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02:25 PM Tuesday, August 05, 2008
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Today's Wall Street Journal, Andrew Ferguson from the Weekly Standard reviews Ahead of the Curve, a memoir of Philip Delves Broughton's experience of Harvard Business School. The part that made me laugh the most was the final paragraph, in which he recounts a banking analyst's study showing negative correlation between the percentage of HBS grads in finance, and the health of the market. "If the figure [number of HBS grads going into finance] was less than 10%, the market went up not long after. More than 30% and the market was headed for a crash. In 2006, Mr. Delves Broughton reports, 42% of the HBS grads went to work in finance. Right on schedule." Obviously, the data point must be taken with a grain of salt--the correlation is probably similar for all b-schools sending more than 5% of its grads into finance. An even better analysis was posted by Paul Kedrosky showing the positive correlation between seismographs and earthquakes. Or this one, demonstrating that the decline in the number of pirates is the cause of global warming.
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06:48 PM Monday, August 04, 2008
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Brad Feld noted an interesting article tweeted by Tim O'Reilly on concentration, dating from 1930. As I read it I was strikingly reminded of some of the concepts advocated by Zen Buddhist master Thich Nhat Hanh. Here are a couple of quick comparisons: Article: "...the point is that when these men pitch hay, they pitch hay--when they write a book, they write a book--when they manage a sales campaign, they manage a sales campaign. That one thing they do at that one time, and nothing else, and every ounce they have goes into the doing." Hanh: "While washing the dishes one should only be washing the dishes, which means that while washing the dishes one should be completely aware of the fact that one is washing the dishes.... If we can't wash the dishes [in this focused way], the chances are we won't be able to drink our tea either. While drinking the cup of tea, we will only be thinking of other things, barely aware of the cup in our hands. Thus we are sucked away into the future--and we are incapable of actually living one minute of life." (Hanh's quotations are from "The Miracle of Mindfulness.") Without question, the ability to focus is a huge advantage for an entrepreneur. For some of us with an extremely broad array of interests, developing such focus can be difficult, challenging our internal notions that there is value in knowing a little bit about lots of things. True, there is value there, but my experience with startups suggests that the ones with the highest chances of success are the ones who, while they are on a task, appear to have no other interest in the world than accomplishing that task.
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02:18 PM Tuesday, July 29, 2008
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Yesterday, Kampyle announced that is has integrated its feedback management platform into both Google Analytics and Nuconomy. I’ve been working with Nuconomy for a while and want to congratulate them on their continued push to create a ton of value for their customers. There’s not a lot to say about Google Analytics. But I’d encourage everyone who cares at all about maximizing the value of their web properties to check out Nuconomy. Heralding the “death of the page view,” Nuconomy delivers a truly impressive array of correlation-based analytics tools and visualizations that really get at the engagement value created by different constituents of the web ecosystem. For example, one vendor might think that life was great from a pageview perspective in Google Analytics, only to learn that—by using Nuconomy’s tools—the highest percentage of actual sales were coming from visitors arriving via Yahoo or MSN. One might think about adjusting one's advertising spend based on that, don't you think? Or perhaps you might like to know which of your bloggers is driving the highest time-per-visit on your site? There are a multitude of insights that Nuconomy's technology can reveal--all of which are actionable. Nuconomy has raised a little over $3MM and are doing some amazing things with Microsoft technology including SQL Server. These guys have serious chops and are swinging for the fences. I encourage you to hit up Nuconomy—there are a number of great stories on them, including this one on TechCrunch and this one on ReadWriteWeb. Shahar Nechmad lives, eats, and breathes Nuconomy, and the company recently hired ex-Googler David Fleck to drive business development.
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03:01 PM Monday, July 28, 2008
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SiliconAlley.com carries a story today by Chris O’Brien from the San Jose Mercury News, complaining broadly about the “laziness” among web 2.0 startups toward innovating new forms of monetization for applications that the public seems to have decided will always require free content or access. O’Brien tries to cover his tail in the final paragraphs, touching on a company called crowdSPRING that is creating a marketplace for creative services. But in sum, he seems depressed at the lack of innovation around monetization. I beg to differ. I see a lot of companies, and pretty much every one of them is concerned with monetization. The ones that are banking on salvation by M&A tend to be ones that A) came out of the gate with good growth and even better PR B) found themselves with slowing growth but a healthy user base C) but found that base still too small to really generate meaningful revenues via advertising—especially when compared to the capital they may have taken on board during their run-up. I think we are already seeing a next-generation of startup emerge even before the current wave—about whom much of what O’Brien says is true—that is highly focused on money, if only in terms of controlling costs significantly in order to have a long enough ramp to try and build a user base. Moreover, companies all across the Web 2.0 board are starting to offer premium services or virtual asset sale options on top of their free, base-level services (Picnik, Flypaper, SynapticMash, Hive7, Challenge Games, etc.). In addition, many companies are experimenting with novel payment approaches (deferred: billmelater, shipping: Amazon,voluntary payments: TipJoy, and perhaps Twitter & Facebook for more micropayment options). Many are leveraging the affiliate networks of larger partners like Amazon and Microsoft’s Cashback Search program. Others are looking at the “gift economy” and imagining how the fact that Facebook users will gladly spend $1.00 to throw a virtual gift at someone might apply to broader economic situations. Others are creating marketplaces just like crowdSPRING’s (oDesk, Flypaper, SlideRocket). As for Facebook: I have a higher degree of confidence than many that Facebook has learned a lot between the first F8 and the second. I expect that by the third (and if they don't screw it up), there will be some serious cash rolling in. Seems to me there is a lot going on.
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08:48 PM Wednesday, July 16, 2008
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A recent uptick in coverage of Entellium’s new CRM applications continues with Marshall Lager’s post on destinationCRM.com.
With the release of Rave Plus, Rave Complete, and Rave Insight, Entellium is giving every small business owner considering a CRM solution—including SaaS offerings like Salesforce—an interesting option for leveraging the power of their existing PCs while delivering a highly engaging user experience. Entellium’s “Gamer-Influenced Design”—along with some really slick drag-and-drop customization features I saw during a recent visit to their Seattle offices—should have strong appeal for competition-oriented sales teams. Before jumping on the Salesforce bandwagon, give Rave a hard look.
I have been working with some of the folks at Entellium for a while now, and what I find inspiring about my contacts there is the simple fact that these guys know how to hustle, know how to go after customer wins, know that it takes more than a post on TechCrunch to build a company. Who knows how the story will end, but for now I have to hand it to these guys for staying in the game and taking some risks in not jumping on the pure SaaS model. (In fact, they’ve seen significant increases in application usage once they chose to leverage the power of client computing along with the power of the Internet—something I heard a good bit of at the recent Google IO Developer Conference.)
Congrats to Entellium on their Rave releases!
Here is a video from MIX08 (March 2008) of Jared Ruckle, Senior Director of Product Management & Design for Entellium, talking about his company and about working with the Emerging Business Team.
Video: Microsoft Startup Zone
Following is a transcript of the video:
JARED RUCKLE: I'm Jared Ruckle. I'm senior director of product management and design at Entellium.
We're an on-demand CRM company focused on small to midsized businesses, and we see a huge opportunity to help small businesses be more productive with well-designed software to meet their sales, marketing, and customer service needs.
There's a real problem in the industry today where small businesses can't find technology to help them really be more successful. On the very low end you have Outlook and Excel and Act and Goldmine that are great for certain things, but not really optimized to help businesses succeed in the age of the Internet today. Then on the high-end you have Salesforce.com, Oracle and SAP that offer a sea of technology; again, great for large businesses, but again not really appropriate for small businesses.
So, at Entellium we're trying to fit that niche with just right technology that helps small to midsized businesses succeed, acquire leads more effectively, win deals more often, and keep customers happier longer.
So, when we looked at the landscape of products out there, there was a real gap in the sense that all the products were too hard to use, they weren't very engaging, and frankly they were boring.
So, when Entellium looked to fill this gap, we turned to Microsoft and technologies like Silverlight and Windows Presentation Foundation to build very visually compelling applications on this technology that would be demonstrably clearer to small businesses about how they could run their business more effectively using these very engaging UI and applications.
So, working with the Microsoft Emerging Business Team has been critical to our effort in that area, because frankly we're on the bleeding edge of a lot of these tools, and so the technical help we've been able to get from Microsoft, helping our developers navigate all the ins and outs of the product roadmap, when we should be introducing new features, what's on the roadmap, has been instrumental to planning our technology now and for the future, as well as our back-end architecture.
On the marketing front Microsoft has been a powerful voice for us, allowed us to borrow their very large megaphone to go to the market and say, Mr. Small Business Owner, there is some technology out there today that will enable you to be more successful than you ever thought, with technology that's just right for you.
So, the Emerging Business Team has been very helpful technology-wise, as well as co-marketing-wise, and with all the exciting things Microsoft is doing with emerging user interface technologies, we're very confident that we'll be able to meet this market need now and in the future.
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02:18 PM Tuesday, July 08, 2008
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Michael Arrington posted an interesting take on the Microsoft-Yahoo conversation today, and I think he’s mistaken in both his assumptions and his conclusions. The full post is here, but I’ve pasted his final paragraphs below: “Yesterday’s shenanigans, however, clearly crossed a line. Microsoft and activist Yahoo shareholder Carl Icahn jointly announced that they’ve been talking, and that Microsoft may be willing to entertain a full buyout offer once again. But only on the condition that Yahoo’s board of directors is replaced: “We confirm, however, that after the shareholder election Microsoft would be interested in discussing with a new board a major transaction with Yahoo!, such as either a transaction to purchase the “Search” function with large financial guarantees or, in the alternative, purchasing the whole company.” “Icahn explained further, saying that Microsoft can’t be expected to let Yahoo stay in current management’s hands during the months-long closing period after a transaction is consummated. He added: “Jerry Yang and the current board of Yahoo! will not be able to “botch up” a negotiation with Microsoft again, simply because they will not have the opportunity.” “This is largely complete nonsense. During the transition period after a merger agreement Microsoft and Yahoo would be working closely and Yahoo would be unlikely to take any actions that jeopardize the deal. What’s far more likely is that Microsoft, led by CEO Steve Ballmer, have taken Yahoo’s rebuffs entirely too personally. It’s no longer just about business, it’s about destroying and humiliating the people who embarrassed Microsoft. And sadly, that has nothing to do with creating a balance of power in search. “Just as I criticized Yahoo for not quickly accepting Microsoft’s offer in early February before the mass executive exodus and destruction of shareholder value, I now point the finger at Microsoft. Yahoo is standing at the alter waiting for you to say “I do,” Microsoft. Time to put up or shut up. I’m all for a merger. But I won’t stand by quietly while Microsoft destroys what’s left of Yahoo just because it can.” I posted my own, unofficial views on this deal a while back. Again, I remind folks that both Steve and Jerry have fiduciary responsibility to their respective shareholders. There is absolutely no reason for Steve to try and “destroy what’s left” of an asset for which he may consider paying billions. It just doesn’t make sense. For the entire duration of this conversation, however, Jerry’s behavior has fallen right in line with classic founder’s syndrome. Let’s face it: Jerry & Co. tried to play hardball, and it didn’t pan out. So now, according to Arrington, Steve should just play nice and violate his own fiduciary responsibility to Microsoft shareholders? I don’t think so. Hey, we all like Jerry. What a guy. But does anyone expect to see him ever run a multi-billion dollar company again? No. Now ask that question about Steve. Steve has the experience to step into any multi-billion-dollar company and run it. It’s a straightforward comparison that really doesn’t need a lot of elaboration. And to be honest, what you're seeing right now is what happens when someone with far less experience and a personality not suited to the situation tries to play ball with the pros on the court. I know that I have been in similar situations, in some cases as the hack, and in other cases as the pro. We all know how this story goes. Arrington is suggesting that Yahoo should somehow get a reward—an “A for Effort”—in its negotiations with Microsoft, in the form of an offer to the same management team that created the current situation. From my unofficial perspective, that doesn’t make much sense to me—nor to Steve, it appears.
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08:29 PM Thursday, July 03, 2008
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Yesterday I met with Mary Holmes from Seattle's Zino Society, an interesting group whose mission, among hosting a high degree of wine-oriented social events, includes supporting the growth and success of entrepreneurial ventures. The Society's history is an interesting one; I'll let you read more about them on their website. One of the 40-odd events that the Zino Society runs throughout any given year, the Zino Zillionaire Investment Forum provides small startups to vie for up to $100,000. The interesting part of this competition is that the decision of a funding winner is made on the same day as the presentations--talk about instant gratification (or instant depression). Here is Mary's note about applying to present at the event: We are now taking applications for presenting companies for ZINO Zillionaire Investment Forum. If you know of any companies who are looking early-stage or expansion capital, please direct them to apply. Applications will be accepted through July 25, 2008. http://www.zinosociety.com/entrepreneurs/applytopresent/zzif2008/.\ ZINO Zillionaire Investment Forum September 16, 9am-5pm at the Fairmont Hotel, Seattle. 28 companies will be selected to present. At the close of the event Fund Investors will award $150,000. $50,000 for Best Technology Investment $50,000 for Best Non-Technology Investment $50,000 for Best Overall Investment (CG -- this basically means that one of the top two winners gets $100k, and the other gets $50k.) I haven't attended any of the Zino Society's events before, but look forward to checking this event out.
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04:04 AM Thursday, July 03, 2008
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Several weeks ago I read a short profile in the Wall Street Journal about Charles Wolf, a man who, while suffering left-brain damage from multiple bouts with cancer, has managed to build an investment portfolio that has beaten the DJIA and doubled its assets since 2003. For me, the most intriguing parts of the story concern various observations by researchers studying the behavior of individuals with various forms of left-brain damage, “some of whom,” writes author E.S. Browning, “have developed artistic, musical, and other talents, apparently using right-brain capabilities that ordinarily are hard to tap.” Recounting his conversations with Bruce Miller, professor of neurology at UC-San Francisco, Browning writes thus: “An almost obsessive focus is characteristic of people with left-brain damage who are using their right brains more. Research suggests that the left brain ordinarily serves as a traffic cop, imposing order on the vast information available from the right brain. Researchers believe left-brain damage may allow people to bypass preconceived ideas.” The general idea is that, while the left brain is key to providing context and meaning around a given data set (like, um, our life experiences for example), its algorithmic quest for pattern recognition (and its accompanying assignment of data to a particular theory, belief, or other “frame”—be it economic, stylistic, linguistic, religious, etc.) is just as likely to fall for false patterns (theories, beliefs, etc.). By letting the data simply “be,” so to speak, left-brain damage may slow down or eliminate the rapid assignment of meaning to the data, giving it a chance to reveal its own patterns. It just so happens that in the latest Wired magazine’s cover story, “The End of Theory: The Data Deluge Makes the Scientific Method Obsolete,” Chris Anderson proclaims the arrival of “The Petabyte Age” in which “the new availability of huge amounts of data, along with the statistical tools to crunch these numbers, offers a whole new way of understanding the world. Correlation supersedes causation, and science can advance even without coherent models, unified theories, or really any mechanistic explanation at all.” [In] a world where massive amounts of data and applied mathematics replace every other tool that might be brought to bear . . . out [goes] every theory of human behavior, from linguistics to sociology. Forget taxonomy, ontology, and psychology. Who knows why people do what they do? The point is they do it, and we can track and measure it with unprecedented fidelity. With enough data, the numbers speak for themselves.” I find this incredibly interesting: 1. Google and similar algorithmic, data-intensive processing systems are lauded as a paradigm shift away from classical theoretical science, going so far as to proclaim the irrelevancy of “the model”. This is conceptually heralded as a good development. 2. Analogous brain function—which, were it an evolved behavior, would (one assumes) be hailed as similarly portentous for the future of cognitive processing—in fact emerges under conditions of otherwise significant disability and illness, e.g., in cases of left-brain lesions or other left-brain damage. From an evolutionary perspective, ruling out all berries that look like the poisonous berry that killed your brother is a pretty good theory, a trade-off involving increased safety in exchange for decreased discovery, e.g. you miss out on a bunch of yummy berries that aren’t poisonous, but hey—you get to live another day/month/year). What Anderson’s article—and, oddly enough, the behavior of brain-damaged individuals like Charles Wolf—suggest, however, is that our own evolution has been a non-optimizing trade-off, and that future humans, evolving beyond the tyranny of frameworks, theories, and contexts levied by the left brain, may emerge with processing powers far beyond any we have yet seen . . . but without, perhaps, the contextual framework to understand why the results might ever matter in the first place, and lacking the ability to communicate what any of it means. Stepping away from this very-real sci-fi digression, what can an entrepreneur learn from both stories? 1. Strive to maintain an “awareness of your awareness” – question yourself about what you think you see happening in your market, with your customers, with yourself. 2. Maintain a healthy skepticism about broad-scale prognostications (except mine, of course). 3. Don’t be too quick to ascribe causation. Sure, swift decisions and action are critical in many situations, but consider the advice an old friend and M.D. used to say to his newly graduated, over-eager medical residents: “Sometimes instead of telling yourself “Don’t just stand there; do something!”, you should tell yourself: “Don’t just do something; stand there!” 4. Recognize the difference between decisions that can benefit from more data and analysis, and decisions that can’t. This, of course, is where that ol’ left-brain might come in handy, even if Google doesn’t appear to use it.
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04:11 PM Tuesday, July 01, 2008
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Over the last few weeks I’ve seen an uptick in news articles citing the lack of tech IPOs (my colleague Don Dodge wrote on this just days ago). Don mentioned some of the macro-economic factors driving the dearth of tech IPOs. But there is another key factor that I haven’t seen discussed much in the major press outlets: CEOs simply no longer see any value in going public. Ever since Sarbanes-Oxley (and other restrictive regulation around publicly marketable securities), smart CEOs have observed that, unless the market is exceptionally hot, the costs of going public simply outweigh the benefits. If executives of a promising, high-growth company want to take some risk off the table, they can almost certainly negotiate a share sale to private investors with far greater ease and lower costs than the reporting strictures they would face in a public filing. In today’s Wall Street Journal, Rebecca Buckman writes about the situation, touching briefly on the issue of regulatory burden for small, high-growth companies seeking greater capitalization and/or liquidity. Peter Falvey from Revolution Partners sums it up by admitting that “the economics have been destroyed for small-cap IPOs.” “Destroyed”—it’s a strong word, and it’s probably not strong enough to convey what over-zealous reporting requirements have done to any previous CEO enthusiasm toward taking small, high-growth companies public. The implications for venture capital returns are large: The WSJ article reports that the average time for a VC-backed startup to go public is now 8.6 years. If things don’t change, the long-accepted yardstick of “5-7 years” may need to be extended a bit. What’s interesting here is that the time span now matches or exceeds the typical market ramp needed to move a company from first round to public exit successfully. At 8.6 years, unless a VC times its investment perfectly, the odds of a good company getting caught in a macro-level trough are much, much higher. And since delayed liquidity = delayed returns to LPs, one could see a longer gap between fund-raising for VCs in the long run, with a longer-term impact on available capital for startups down the line.
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05:25 PM Monday, June 30, 2008
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A recent study published in the journal Neuron, as reported in Ars Technica, has particularly relevant conclusions for the entrepreneurial mind—both positive and negative. John Timmer reports in Ars Technica that “in the brain, neural activity associated with a novel choice occurred in an area identical to that activated when a known image triggered the expectation of a positive result. In essence, the test subjects chose novelty because their brains—specifically, the right ventral striatum—interpreted it in a manner similar to a known positive result. To confirm that this was specific to novelty, the authors determined that the degree of activity in specific test subjects correlated with the frequency that they choose a previously unknown image. The activity also correlated with novelty-seeking behavior when the subjects filled out a personality survey. Overall, the researchers build a pretty compelling case that people try the new in part because they view a novel choice as its own reward.” Entrepreneurial advisors often speak about risk tolerance and, more specifically, how the more entrepreneurial among us tend to possess a higher degree of it. Many suggest that, like similarly elusive qualities of successful “leadership,” these traits or risk profiles can be learned. I used to argue passionately against the idea that these qualities could ever be learned. I’d like to revise my position a bit. After 20 years, I think that if those skills (or a tolerant/positive perspective regarding risk) aren’t learned early, there is little to suggest that later training will remake an individual in any substantive way. By the time you’re in your twenties (and maybe earlier than that), you either have it in your blood or you don’t. But in both cases, what’s “in your blood” are learned patterns of perception and behavior. This isn't quite the same thing as Warren Buffet's comment about being careful to choose one's parents wisely, but it reinforces the huge impact of early experiences on future psychological profiles. In short, acquiring most skills—including entrepreneurial ones—is much like acquiring a second language—nothing beats starting early. On the negative side, there is an interesting note toward the end of John Timmer’s article: “The authors note that there are limits to this behavior. Nearly any animal humans have tested will learn to avoid novelty if it is frequently associated with negative outcomes.” Thus we have a base neurological rationale explaining why some cultures that punish failure more severely may tend to perpetuate more risk-averse perspectives among its citizens.
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07:41 PM Thursday, June 19, 2008
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Yesterday’s Good Morning Silicon Valley email called out an ABC news article titled “Will GPS Make Us Dumb.” This, of course, follows right on the heels of The Atlantic’s recent cover story: “Is Google Making Us Stupid?” Macro-economic trends aside (my hunch is that 2009 is going to be a disaster), I find the general rise in quasi-philosophical doubt about technological progress entertaining. In the ABC article, Middlebury College professor Anne Knowles was quoted thus: "One effect of an increased dependence on GPS will be that peoples' ability to read maps will further decay. Americans are generally poor map readers. Some cannot read maps at all because it's not part of our education. But what will grow, instead, will be better geographic imagination and awareness. People will see the connections between places more clearly -- not quite as accurately -- but will better imagine how to get from one place to another because of this technology." I found this article particularly funny in light of a dinner conversation a few days ago with a friend who is currently taking sailing lessons. My friend was joking that during the classroom sections on map-reading & navigation, he kept thinking to himself, “yeah, that’s great, but I’ll just use my iPhone, thanks.” This seems to play into Knowles’s argument about the diminishment of the public’s map-reading abilities, but I believe that the first half of her equation is overblown. It’s like saying that the fact that most of us aren’t great at putting a saddle on a horse is a bad sign for the future of transportation. In a similar vein is Nicholas Carr’s article in The Atlantic. It’s a very light piece that considers whether humanity (the Internet-obsessed portion of it, anyway) is going to experience “particularly far-reaching effects on cognition” due to the rise of information snacking, rapid article scanning, and a general inability to stick with a book, idea, or problem for more than three minutes. And some, like Kevin Slavin from the ABC article, add to this chorus a eulogy for the social interaction that will vanish when no one has to ask a stranger for directions. To Carr, the answer to whether we are changing neurologically based on our interactions with our chosen environment is, of course, “Yes.” And for my nickel, one of the clearest arguments as to why such changes will occur can be extrapolated from Jeff Hawkins’s 2004 book On Intelligence, in which Hawkins articulates in common language his theories about the neocortex. In short, one can think of the cortex as layered, with memory levels of increasing generality as one moves up through them, e.g., layer one holds letters, layer two holds words, layer three sentences, etc. When we are able to offload lower-level data—via either technology or by studying the data extensively so that we understand the combinations rather than the individual pieces—we open up cognitive space "at the top" for more complex, higher-order thinking. For example, if you are literate, you aren’t processing each letter of this blog post individually but rather are “chunking” the data into meaningful pieces with great ease, freeing up brainpower so you can weigh my overall message and decide for yourself exactly how wrong-headed I am. In sum, while some might bemoan the growing loss of paper-and-compass orienteering skills among the general public, my odds are that the proliferation of GPS tools will, after the usual overhyped scaling period, become indispensable. Moreover, by off-loading some of the base-level data via technology, new neocortical doors may become opened for thinking up innovative ways to leverage our relationships with own increasingly pinpointed place in this world. To Slavin’s mourning of lost-stranger interactions, I can only offer that perhaps, just perhaps, social interaction among strangers and the “formerly directionally challenged” may similarly evolve. Perhaps our devices will screen in real time the strangers at the corner, identify for us which ones share similar schools, political views, and business interests, and then allow us to engage in whatever manner we see fit. And while some might bemoan the ever-increasing tendency for like-minded folks to cluster together, perhaps some of us will look at all of that stranger-centric data and decide to buck the trend and tap the shoulder of the person most different from ourselves instead.
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12:16 PM Friday, May 30, 2008
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Interleaved between the company presentations which comprised 90% of the Goldman Sachs Internet Conference were several panels and data presentations, including a presentation of Goldman’s latest survey among a broad sample weighted to reflect the general Internet population. Much of the data was unsurprising, but I will list below a few of the more interesting data points: · If you look at the top online activities based on time spent, these activities appear fairly stabilized across 2005-2008. Email hovers around 26%, Search at 14%, Games at 11%, and Reading News at 10%. This seems incredibly boring when viewed at this level, in spite of a rash of startup activity touching each of these areas in various ways. · Watching videos online is the fastest growing category of online activity, but viewing habits are already starting to look an awful lot like the way people watch TV today. · The proportion of respondents who just go directly to a website of interest instead of using search more than half the time has grown to 66% in 2008 vs. 57% in 2005. · Like the top online activities, the top categories in online spending also appear stable over the last 4-5 years: Clothes/Apparel (48%), Books (35%), Travel Arrangements (32%), Consumer Electronics (31%) (2008 percentages, but could just as well be the 2004 or 2005 percentages). · The top drivers of e-commerce remain Price, Ease of Use, and Product Selection. Boring, Less Boring, and Boring. (Speaking of boring: in another post I should talk about why eBay is on its way to becoming just an online Wal-mart). · Alternative payments are growing: nearly 50% of online shoppers and 59% of heavy shoppers use alternatives like PayPal or Bill Me Later. This is one that I do find interesting—when I pulled out my wallet recently, I found myself staring at a few twenties the same way I used to look at fake Confederate money or Monopoly money when I was a kid. This was the first time that this feeling had been visceral, rather than intellectual. Weird. · Perhaps the most interesting, obvious, and important: the top driver of mobile search choice is the quality of the interface, not relevance. In fact, concern over relevance in mobile search is less than half that shown for PC-based web searches. This may be an artifact of the press being given to the iPhone's terrific interface, but it seems a little weird, given the huge added value that relevance can have in mobile search. I am thinking of location-based relevance here, but that doesn’t appear to be on general users’ radar screens yet. I think this will change in a very big way over the next decade (yes, I said decade....). I have seen some really interesting startup activity in location-based services, and the Android demo at Google I/O offered some pretty expansive LBS possibilities. It's going to be interesting to see whether the complexities involving spectrum licensing, network carriers, device manufacturers, OS creators, third-party app developers, content creators, advertisers (and, by the way, mainstream consumers) make the rise of LBS rapid and powerful, or slow and excruciating.
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01:49 PM Thursday, May 29, 2008
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29
Thu
In yesterday’s post on “The Great Inventory Split,” I talked about the very real and growing bifurcation between vast amounts of low-quality, low value content and focused pools of high-quality, high-value content available to online advertisers. For the last day or two I’ve been attending Google I/0, the company’s developer conference, in San Francisco. As I type, I am listening to Google’s Marissa Mayer, VP of Search Projects and User Experience, describe the several of the problems that Google is working on. General search, of course, tops the list. Unlike other companies, like Barry Diller’s IAC/Interactive, which is working to create segmented, vertical search experiences like Rushmore Drive, Google continues to try and tackle the “impossible problem” of parsing single, general queries to determine semantic intent, local application, automated cross-language results, etc. Marissa is continuing to run down a laundry list of cool, math-camp kind of projects that Googlers work on—often without real concern for whether a project can become a business, but instead for whether they could solve a problem, explore a concept, or push an idea to its limit. StreetView emerged from one of these projects. Google Book Search is another. Her presentation is clearly a marketing effort (for their “20% time” idea, which I don’t need to explain) versus 99% of the rest of the conference which is fairly hardcore, and very good. Thinking about yesterday’s post and Marissa's talk, I’m seeing an interesting relationship between the two general categories of publishing inventory on one hand, and the two broad approaches to search we’re seeing emerge (verticalized/segmented vs. general). In both cases, the category where the goal is to succeed against a broad, general challenge is the harder one. In both ad monetization and search, the challenge is about zeroing in on meaning without taking the starting-point shortcut of beginning with a smaller content pool. Think of it as the needle in the haystack problem: if you are able to start with a smaller haystack, you’re better off, but the real feat would be to find the needle in the hayfield. Google wants to solve the “needle in the hayfield” problem. Why? Because at the moment, working on the hard problem doesn’t hurt Google’s business, and it keeps its engineers engaged and motivated. For others, who lack the huge market share and corresponding ad revenue, and whose sole focus is to shift that market share and revenue, different guiding principles may apply. Really, though, this shouldn’t be a surprise, as it is universal: formulating a general theory of relativity continues to prove a challenge even after Einstein’s (generally successful) crack at it, while event prediction in closely controlled environments is commonplace. As a final note, I happened start reading The Black Swan by Nassim Nicholas Taleb on my flight to Google I/O. One of the advantages of being part of a positive Black Swan event is that one is afforded the luxury of being able to choose one’s next pursuits purely on the basis of one’s own interests, rather than the market's (or one's investors'). As Taleb notes in one anecdote, for a trader capitalizing positively on a Black Swan event, one good year out of ten, or even one out of one hundred, is enough. Clearly, Google’s actions continue to follow this pattern generally: so far, they have had the equivalent of “one good year” – but that one may be enough to cover them for a long, long time.
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04:51 PM Wednesday, May 28, 2008
May
28
Wed
Last week I had the pleasure of attending the Ninth Annual Goldman Sachs Global Internet Conference in Las Vegas. Part road-show, part long-view, the conference offered a different perspective on the Internet space than that usually provided at Silicon Valley-area events. Specifically, in presenting a wide range of companies from the very small/newer (examples: Spot Runner, KickApps) to the very large/older (Ticketmaster, NY Times, IAC/Interactive Corp.), I was able to see not only how small companies were working to gain initial traction, but how large companies were working to execute operationally against the expectations of public markets. One of the most interesting themes to emerge from the event involves the realization by companies with ad-based revenue models of a bifurcation of inventory across publishers into A) huge inventories with little/poor content quality (and consequent low CPM rates) and B) more focused inventories with high content quality (and consequent high CPM rates and other ad revenues). Barry Diller, who kicked off the conference Wednesday morning, was the first to hint at this inventory split in repeatedly noting IAC’s current theme of incubating vertical categories (including search, with the black-focused site Rushmore Drive). New York Times Digital’s Martin Nisenholtz called out this bifurcation specifically, noting that—countering many who claimed that all online content would be dispersed and therefore commoditized—high-quality, focused, and/or branded content was absolutely key to a successful ad-based monetization strategy for the web. This was corroborated by the fact that nearly every ad-based business that I saw present at the conference focused on its ability to aggregate users into tightly monetizable pools via content or user demographics. In short, 1 million die-hard skiers are better than 20 million random users any day—and maybe better than 100 million of them--at least for now. The elephants in the room, of course, were broad social networks and user-generated content (UGC) sites. One result of making the creation of online content incredibly simple, social, and free is the rapid proliferation of publishing inventory—all those pages, videos, etc. being thrown up on the web every day by users who may or may not have any aspirations to monetize their additions to that inventory. By analogy, imagine what would happen to outdoor ad rates if suddenly everyone could instantly create a 40-foot billboard in their front yard, with whatever content they wanted on it. The short-term solution, noted above, is to create islands of focused, related content. The longer-term solution, which is much more difficult, is to create tools and technologies that can create virtual islands of such content—so that rather than having to go to Rushmore Drive to “go deep” on black web content explicitly, a user can have that material integrated into his or her online experience implicitly. It appears that the large media companies (IAC, NYT, Glam Media) are taking the short-term solution of having the user go to verticalized, quality content locations—and they are doing well by it. Others (particularly Google, based on their comments at the conference, but also a raft of semantic-search startups like Radar Networks, Powerset, etc.) appear to remain focused on the harder problem of parsing intention within a single user experience and striving to bring high-relevance content to the user (more on this in a later post, as I am at Google I/O this week). Personally, I think there is going to be room for both approaches for quite a while, although in the long term (7-10 years), I suspect that the latter, more difficult model will win. Think about mail: there was a time when I had to go to a central post office to send a message. At present, I can send a message to virtually anyone from virtually anywhere. In the short term, the fact is that the advertisers holding the purse strings still think largely within frameworks established during the reign of network television, i.e., vertical targeting via programming content. So while it may not yet be a brave new world for online advertising, the hard reality is that vertical content, quality content, and branded content are proving to have the greatest short-term (and probably medium-term) potential if you are building a business based on an ad-revenue model. The challenge remains for those startups generating a proliferation of pages, views, and UGC, i.e., the broad, non-vertical, social networks. Benchmark Capital’s Bill Gurley noted in one of the conference panels that the Facebook team seems to think of itself as a utility, but the reality is that gaming and entertainment are the current, best monetization models for large social networks, citing Tencent as a clear example. If Google, Microsoft, Facebook, or someone else, however, can set loose tools and technologies to deliver the long-term potential of connecting me to meaningful, quality content—even when I don’t know exactly what it is I want—then a truly workable ad monetization strategy for broad social networks will start to emerge alongside the more transactional, gaming/entertainment models we see today. I think this is a case of short-term vs. long-term monetization, and there are only a handful of companies around at the moment with the financial resources to bet on the long-term solution.
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01:28 PM Friday, May 16, 2008
May
16
Fri
This is a tale of two cities, of sorts. In one, the quarters are cramped, but the creative energy is palpable. In the other, the rooms are spacious, but the energy is less frenetic, more subdued. One resembles a street fair or tent revival, people bustling around, talking over each other, searching for opportunity with a sense of urgency. In the other, civility reigns: people shuffle politely into well-ordered rows, listen quietly, weighing what’s being sold with a certain coolness and distance—more like a medical conference or a cathedral service. Both are friendly; both offer opportunities. But they couldn’t be more different. Last Friday I attended the Northwest Entrepreneur Network’s Early Stage Investment Forum, held in Seattle’s Washington State Convention & Trade Center. The Convention & Trade Center is cavernous, and as a result the presenter booths, the event attendees, etc. were dwarfed in proportion. There was, actually, way too much room, and at least for me, this physical environment lent a certain level of formality to the event. During lunch, the organization ran a well-crafted video of local entrepreneurs discussing the wonderful support and community that both Seattle and the Northwest Entrepreneur Network provide. The event materials came in a very nice binder, with tabbed sections, graphically consistent company descriptions, and an accompanying flash drive with company presentations on it. Very professional. Overall it was a good event: I was able to meet some really great people including Peter Quinn, the new Executive Director of the Network, and I am looking forward to attending future events. The Network clearly creates value for its participants, and the level of community support is high. Two days prior to this Seattle event, however, I was in Silicon Valley at the PlugandPlay EXPO in Sunnyvale, presented by PlugandPlay Tech Center—a kind of combo incubation center and entrepreneur network. The event space— it was held at the PlugandPlay Tech Center itself—was packed with attendees. It was too hot. People were bumping into each other at every turn. Each startup had a small bar table that couldn’t hold much more than a laptop. Presenters had something like 5 minutes to pitch, with no slides, and even with a microphone they had to nearly shout over the individual conversations in the room. The event materials were basically a stapled set of glossy photocopies of each company’s 2-page summary. The production level was super-low: every page was different; layouts, fonts, graphics were all over the place…it was a mess. But here’s the deal: it worked. It provided the necessary information with the minimum amount of overhead. It included a rough map so I could hunt down the startups with whom I wanted to engage. The overcrowded room created a higher level of energy. While there was undoubtedly a community component to this group as well, it was more obvious than in Seattle that the whole thing was built on a competitive foundation. Just as in Seattle, I met a bunch of great people, but when I left the PlugandPlay EXPO, I left with the feeling that something exciting was going on. I left the Seattle event thinking, “that was nice; what a supportive community.” Other differences, while seemingly irrelevant, actually have meaning in thinking about the different cultures of Seattle and Silicon Valley. In Seattle, the median attendee age was probably 10-15 years older, including the entrepreneurs. In Seattle, there were a lot more ties, suits, and traditional “professional” attire. There were 70% more companies at the Silicon Valley event (49 versus 27). In Seattle, there was a broad range of companies from tech to financial services to personal wellness. In Sunnyvale, the companies were 100% tech. Now, at some level I am comparing apples & oranges: the two events don’t align perfectly in scope or mission. But you know what? They align enough to get a general flavor of each organizational environment. And the choices each organization made—from location to event materials to presentation setups—sent a message. As some people say, “all data is data.” And I found these two data sets to be extremely interesting in contrast.
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