construction, planned opening September 2008 Dublin, Ireland Under Construction Northlake, Illinois Under Construction, Phase one to go live in October 2008 Iowa TBD

When complete, it will consume 48 megawatts of energy. Microsoft can tap up to 72 MW of energy coming from hydro power. Microsoft is paying about 1.8 cents per kilowatt, but will rise to between 2.6-to-2.9 cents per kilowatt as more capacity goes online. Two data centers in this location.

It will be 447,000 square feet on 44 acres. Microsoft is building two data centers here

first Windows Live data center outside the U.S.

The first floor of this facility is going to be entirely made of containers and would house Microsoft search.

Source: Microsoft

Watch the video to get the full low-down, but if you’re in a hurry, here are some highlights, including her quotes from our conversation.

• “We are building data centers but I don’t want to say not just data centers. We are already on to our second generation data centers. More utilization, better density and more power efficient.” For Chrapaty, power efficiency is not just talk, it’s her mission — she is the driving force behind Microsoft’s server utilization.
• “Infrastructure is a differentiator. I use FedEx as an example. They are world’s most predominant distribution company. It wasn’t that they had a great brand or they had all these plans. No, what they did was find these strategic landing fields where they could get in and out quickly to key distribution points across the globe. It defined their company. I think the same is true in the infrastructure now. Data centers are already becoming a scarce resource.” Google realized this a long time ago; Microsoft is now demonstrating how it can put money to work and build an advantage over others.
• Like Google, Microsoft is taking the design of servers into its own hands. “We are doing some unique things in the mother board designs, server designs, and because we are Microsoft, operating systems.”
• She’s a big champion of container data centers, which essentially act like the trailers on long-haul trucks, optimized and packed with all sorts of gear — servers, switches, storage systems — that’s wheeled in and plugged into the power grid and the network. Sounds like Rackable Systems and Verari are major suppliers of these containers to Microsoft; the company is making extensive use of them in their Chicago facility.
• Her comments indicate that Microsoft has plans to offer managed services to large corporations.
• She lets us know first that they are building a IOWA data center, which is huge for Iowa. Google has one in Iowa too.

Well, like you I am finding that Microsoft memos are better at telling the story (or lack there off) than other people’s voices. Today, we got our grubby paws on Microsoft VO of Search Satya Nadella’s memo sent out to the troops. While I ponder over it, some quick thoughts via someone in the know at Microsoft:

“It consolidates portions of search back into the portal, MSN, from an organizational standpoint. It also tells us that any new branding to be done will be search only and that these others will retain MSN.”

Full memo, below the fold.

Nvidia has plans for a mobile chipset that will change the look and functionality of smartphones when it hits in mid-to-late 2009. While many of the big chip vendors are placing bets on the concept of a mobile Internet device that’s larger than a smartphone, but smaller than a laptop, Nvidia’s APX 2500 chips could enable devices that are so sexy, they might render the need for an MID obsolete.

However, I’m told the company will announce an expansion of the APX chips into MIDs soon, so I could be wrong on that last point. Nvidia launched the chips that will make a smartphone function like a PC (or an iPhone) at the Mobile World Congress in February, and I can’t believe I missed it.

This is Nvidia’s first move into making the “brains” of a mobile device, and it’s using its graphics expertise to turn the devices containing the chips into portable media players that can play 10 hours of HD video (on an external screen) and 100 hours of MP3s on a single charge. All while the 750 MHz processor consumes less than a watt of power.

In a demo at Nvidia headquarters two weeks ago, I saw a device slightly larger than an iPhone power an HD rendering of a Pixar short called “For the Birds” on a big-screen TV. It was connected via an HDMI cable and it looked good at 720p. I get that some people don’t mind watching movies or TV on their cell phone or iPod screens, but if I’m able to download that content and plug it into a TV, that’s an entirely new ballgame for travel and sharing. I want that device.

The demo I saw was powered by Nvidia’s chipset running on Windows Mobile, creating a chip/OS combo that mimics some of the visual pizazz of the iPhone, but on a more business-friendly operating system. Sure, as far as mobile operating systems go, Windows Mobile isn’t exactly tearing it up, but the integration of business and pleasure could make the current angst of choosing between a BlackBerry or an iPhone a thing of the past.

The chipset will first appear at the end of this year in personal navigation devices and personal media players, with a smartphone due out in the middle of 2009. Unfortunately, the APX 2500 contains an HSDPA RF chip, so it won’t be deployed on my network, but TMobile subscribers should keep their eyes open. Like the iPhone, the APX is modem agnostic, which means it’s not tied to any particular cellular network. There’s plenty of room for Nvidia to stumble, since it doesn’t have the experience designing for the mobile space, but I’m hoping it can succeed right about the time my current mobile contract is up.

The second generation of Mediaroom set-top boxes should cost less thanks to silicon from Microsoft partner Sigma Designs. Sigma has a system on a chip that helps lower the costs of silicon in a device by providing features such as storage, DRM and processing power, onto one chip. That drives down the costs of consumer premise equipment for IPTV deployment, which is good for the carriers and Microsoft, which is pushing its Mediaroom platform for IPTV. Let’s hope this carrier equipment doesn’t explode.

• TechCrunch: Google, Microsoft Preparing Bids for Digg
• ArsTechnica: U.S. Rural Broadband, You Can Get it But You Can’t Afford It
• Light Reading: Appliance Vendors Don’t Fear Cisco
• Reuters: Ciena Quarterly Profit; Outlook Beat Expectations
• Fortune: Re-engineering HP Labs
• Gizmo News: Apple to Allow VoIP over Wi-Fi

Google has kept mum on the much talked about Microsoft-Yahoo deal, but today the company broke its silence and posted its official statement on its blog. The statement is credited to David Drummond, Senior Vice President, Corporate Development and Chief Legal Officer…

Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC? While the Internet rewards competitive innovation, Microsoft has frequently sought to establish proprietary monopolies — and then leverage its dominance into new, adjacent markets. Could the acquisition of Yahoo! allow Microsoft — despite its legacy of serious legal and regulatory offenses — to extend unfair practices from browsers and operating systems to the Internet? In addition, Microsoft plus Yahoo! equals an overwhelming share of instant messaging and web email accounts.

Does anyone else see this as Google playing tit-for-tat? After all Microsoft created some problems and complained loudly when Google decided to when it acquired DoubleClick. Will Google now start beating the anti-trust drums?

In 2001, just 1.8 percent of households had an Internet-attached handheld device, according to a report issued that year by the NTIA. By the time Ipsos conducted its 2005 Face of the Web survey, 26 percent of Americans had surfed the web on a wireless device. Fast-forward to 2007, when it could be done using both the Sony PSP and Nintendo Wii, along with a host of other gadgets. And the introduction of ultramobile PCs means even more Internet-capable machines per person. We’ve come a long way from the days of shared computing.

Our multiple-machine home life has snuck up on us. And it’s a consumer trend that has spawned many new products, and highly publicized launches, at this year’s CES.

Belkin, which got its start in cabling, introduced a keyboard/video/mouse (KVM) switcher aimed at the small office/home office market. Traditionally the domain of data centers and enterprise IT, KVMs may now have a place in the home. With computer prices falling, high-end displays, keyboards and mice are an increasingly large part of a computer’s price tag. KVMs let people use a single set of interfaces across multiple physical computers, so they’re really about amortizing the cost of expensive interfaces across many machines.

Rather than using plugged-in KVM switches, however, many vendors expect consumers to stream media to a big-screen TV or home stereo system. Deloitte’s 2008 State of the Media Democracy survey shows that 58 percent of respondents want to share Internet and personal PC content with their home TV. Logitech, Cisco, D-Link and others have all launched or invested in this approach.

The rapid adoption of notebooks as the preferred home machine may also shorten the lifespan of KVMs; after all, home users are increasingly buying notebooks, and those notebooks come with their own keyboard, video and mouse.

While notebook computers were once the domain of coast-to-coast road warriors, today they’re as likely to be bought for residential use. In November 2006, the notebook hit a tipping point: Of the consumers Belkin surveyed, more said they never took their notebook out of their house than said they did. Belkin’s Jamie Elgie calls these buyers, who want to compute on the couch and view recipes in the kitchen, “zen home” users. Unexpectedly, however, Belkin’s studies also showed that rather than replacing a home desktop with a notebook upgrade, roughly 60 percent of consumers were keeping their old machines and using them as servers.

Microsoft is hoping to capitalize on this trend with the introduction of the Windows Home Server. Based on Windows Server 2003, the new product offers a greatly simplified version of server administration. It allows a relatively non-technical user to manage storage, permissions and backups, and works with up to 10 Windows machines.

Will the home server catch on? In enterprises, servers are a fact of life. They perform centralized processing and run large-scale applications, as well as handling messaging, backups and so on. But for most homes, a server handles two main functions: file storage and peripheral sharing. Both of these functions have compelling alternatives for consumers that mean servers aren’t as necessary. And notably:

• File storage is built into most popular operating systems, and in-the-cloud storage services aimed at consumers, such as box.net and xdrive, are springing up all over the Net.
• With the cost of built-in networking so low, peripherals like printers and scanners connect directly to the network, so the value of a server to share printers is diminished substantially.

It’s also unclear whether consumers will pay a Windows license for storage and peripheral services that can easily be powered by a free, open-source operating system.

Another enterprise trend that may find its way home, with a twist, is the virtual machine (VM). Companies like VMWare and Citrix Xen make software that lets one computer look like many — or many computers look like one. In the enterprise environment, where processing and applications run on servers, VMs are a great way to scale capacity and quickly provision new machines.

In the home, where content is what matters, a full-blown VM may be too much. Instead, consumers may adopt solutions that merge the media from all of their machines and distribute it within their homes or across the Internet. We’re already seeing the start of this trend, with companies like Avvenu (which Nokia recently agreed to acquire) and SoonR (which just closed an investment round led by Cisco) putting software on home machines that makes content available elsewhere.

There is still a great deal of uncertainty about how consumers will deal with the profusion of computers, and the content they contain. One thing is certain: There are lots of home computing bets being made in Vegas this year.

(Full disclosure: Alistair Croll has a consulting relationship with WeBot, a distributed media platform, which makes remote media access tools for consumers.)

Om just passed me the link to two contests on a Microsoft site that sells their office software to college students. I can just picture the meeting in Redmond where this was cooked up. “So what are the kids into nowadays?” demands the Microsoft exec. His team begins barraging the whiteboard with buzzwords. Avatar-based interaction! User-created, user-rated content! Viral videos!

A few hours later, a new campaign is born: Create a lip-syncing avatar for a chance to win an Xbox or some games. And oh yeah, buy discounted Microsoft software while you’re at it. (If you happen to notice the banner ad running on the contest site, that is.) The featured avatars are built on Oddcast’s Voki platform, which offers a pretty robust toolset for customized avatars, though so far, the zombie-looking human avatars still seem to be on the wrong side of the Uncanny Valley. (Which is probably why the top user-rated contestants are currently a beat-boxing bear dressed like Elvis and, well, an actual zombie.)

With just a couple of Xbox 360 Elites and several dozen games for the console as prizes, the contest is decidedly low stakes, so it comes off like a very tentative experiment in Web 2.0-era advertising on Microsoft’s (MSFT) part. It’s not even a true 2.0 effort, arguably, because the actual winners are not selected by user vote, but according to the rules, “in a random drawing from among all eligible entries received.”

It all feels a bit forced — or as I said to my pal Marshall Kirkpatrick at Read/Write, like something John Hodgman’s character in the Apple commercials would come up with. But then as Marshall notes, some of the submissions are actually pretty funny. Which is really the best Microsoft or any company dabbling in Web 2.0 advertising can hope for — that somehow, enough genuine grassroots talent shows up to create a buzz.

A final irony? While writing this post, the contest site has crashed my Firefox browser several times. But that’s probably because I’m using Vista.

Image credit: Microsoft’s Theultimatesteal.com.

By Mark Kingdon

Meet Leah. She is a fictitious consumer, but one whose life in 2007 will help demonstrate how drastically online advertising is going to change over the next five years as it morphs from an industry based on impressions to one based on engagement.

Leah is a 20-year-old college student at an East Coast university. She’s finally acclimated to the cold winters (she’s originally from the South), but she still misses her sister and high school friends. They text back-and-forth and stay connected through MySpace, although lately Leah has grown to like Facebook more because it’s where she connects with her newer college friends. Leah works a few afternoons a week and every other Saturday at a clothing boutique to supplement the allowance that her parents provide. That’s Leah today.

We’ll jump ahead and look at Leah’s life in 2012 in a moment. First, let’s look at the dozen or so important trends that will shape consumer behavior over the next three to five years. In Leah’s case, three of them will be most influential:

1) Time and Place Shifting: Devices are changing the way people work and play and how they manage and allocate their time

2) Cause Consumption: buying things that do what you need them to and more, such as help the environment

3) Mo-dentity Management: People already have multiple online identities and managing them will become a key life skill.

Fast-forward to 2012. Leah lives in a medium-sized city in a Southeastern smile state. It’s summer, and she’s just back from a three-day birthday celebration with two of her girlfriends, where she was decompressing in a media-free, advertising-free, (notice I didn’t say device-free), emission-free eco-resort two hours from home.

Sort of like a Passages for the digitally over-stimulated (rather than the chemically dependent). Leah needed a reboot because she was fried. She has about 100 close followers (high school friends, college friends, and family) whom she regularly updates on her life with text, audio, and video snippets, and she follows many of them closely as well. (This is a big new trend, so keep an eye on it.)

Taking a break was great, but now she’s back to reality. Sitting at the kitchen table and drinking a green-tea fruit juice infusion, she changes the “Do not disturb” status on her mobile device’s profile page to “Back on the treadmill.” Within seconds, messages start scrolling across the feed beneath the mashup video that’s playing on her screen, which is brought to her by Method cleaning products. Most are network updates from friends, along with some news feeds.

But a couple of them – those blinking in red – are from her boss. So with a swipe of her index finger, Leah goes back to work. She clicks on her boss’s note and — blink — there she is, describing to Leah the details about her next project. I could go on, but I think you get the picture.

A visit to Facebook in 2007 provides another glimpse into what Leah’s life might look like in 2012. She’s spending her time connecting, engaging, documenting, sharing, following, and being followed. She can add and delete on a whim. News, opinions, and recommendations flood in from her friends. Filters are big in her life. She’s not spending her time consuming media (and the advertising that supports it) the way she used to; her content is broken up into smaller pieces, made into applications, and distributed across platforms — sometimes with advertising around it (or in it).

The world of online advertising — let’s call it digital marketing instead — is going to get a lot more challenging as we race to meet Leah in 2012. The era of impression-based advertising (lazy man’s marketing) is being replaced by the era of engagement. Facebook and its social-networking cohorts will join Google (GOOG) as big entry points to the digital world.

At the same time, flat, long-form media will become bite-sized and in many cases “app-lified.” It took less time for new ad networks to begin monetizing apps in Facebook than it took Microsoft (MSFT) to acquire Aquantive — and the Facebook API has been open less than ninety days.

Marketing messages and the way that they are presented to consumers will also change dramatically. Search will still be a powerful tool, and on the commodity end of advertising, you will still see zillions of “impressions” presented to consumers in a wide array of formats. But they will be micro-targeted, with the image and message compiled dynamically just for that viewer. Exploding formats and media will create a measurement and tracking nightmare, but complex algorithms will optimize everything on the fly.

Although search will still be a powerful tool, the big money in digital marketing will be in getting people to engage with a brand. Agency winners in that world will be a new mashup of things we already know: part ethnographer, digital strategist, architect, air-traffic controller, impresario, film director, video game artist, hacker, and data freak. They will be the people who create and spread engaging content and experiences that connect consumers and brands.

The smartest in our industry have moved past reach, frequency, awareness, preference, and conversion — they are working on inspiring, engaging, and persuading consumers.

Digital marketing in 2012 will be about simultaneous combustion where preference is created in an instant. Everything is being compressed to the third power, especially the precious milliseconds that marketers have to connect with consumers.

Mark Kingdon is the Chief Executive Officer of Organic, a digital media agency. He previously worked with idealab!

Social information sharing startup HiveLive launches their LiveConnect Community Platform today at the Defrag conference in Denver, but it’s not HiveLive’s first appearance on the web scene. In 2006, they opened a private beta that looked to some like just another Web 2.0 social sharing site. Now they’re finding success bringing the social web to businesses.

If this were 1999, you might say that HiveLive moved from a B2C (business-to-consumer) model to a B2B (business-to-business) model. But it’s 2007, so instead let’s call it Web 2.0 to Enterprise 2.0. Even that label is a bit misleading, though, because HiveLive is succeeding with nimble and innovative smallish organizations rather than the lumbering, multibillion-dollar giants that you might think of when you hear the word “enterprise.”

What is HiveLive?

HiveLive’s social sharing platform provides all the pieces you’d expect: user profiles, blogs, discussion forums, wiki-style editing, RSS feeds, and more. But it uses an architecture that makes it very easy to customize — without coding. HiveLive also includes features the business market demands, such as granular privacy settings, customizable skins, and moderated content editing.

HiveLive introduces the concept of a “hive” that brings people together with information. Instead of choosing from a set of predefined features like a blog, wiki, or discussion forum, HiveLive community creators (and even community members, if administrators allow it) define their own semi-structured information types using a web-based interface (shown below) rather than by writing custom code.

Hives serve as building blocks for creating flexible, customizable and social information spaces. You can use a hive for blog postings or wiki sites or, of course, forums. You can also use one for other social information sharing — classified ads, recipes, feature ideas, bug reports, video sharing, and more. For example, a file-sharing hive is shown below.

But is it enterprise scale?

While HiveLive says it’s currently in talks with very large businesses, the company has initially shown traction with smaller organizations using forward-thinking business models. Current customers include Alpine Access, a telephone support outsourcing concern that relies on home-based personnel; Rally Software, a SaaS (software as a service) provider of Agile development tools; and Stanford’s new Hasso Plattner Institute of Design, a “D-school” for multidisciplinary studies of design thinking.

HiveLive’s competitor Jive Software (profiled by GigaOM recently) may find it easier to work at enterprise scale, as Jive’s ClearSpace provides a Java-based, deploy-your-own solution that will fit into many big companies’ IT infrastructures. HiveLive, on the other hand, is a hosted service based on LAMP (Linux, Apache, MySQL, and PHP) reflecting its Web 2.0 roots. ClearSpace’s genesis, by comparison, was in knowledge bases and online discussion forums.

HiveLive claims to be “the first community platform to seamlessly integrate social networks with information networks” but they’ll compete in that space not only with Jive’s ClearSpace but also with Drupal, Ning, and even Microsoft (MSFT) Sharepoint. But Drupal requires coding for customization, Ning doesn’t offer the fine-grained permissions that HiveLive has, and Sharepoint will be mostly of interest to those with Microsoft-based infrastructures.

Moving upscale

HiveLive hasn’t given up on Web 2.0. But their focus right now is on enabling communities that are company-sponsored rather than organically formed. CEO John Kembel says that in the future they’ll open up HiveLive capabilities for personal use in a controlled way. He notes that the original private beta of HiveLive still exists, as Hive Commons.

HiveLive took venture funding last year ($1.65 million in an institutional angel round) and signed their first enterprise license the same week. Venture capitalist and HiveLive angel investor Brad Feld says that Hivelive’s strategic shift was “a deliberate, logical, and very successful one.”

So it seems HiveLive agrees with GigaOM boss Om Malik that the big opportunity for Web 2.0 tools lies not in winning 53,651 users, but rather in making social tools ready for business, whether you call that Enterprise 2.0 or not.