Arrington On Charlie Rose: Talks Twittergate, CrunchPad, and Competition

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TechCrunch editor Michael Arrington recently was interviewed by Charlie Rose for a chat about the latest news and events in technology. Michael gave his take on the Google vs. Microsoft rivalry, saying that each tech giant is going after the other’s core businesses. Michael also touched upon the latest news around the CrunchPad and Apple’s much hyped and potentially similar product, the large form iPod Touch, which is reported to hit the market in early 2010.

Of course, Rose unsurprisingly delved into the whole Twittergate controversy, which Michael gave a lot more insight into, including the discussions with Twitter and the ethical decisions he faced in his decision and why he published the documents. Michael also weighed in on mobile social mapping startup Loopt, the iPhone, the Palm Pre (which he says is a “great phone”) Facebook’s viability as a money-making enterprise and more. Read below for the full transcript of the interview. You can see Arrington’s other Charlie Rose appearances on Crunchbase.

Full Transcript:

Michael Arrington is here. He’s the founder and editor of TechCrunch,
one of the most widely read blogs in Silicon Valley. TechCrunch was
founded in 2005, and now has separate sites covering specific countries and
technologies. Arrington has also formed a company to develop a tablet
computer primarily to use the Web. It is called the Crunchpad. I’m
pleased to have him back on this program. Welcome, sir.

MICHAEL ARRINGTON: Hello, Charlie.

CHARLIE ROSE: Google versus Microsoft. We now have Bing, their
search engine at Microsoft, and Chrome, which is going to be an operating
system, a browser and an operating system.

MICHAEL ARRINGTON: Yes, it’s fascinating, because you think of Google
as a search engine company, which most of the revenue is derived from
search marketing, and Microsoft as a sort of software company. Windows and
Office, that’s where they get a lot of their revenue. And yet these two
companies are competing head on, viciously, because Microsoft wants search
share. There’s so much money in it. So they’ve got Bing and they’re
trying to do things with Yahoo! And Google, I don’t know if they want –
if they want sort of revenue from Office and the operating system, but they
certainly want to take that revenue from Microsoft. So you have them with
Chrome OS and Google Docs competing directly with Windows and Office. And
they’re going at each other’s core businesses, and it’s fascinating to
watch.

CHARLIE ROSE: But do they really look to have great success in that?
Do they expect to take away a lot of Microsoft’s operating system?

MICHAEL ARRINGTON: If you listen to Eric Schmidt at Google, he seems
pretty serious, that they want — they want to do innovative things in the
operating systems space.

I don’t know what their projections are around that, but…

CHARLIE ROSE: There was a story that Eric was the one resisting going
ahead with Chrome as an operating system.

MICHAEL ARRINGTON: Oh, I don’t know if he resisted or not, but he’s
certainly behind it now that it’s public. And they also have Android, of
course, the mobile phone operating system that is also based on Linux.

CHARLIE ROSE: There’s also Bing. So, Bing got very good notices.
People in the business, the Walt Mossbergs of the world.

MICHAEL ARRINGTON: Yes. Bing is a great search engine. They
launched it, what, two months ago now. And it’s a little too early to tell
what kind of market share gains they’ll have, if any, but it’s definitely a
great search engine.

One of the problems with search — and all the guys who do search
testing will tell you this– it doesn’t matter what the results look like
if you have a testing group sort of blind sampling. If you put the Google
logo on top and ask them what they think of the search results, they like
it more than they like it otherwise. And so Google just has the brand in
search, and it’s going to take a lot of time and a lot of money.

CHARLIE ROSE: And a lot of people have to say Bing was better.
Someone said to me this interesting point, that what Google sometimes
worries about if somehow Microsoft computers, PCs, wouldn’t take Google.
Does that make sense to you?

MICHAEL ARRINGTON: I think that Microsoft in the past has made
changes to Internet Explorer that stopped the gathering of information by
the browser — by Web sites. The browser sort of puts up not a firewall,
but you can imagine something like that. I think that’s part of the reason
why Google decided to back Firefox so heavily and also to create their own
browser, to stop that from happening. But I think with Google…

CHARLIE ROSE: So, it wouldn’t be Explorer?

MICHAEL ARRINGTON: Yes. Right. And Explorer’s market share is
dropping.

But I think Google wants to get Microsoft out of the PC entirely. And
they’re offering alternatives across the board to Microsoft software, which
makes that battle so fascinating.

CHARLIE ROSE: Speak to me about mobile phones and mobile technology
and where are we?

MICHAEL ARRINGTON: We’re in an awesome place. I mean, think back. I
know you talk about the iPhone quite a bit. The iPhone changed –
absolutely changed the mobile landscape. And people said, you know, some
people said that Apple couldn’t do this, they won’t do it.

CHARLIE ROSE: Because they began to see it as a computer in itself?

MICHAEL ARRINGTON: Well, yes.

CHARLIE ROSE: That’s what…

MICHAEL ARRINGTON: Although not just that.

CHARLIE ROSE: And it looked good and everybody wanted to have one
because they thought it was so cool.

MICHAEL ARRINGTON: They also figured out Web surfing on a phone with
a small screen that’s a touch screen, but it’s small, but they figured out
the gestures to zoom in and out, and it’s actually an adequate Web surfing
experience that they figured out. No one else had done that before.

CHARLIE ROSE: And what about the Palm Pre?

MICHAEL ARRINGTON: It’s a great phone.

CHARLIE ROSE: It’s a great phone. Why is it a great phone?

MICHAEL ARRINGTON: The operating system I think is as good or in some
cases better than the iPhone. The operating system is quick, you can have
lots of apps open, it’s a great operating system.

The hardware on the phone I think was a little rushed and feels a
little cheap, so for me I’m sticking with the iPhone, but I came close to
choosing the Palm Pre, partially because of the physical keyboard. I think
it’s really nice, and also because I feel like I’m getting a little bit too
tied to Apple.

CHARLIE ROSE: OK. Tell me what Crunchpad is.

MICHAEL ARRINGTON: About a year ago — and I really like where the
industry is going with this — about a year ago, I realized I just want a
big iPhone. I want a computer that I can sit on the couch and surf the Web
without having a weird keyboard stuck to it that doesn’t really work when
you’re not sitting at a desk. And so we started this project on TechCrunch
just talking about it, saying we want to build this and we want help from
the community, and great things happened over the course of a year. We’ve
hired a team. We’ve had lots of people, partners come on board and
contribute their time, their resources, suggest partnerships.

CHARLIE ROSE: Did you go get venture money?

MICHAEL ARRINGTON: Well, you know, I’m not going to answer that
question.

CHARLIE ROSE: Why not?

MICHAEL ARRINGTON: Because I haven’t — I don’t want to answer the
question.

(LAUGHTER)

CHARLIE ROSE: We have our ways, sir.

MICHAEL ARRINGTON: But I’ll say this. I think that Apple — so
there’s rumors — forgetting the Crunchpad and the fact that I want to
build that — Apple is talking about coming out with a tablet computer,
which is going to be a large-screen iPod, or iPhone or iPod Touch. I think
that’s a good thing. I think they’ll sell a lot of them.

Google’s new operating system, Chrome OS, is a Linux-based operating
system with a browser on top, and the idea is you never see the operating
system. You never go to the desktop on the computer. It goes right to the
browser, which is what we’ve been talking about for a year. They’ve been
working on it for a long time. I’m not suggesting we had the idea first.
I have no idea. But the point is, it’s coming to market as a free
operating system. I think that’s really good, and we’re going to see
netbooks without keyboards. We’re going to see computers with other input
mechanisms besides keyboards, or alternative input mechanisms that I think
are going to — really exciting stuff.

CHARLIE ROSE: Facebook versus Google. Is that a big competition?

MICHAEL ARRINGTON: You know, last time we talked, it was Facebook
versus MySpace. And the funny thing is, that’s not the question anyone
asks anymore.

CHARLIE ROSE: It’s what is Facebook becoming?

MICHAEL ARRINGTON: Right. And what is Google becoming. I think it’s
almost like everybody is chasing Twitter right now, and Facebook clearly
is. But when it comes down to it, the social aspect of Facebook, where
your friends are recommending things to you, which could be products or
news items, and it’s the constant sort of logging into the site 25 times a
day is something that Google needs to address. And right now they…

CHARLIE ROSE: So that’s Zuckerberg’s argument. Look, I mean, who
better to go for a search than your friends? If you know and trust.

MICHAEL ARRINGTON: Exactly. Exactly. Yes. Why not?

CHARLIE ROSE: Because they will know who you are and what you like.

MICHAEL ARRINGTON: Some of the startups that buy traffic on Google
search are talking about the conversion rates from those — conversion
rates meaning a purchase or a signup that they get from that purchase
traffic from Google is good, but not nearly as good as the conversion rates
they are seeing from Facebook and Twitter. So if I just send out a link
saying, wow, I just saw this movie and it sure is good, and you click on
that, you’re more likely to go see the movie than you are if you do a
search for it and click on a paid ad from Google.

Google is very aware of that. The free stuff on Twitter and Facebook
is better than the paid ads on Google. And that has to be freaking them
out a little bit.

CHARLIE ROSE: So, what did you do? You published some internal
financial documents from Twitter?

MICHAEL ARRINGTON: There’s this hacker…

CHARLIE ROSE: I know that.

MICHAEL ARRINGTON: This French guy that got these documents from
Twitter because of these guest books (ph)…

CHARLIE ROSE: Right, and so what did you do?

MICHAEL ARRINGTON: I’ll get to it. He — so what he did was, he
wanted to warn Twitter that, you know, your security is awful. And also he
wanted to get credit for doing this as hackers and crackers do. So, he
went to the French media, and a French journalist — he was told about it,
this French journalist went to Twitter and said what happened, Twitter
wouldn’t respond. So he dropped it, came to us and said…

CHARLIE ROSE: Who came to you?

MICHAEL ARRINGTON: This hacker, anonymously, and said, here are all
the documents and sent us all these documents. Started this fascinating
discussion about…

CHARLIE ROSE: What was in the documents?

MICHAEL ARRINGTON: It was hundreds of documents taken from Twitter’s
employees’ attachments to e-mail accounts. And it included interview
schedules, people they interviewed in Silicon Valley, prominent people that
work in other companies that didn’t end up at Twitter. So very
embarrassing stuff. Credit card information for many of the employees. E-
mails, inbox screen shots, executive meeting notes, financial projections,
et cetera, et cetera, et cetera. Just the whole sort of thing. And we
looked at that and said, we’re going to post some of this. Some of it
we’re not. But we said…

CHARLIE ROSE: Like credit card numbers, you’re not going to post
that.

MICHAEL ARRINGTON: We’re not going to post the credit card numbers or
things that would embarrass people, but some of this was — we thought was
pretty darn newsworthy, particularly the financial projections and the
executive meeting notes from the last few months. And so we engaged in a
dialogue with our readers, where we said, look, we have got these
documents. We haven’t decided yet what we’re going to post, we think a
couple of documents. We talked to Twitter, sent them all documents, so
they knew what was going on. Talked to our lawyer…

CHARLIE ROSE: So, what did they say, go ahead and post them?

(LAUGHTER)

MICHAEL ARRINGTON: They said…

CHARLIE ROSE: We have no problem with this?

MICHAEL ARRINGTON: The ultimate answer was, we know you’re going to
post a couple of these, and that’s OK, but for most of these, we’d really
rather you not, and so that’s not a problem, we absolutely won’t. And we
worked with Twitter on the back end to make sure they closed up some of the
security holes that they had. But the interesting thing to me wasn’t the -
– the documents were fascinating. The interesting thing to me was the
discussion that was generated around whether we should publish them or not.

And there are people that have come out, major journalists who have
come out said it was unethical for us to do this. And there were
journalists who had come out and said it was absolutely fine and ethical
for them to do this. In fact, their readers deserve that kind of access.

And obviously I have an opinion because I’m in the middle of the
story, but just taking myself out of it, I think it’s a fascinating
discussion, because I know in the old days, when “The New York Times” or
“The Wall Street Journal” got documents like this, they weren’t — they
didn’t have that discussion with the readers.

CHARLIE ROSE: It’s interesting how you did it, you know, engaging
your community.

MICHAEL ARRINGTON: I engaged them, and I would say that 80 percent of
my readers disagreed with me. And let me know about it.

CHARLIE ROSE: So, why did you do it?

MICHAEL ARRINGTON: Because I think — well, you know, it’s funny.
When I make decisions with TechCrunch on whether to publish or what
position to take, often I’ll look back after everything is played out and
say, would I do things differently with the benefit of hindsight? And
there are a couple of instances in the past where I would have probably
done things differently. In this case, I think I absolutely did the right
thing, and I wouldn’t do things any differently. So.

CHARLIE ROSE: Do you know the site called Loopt? It’s amazing.

MICHAEL ARRINGTON: It’s this mobile social networking. And it’s all
about location.

CHARLIE ROSE: Wherever you are, you know everybody in your block.

MICHAEL ARRINGTON: Yes. I can turn mine on — I mean, I don’t have
my phone with me, but I can turn it on when I get out of here and see
everyone around me who’s a friend. Actually, mine is set up a little
differently, so I’ll see everyone who wants me to see them. And it’s a
different way of networking socially.

I love it. In fact, I’ve written about this, where you can imagine a
time where you walk into a bar and you pull out your phone and you see –
for everyone that wants you to see it, you see — and you laugh and it’s
funny, but it’s also big business. Everyone’s picture who’s the opposite
sex or whatever your sexual preferences are, who is single and maybe wants
to — you can see all of them. And that way you know, you know, you can go
and flirt with them on the phone and it sort of helps you meet people in a
bar.

Or you go into a business cocktail setting, and you see people on your
phone that you’ve met before and maybe it helps you with their first name
or to remember things. I think that’s the kind of thing that Looped (ph)
and others are doing that is going to change social networking.

CHARLIE ROSE: So, tell me how you see the future of social
networking? I mean, is it…

MICHAEL ARRINGTON: I don’t know what it is. I mean, it’s hard to
define. It’s — if you look at Facebook, it’s really the plumbing behind
the interactions online between people and helping them map to the real
world. It’s clear that people love interacting with each other on Web
sites. And it’s clear that Facebook has been able to get third parties to
build applications on their platform that leverage you having your friends
sort of seeing what you’re doing. And it’s clear also that they can then
take that — if you saw what they did with CNN around the elections, and
then you can comment and your friends can see you comment, you know, what’s
going on during the election.

That’s all — it’s sort of really fascinating. What’s unclear is
whether it can really become profitable over the long run. Because
Facebook has these massive expenses, and the revenues are growing rapidly,
but it’s unclear if in the long run, they can make that vastly profitable
like Google has.

CHARLIE ROSE: What about the Kindle space?

MICHAEL ARRINGTON: The ebook reader space is very interesting, and I
wouldn’t expect Apple to stay out of it for much longer, to be honest, but
Amazon has been successful in selling the Kindles. I think they — the
estimates are they might sell a million or so this year. They sell lots of
books on top of it and subscriptions, so it’s a great revenue stream for
them.

I’ve argued that Amazon should not be building a hardware device
specifically. They should be building the software or the device and let
anyone build a Kindle if they want. These are forcing Sony and Barnes &
Noble and Apple and others to come up with their competing sort of closed-
off ebook systems. And so I think that Amazon should really say, look,
we’re going to do the books, we’re going to do the software for the Kindle,
but other people build the hardware.

CHARLIE ROSE: You take care of the hardware. Yes. TechCrunch, thank
you.

MICHAEL ARRINGTON: Thanks very much.

CHARLIE ROSE: Michael Arrington.

Thank you for joining us. See you next time.

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