allensblog

Convergence on Two National Newspapers: Liberal or Conservative?

As the WSJ and NYT become our only surviving national US newspapers (leaving out USA Today and Washington Post), which is advantaged in reaching a large national audience: the clearly liberal NYT or the clearly conservative WSJ?  Maybe the industry will segment along current political lines, much as it has in other countries historically.

IT Glory Days

Interesting column in last Sunday's NYT by Randall Stross.  Continues a debate fomented by Larry Ellison (good summary of it here in the context of the Oracle/PeopleSoft merger) about whether IT is a "mature" industry (as opposed to a growth industry).  This is a hot topic in the VC world right now (e.g., is Saas going to save enterprise software investing because it's outgrowing the general market for IT spending?), and has implications for entrepreneurs - large VC funds can't make money investing in successful, but small-to-medium size outcomes.

More to come as part of the series on "Financing Innovation".

Co-Founders vs. Early Employees

Ever notice that, after the fact, hugely successful companies have many "co-founders", while failed companies have only "early employees".  VC's make it their business to know who the "real" founders of succcessful companies were (we try to be involved in their next company) -- and it's a small world, so not that hard to track this.  Entrepreneurs hurt their credibilitly if they claim 'co-founder" status too generously.  Conversely, having comported oneself admirably in a failed start-up is nothing to hide.  So, tell the truth when you're pitching VC's.

Modes of Online Collaboration -- Why not a hybrid?

There seem to be two major modes of online collaboration:  (1) the "messaging" model (email, IM, texting -- often with content files attached to the message (e.g., an Office file)) and the (2) the "shared workspace" model (e.g., wikis, Sharepoint, the various "web meeting" applications).  Each has strong advantages and disadvantages.

With the messaging model, it can quickly become difficult to keep track of the "master" file (e.g., the sales presentation in an attached Powerpoint file), and generate lots of "messaging" activity that is not productive.

With the shared workspace model, the need to shift from the primary "messaging" mode to a different mode of work (i.e., logging into a shared space that feels more oblique or indirect) can make the application seem more difficult and impede usage.

I haven't seen any good attempts to find a blended or hybrid model; I'd love to hear from anyone who knows of interesting attempts to do so.

Twitter Doesn't Need Revenue to be Valuable

Lots of debate going on about how Twitter will eventually monetize their traffic (or not).  And, they may actually figure out ways to do so.  But the economic value in Twitter is not in the monetization of their own traffic as an independent company, but rather in eventually selling to a larger "platform" company that can use Twitter's enormous traffic (plus, see yesterday's post in TechCrunch) across a larger platform to make money in ways other than display ads.

Media that is highly and fundamentally interactive (e.g., Facebook pages, Tweets -- and most "communications media" such as email and other messaging media (e.g., IM, texting) are lousy places to do advertising.  Users are simply too engaged with the "content" to notice marketing messages.  Hence the well-documented slide in eCPM's for (especially) display ads on social media sites.  So, Twitter, the apotheosis of engaging, fundamentally interactive media, is a lousy advertising medium.   So, too, were ICQ, Hotmail, YouTube, etc., yet they were enormously valuable to larger platforms that could find a way to leverage the enourmous usage each of the companies generated.

The investors (at least the early ones) likely will make a bundle on Twitter when it gets sold, even though Twitter, itself, may not be a huge revenue generator.

Facebook and Twitter = "Dumb Pipes"?

A story today in the FT reminded me of a conversation I'd had with a friend who is the head of a media buying agency a few weeks ago about how Facebook (and maybe Twitter) are becoming "dumb pipes" (more charitably, "platforms").   The argument:  FB and Twitter are fostering large and growing economies (for free) that are (or will be) larger than the revenues of FB or Twitter themselves (if Twitter eventually does have revenue).  FB and Twitter bear the expense of supporting these economies, but generate no revenue from them (or precious little given the ad rates on social media sites).

Case in point:  my friend mentioned that his clients had spent "tens of millions of dollars" in the past 12 months on marketing activities that leveraged FB (e.g., marketing campaigns using FB groups, FB apps, etc.), but that none of the "spend" was on FB "advertising", so FB received no revenue from the "tens of millions of dollars".

The same may well be true for Twitter, although, as I've argued elsewhere, Twitter may well become a valuable company despite never having substantial revenues (a la ICQ, Hotmail, YouTube, et al.).

Interesting challenge for FB (and Twitter and MySpace) to figure out how to monetize the robust and growing economic activity that takes place through their "pipes" (on their platforms) in ways other than putting display ads on the page views generated by the economic activity.

Kind of like some challenges facing the providers of other potentially "dumb pipes":  cable MSO's, phone companies, wireless carriers, etc.

Javascript vs. Flash

Is is just me, or am I seeing much more Javascript these days?  It seems to me that my browser (all of them: IE, Firefox and Chrome) alerts me that almost every web site I visit wants to install Javascript.  Anyone else encountering this?  If true, anyone have an explanation?

Financing Innovation -- Introduction to The Series

In my post of January 22, 2006, I argued that it was too soon to tell whether the IPO drought was a deep, systemic worry, or whether it was simply an artifact of the low pace of new company formation in the nuclear winter of ~2000 - 2003.  In noting that startups always have -- and always will -- take at least 4-6 years to mature to the point where they should go public, I urged that the appropriate attitude was "wait and see" rather than "the sky is falling". 

Well, here in the middle of 2009, the jury has filed back into the courtroom and delivered the verdict:  the sky is falling.  Financing innovation in this country is facing a crisis, with the dearth of IPO's a core issue, but not the only one.

I'm going explore this tangle of topics in the next series of posts.

Everyone hates their CMS

I've been thinking about an issue for a new breed of online publisher, one that starts as a blog, then grows into a real, commercial, multimedia-enabled web site -- with all the other accoutrements -- e.g., hyper-distribution of its content through widgets, etc. -- that one often sees today.  The issue is the difficulty of finding a third-party content management system (CMS) that is adequately flexible and scales with the success of the business -- in all dimensions: traffic, media file types available on the site, content distribution, etc.  While this may betray some subtle bias in the sample, most online publishers I know, even smallish ones, end up "rolling their own" CMS because they can't get third-party offerings to work in the way they need.

A company that illustrates this dilemma is Halogen Guides (www.halogenguides.com) -- (full disclosure: I'm involved in Halogen Guides), about which more over the next several posts.

There are, of course, several "off the shelf" low-end CMS's:  Moveable Type and Wordpress are two of the better known.  At the high-end, one finds Interwoven and Vignette as big enterprise-level solutions.  But in the case of Halogen Guides, as well as most of the major, large online publishers vis-a-vis Interwoven or Vignette (or other similar offerings), the platforms offered by third-party vendors were not adequate to the task as the business grew, and grew more complex, and the online publishers, big and small, ended up developing their own CMS.

Over the next couple of posts, I'm hoping to explore this phenomenon in a little more detail, and would love to hear from readers about their experiences in this regard.

Quick Notice about the NYT Situation

Just a quick notice here to set the context for something that has been getting a little press. Because of my longstanding interest in, and experience with, internet and new media companies, I was approached by a group of stockholders of the New York Times Company to see if I would agree to become a nominee, on their behalf, for the Board of Directors of the NYT - and I've agreed. Here's a link to an explanatory letter that we filed with the SEC that gives an overview of our position.  In this brave new world of "new media", it's not clear how the existing regulations on communications in this type of situation apply, so I'll play it conservatively in terms of posts during the process.

I also want to mention that this is something that I'm doing in my individual capacity, not as a Managing Director of Mayfield Fund. Mayfield Fund is not affiliated in any way with our effort.