Posts filed under 'Startups'
In the last few hours two associates both pointed me to David Beisel’s post on Vertical Social Networks. Based on my previous post, obviously I agree with David that we’ll start to see niche or vertical social networks. I wanted to address David’s question about the monetization of these vertical social networks:
So the more niche and limited audience a given subject area, the less able the network is able to take advantage of this exponential effect. But I’ve also argued that in the long run, the value of the network is not only determined by the number of nodes in it, but in the ability for the network to monetize those nodes. The question then is that if there’s a greater ability to monetize niche subject areas than more general ones because of the passion and interest-level involved in some of them. The answer is probably that it varies from vertical to vertical, subject to subject.
I have data on these things that most observers probably don’t have handling thousands of publishers advertising, and I can say that general social networking sites can’t monetize each “node” or user as well as a niche site can monetize each one of their users. As an example, let’s take two sites with similar unique visitor and ad impressions that I have permission to talk about in detail.
The first is Whoomp.com. This isn’t a social networking site, but it’s got a similar demographic and general audience who’s interested in humor and entertainment. A lot of this site’s links come from social networking sites where people are sharing funny videos with their friends. This site averages somewhere between 1-2k in ad revenue a month.
Let’s contrast that with Wakeboarder.com. This is a specific vertical based on a sport/hobby, so the userbase is very focused in their interest. As I mentioned above, it has a similar unique user and impression level to Whoomp.com, but it will average about 4-6k in revenue from advertising. It also has other specific monetization such as ecommerce which is much harder to pull off on a less focused site.
While neither of these sites are social networks, if we changed these to Myspace vs. Wakeboarding Social Network Site, I can guarantee you that each user is worth more on the more focused wakeboarding site.
The lesson here is that specific niche social networks will not grow to the size of Myspace, but they don’t need to still be a viable business.
February 9th, 2006
There is a new and unconfirmed rumor that Yahoo is interested or going to buy Odeo. Who the heck knows if it’s true, however I will say that like I mentioned with Feedburner, there are some companies out there that seem like they’ve still got a good shot even if acquisitions start to slow down. These are the companies that have applications I found extremely helpful, and they’re so well done and easy to use it all just makes sense.
When I signed up for Odeo, it took me about 30 seconds to figure it out and record my first audio and see how to use it. It was one of the easiest and cleanest user experiences I’ve had in a long time in starting to use a web application. While I still don’t know if podcasting is the future, there is value in user-created audio and I think that is an area poised for growth. Odeo is the best solution I’ve seen so far, and they’ve got an experienced team. Whether or not the rumor is true, it smells like a long term winner to me.
February 7th, 2006
It’s becoming more and more obvious, but launching a company or product in the web world is so much easier than it used to be, as long as it’s good.
Don Dodge outlines how this has occurred, and I’d like to take it a bit further and see how it changes the way companies use PR firms, venture capitalists, and marketing.
PR Firms
I’ve heard some people say that there isn’t much of a use for PR firms anymore. I don’t think that’s the case. Obviously it’s easier to get press coverage due to the world of blogging and your company/product can spread via word of mouth that much easier. So not only is it easier to get press, it’s easier to get a userbase without getting articles in the media. If it’s easier, why is PR still necessary? Because it’s easier to get positive coverage, it’s also that much easier to get negative coverage or just have the stories give out a confusing message. PR can help a company prepare for those situations, they can help deal with them when they happen, and they can help you fine tune your story to make sure it’s right. PR firms do need to change though to be comfortable and well-versed in the new world of blogging and social media, if they haven’t changed already.
Venture Capitalists
I’m not an expert on venture capital having never took any or studied it all that closely. However, it strikes me that it’s easier now to get a company off the ground cheaply, and you don’t need a venture capital firm backing you to get press or partnereships. It seems that it makes more sense for venture capital to make sense when a company is in a growth period that requires a lot of cash, or if the venture capitalist provides a ton of experience and connections that can really help your company.
Marketing
What has this all done to marketing? Marketing is really blurring with numerous areas to really just become how your company faces the world. Combine traditional marketing with organic search marketing, PPC marketing, display advertising, public relations, viral marketing, blogging, and social media. That’s really the new marketing. A new marketing strategy really must encompass all of these if you really want to be effective. How do you hire for these marketing positions? I’m not really sure, but it’s easier than ever to get your name out there, as long as you have a great product. Focus on the great product first, and then find some people who know how to work with these new ways of marketing. the combination should be dynamite.
February 5th, 2006
As I continue to try out web applications and work on building one, I’ve become curious as to what the main factors are that make people not only try out a web app, but that make them continue to use it and tell others about it. What really drives this curiousity is that I’ve tried out applications that I think are very well made and useful, and then I never use them or really think about them ever again.
An example of this is that I try out sites like Newsvine, Blinklist, Digg, Reddit, Wink, Ning, nd Squidoo, I find myself thinking they are nicely designed and have some real utility. But, I find myself not going back to them at all on my own. I really only go back if I see a blog post mentioning them again. On the other hand, I try out applications like del.icio.us, Last.fm, Flickr, YouTube, Voo2Do, and Memeorandum, and continue to use them constantly. What’s the difference in what I do and don’t like? Am I alone or do other people have similar reactions? I know some of the sites I’ve tried like Digg are immensely popular, so what am I missing?
Utility
I think a big key to having a useful web application is for it to have utility. It needs a purpose and to get something useful done. Applications which just provide entertainment are hard to pull off with such a busy society. It’s amazing that Myspace has taken off like it has when for many people it does nothing but waste time. I think that’s why it’s much bigger in the teenager userbase than with professional adults. Of the applications I use often, they provide useful things that help me organize, store and share digital content and information.
Focus
Applications that do too much are going to lose. People are too busy to figure out a complicated system and overwhelming feature set. It’s not just features though that need focus, I think I prefer Memeorandum over Digg in that it has a highly specific technology news focus. While Digg still has a technology focus, it drifts off into humor, astronomy, news of the weird, and other topics.
Simplicity
Focus is part of this, but I prefer del.icio.us over Blinklist just due to simplicity. And Blinklist isn’t even that complicated, it’s just that it seems to combine bookmarking with voting and rating, and that’s just too much when I just want to bookmark something.
Buzz
Applications that are continually talked about draw people’s interest. I probably read about del.icio.us ten times before I ever tried it. There’s a bit of a feeling that if other people are finding a tool valuable, I might be missing something if I don’t try it. There’s usually a reason people are talking, and the applications that generate that buzz seem to win.
Timing
The general consensus is being the first to market with your application is the best. You can gain a userbase, and sites that come after you are usually considered followers or copies. There is value in it. But it’s not really being first, it’s being the first to be successful. There was a bookmarking site or two before del.icio.us, but they were either too early, or didn’t execute well. However, del.icio.us was essentially the “first to succeed’, which means someone who comes after them is just a copycat and really must be great to take users who have already committed to an application. You don’t need to be first, just first to do it right.
What aspects are overrated?
Famous Founders
You hear buzz about startups who have famous or well-known founders. While it may help to generate some early buzz and get more users to try it out, if the application isn’t good, it won’t matter. There are also countless examples of sites built by nobodies that have gone on to huge success.
Funding
Money can help, but it also hurts and can distract from the mission. Sometimes having no money makes you leaner, hungrier, and makes it so that there is no choice but to do it right.
Technology
You hear all about AJAX, Ruby on Rails, Tagging, and all kinds of technology in new applications. You don’t need these things to succeed, and having them won’t ensure success either. While they are used for a reason, don’t get caught up in whether a site has them or not. As long as the application is truly useful and well-designed, your average user won’t give a damn what technology it uses.
The lesson is if you’re building an application to focus on what matters, which is building a lean and powerful tool that provides true use. Get to market when you can, but don’t worry about being first, worry about doing it right.
January 21st, 2006
Mike Arrington rips Ning at TechCrunch, and I have to fully agree.
A couple of months back when I posted about wanting a Web 2.0 community platform I checked out Ning in great detail to see if I could possibly build something out of their tools/applications.
I was pretty disappointed. While it’s neat to be able to so easily make an application, it’s both not that easy, or very flexible. Mike details most of the problems, but even knowing PHP and HTML I found it to be a pain in the butt to clone an application and edit it to my liking. It was definitely not a process that was as quick or easy as I’d like, and then when you combine the fact that I can’t move the code elsewhere or monetize it how I like, it just didn’t have much value.
I’d happily pay Ning if they’d allow me to easily build an application I can monetize in my own way and take the code where I wanted to host how I pleased. Add some flexibility and you’ll have yourself a product.
January 20th, 2006
Blogs everywhere have been talking about Gather.com’s recent $6 million in funding they received, and then critiquing their business model and site in a mostly negative way.
The most interesting post about them though in my opinion comes from Newsvine founder Mike Davidson. Mike takes an even road approach about it, saying that he’s sure Gather.com is full of good and well-meaning people. However, he points out some key differences between them and Newsvine. Gather has around 45 employees, Newsvine has 5. Looking at their sites, you feel like Gather.com has too many cooks in the kitchen wanting to do too many things. Newsvine has kept it lean and mean, and ended up showing that less can be more. The design is cleaner, the focus is more clear, and the execution is just less-garbled.
January 18th, 2006
On many sites, tags are a secondary way of navigating the site. Sometimes augmenting categories, on other sites they act as the primary navigation. Recently, I’ve read backlashes on the use of tag clouds as a navigation tool. The argument is that if you get too many tags in a cloud, it’s a mess and hard to read, and in some ways a tag cloud means you can be lazy and not categorize things cleanly.
One new classified ads site called theadcloud.com is testing how well tag clouds work for navigation and organizing content by making tag clouds the navigation tool for looking at local classified ads.
In my tests in browsing the site I found the clouds fairly easy to use, but I think as the site grows and more cities are added and more tags per cities, it could get cumbersome. However, I think we’re still early to make a judgement on the best uses for tag clouds. We’ll get there.
January 13th, 2006
The much-anticipated web 2.0 news site Newsvine has now launched, and I received my beta invite last night. Here are some thoughts:
- Nice Design – The overall feel and design of Newsvine is quite nice. The look is appealing, professional, the green color is different for a news site, and everything seems well thought-out and organized.
- Where Do I Start? – In comparison to some other social news sites like Digg or Reddit, I think Newsvine is a bit harder to understand what you should do as a user. Part of this is that there are more things you can do, so it’s a bit of a double-edged sword. I immediately started wondering if I should write something for my column, post links to news articles (called “seeding”), comment, live chat, or vote for other stories.
- What Do I Do With My Column? – The name “Column” makes me think I need to only write long articles there. Should I post my blog posts there? Should I write original content? I’m sure this will become more clear as we see how people succesfully use their column, but I’m not sure exactly how to use it yet.
- Revenue Changes Things – Newsvine is offering revenue to users for ads shown on their column pages. 90% of the revenue will go to you, and 10% will go to the user who referred you to Newsvine. If nobody did, that 10% goes to Newsvine. Will this make it more of a haven for spammers than another news community site? Or will it bring more professionalism and people who work very hard to contribute with a monetary incentive?
- More To Do Is Good – People have different incentives for participating in community news sites. Some people like to help the greater good, others are looking to build a reputation for themselves or their business, and others just like to be a power user of a site. I think in the case of Newsvine having the ability to contribute news, vote on news, live chat on news, and create your own column is a great combination that will in fact lead to a powerful community. There are various ways they highlight top content in various categories, and so far it looks like it will work well.
My overall feeling is that Newsvine is going to be a success. It has a professional feel with helpful tools, and is almost a new version of the social news sites we’ve recently seen grow so much. I don’t think it will kill any older sites like I’ve seen some people say, I just think it will grow to be a powerful user-powered news community.
January 7th, 2006
In Steve Rubel’s predictions for 2006, he talks about what he calls Crash 2.0, which is basically that the 10% predicted growth rate of online advertising isn’t going to support the startups who are banking on advertising as their primary revenue source.
I think he’s partly right, but it shouldn’t be a big concern. First, if a new startup fails, it will probably be because they just didn’t get traction getting users. It’s so easy and cheap to start a good web company now that expenses should not be so high that you can’t rely on advertising for a long enough period to see if the concept flies.
In the long term, if advertising is all you’ve got for revenue ideas, you need to either have a lot of traffic, or very targeted content that attracts audiences that will get high CPMs.
And while I think predictions on growth rates are totally hit and miss, I also wouldn’t be surprised if that 10% Steve’s referring to was underestimating the money that will be spent as more brand money comes online from TV and print, and also as advertising companies and publishers get better at generating better online advertising ROI.
January 2nd, 2006
As I pointed out in my
Top Web Predictions for 2006 post, I think the number of high-profile acquisitions will probably slow down in 2006.
I could be totally wrong, but I could see the
USA and global economy slowing down, as well as the realization that some of these companies being acquired aren’t really generating a ton of cash. That being said, I think it’d be fun to give my thoughts on what companies are likely acquisition targets in 2006. I’ll include some guesses at likely buyers for fun as well.
- Digg - The hot social news site is profitable from Adsense revenue and has had recent venture capital funding. While VC’s do build long term businesses, they do like a return on investment. Another possible acquisition target in this space would be Reddit. Likely buyers: CNET, Yahoo, IAC, News Corp, New York Times.
- Netflix – Yes, they’re pretty big and public already, but that doesn’t mean they can’t be acquired. Netflix has a strong web presence, is growing well, and would be a nice entertainment property as well as a potential large future player in the video on demand world. Likely buyers: Yahoo, Apple, Amazon.
- Newsgator – As the Scobelizer has pointed out already, Newsgator is a leader in the RSS world and has it’s bases covered. A company that wants to gain a stronger foothold in the RSS feedreader would have to look at them. Plus, it’s a crowded space there, something needs to happen. Likely buyers: Microsoft, News Corp, AOL.
- Riya – Still in beta, but a very promising face recognition technology for tagging and finding photos. There were a ton of rumors that Google had acquired them which proved untrue, but Scoble admitted in his blog that Microsoft was in talks with them but the price was too high, meaning someone else had bid more than Microsoft was willing to pay. Perhaps Riya didn’t want to get snatched up so soon, but obviously means there is some serious interest there. Likely buyers: Google, Microsoft, Yahoo, CNET.
- Feedburner – They are the leader in RSS feed analytics, have an ad network going, and are innovating well with features like their FeedFlare. They’d be a good target for a big player that wants to get more in the feed analytics/monetization space, or a good acquisition for a larger web analytics company. Another company that could be acquired in this space is Pheedo. Likely buyers: Google, Yahoo, WebsideStory, Webtrends, Omniture, IAC.
- YouTube – Kind of like the Flickr for videos, it’s blowing up fast and is being used heavily by the MySpace/Facebook userbase. It’s probably got some sizeable bandwidth/server costs that it could use some help with. Another potential acquisition in this space is Grouper. Likely buyers: Yahoo, News Corp/Myspace, CNET.
- Become.com - A slick shopping comparison and research site. Shopping comparison sites were hot this year as three were purchased around the $500 million range. Likely buyers: IAC, News Corp, Amazon.
- Technorati – Blogs just don’t stop growing, and Technorati has had it’s problems but had continually improved. Somebody will want to get more involved with blog search and they’ll be a likely target. Likely buyers: Yahoo, CNET, IAC.
- Facebook – Social networking for college students only, Facebook has grown at a fast and furious pace, and they get a huge number of new freshmen each year to add as their userbase. Someone will see them being a value like Myspace, altghought not as valuable. Other possibilities include Tagworld.com and Tagged.com. Likely Buyers: IAC, News Corp, CNET.
- Automattic – The creators of the hottest blogging platform Wordpress have formed a company out of the business and added a hosted platform in Wordpress.com. Like Google and Blogger, it’s a platform someone will want. Another possibility would be Six Apart who runs Typepad. Likely buyers: Yahoo, Microsoft, IAC, News Corp, AOL, eBay, some random company.
- A Web Analytics Company – This is a general prediction because there are too many likely targets. But Google’s play into web analytics can’t go unmatched from their big competitors out there, so another web analytics company will get acquired. Possible companies include WebsideStory, Webtrends, Omniture, Clicktracks, Coremetrics, MeasureMap, Mint, and many more. Likely buyers: Yahoo, Microsoft, Amazon, eBay, IAC.
- Ad Network Consolidation – In both the display and text ad network space there are numerous players, and lots of money is involved. Fastclick was acquired by Valueclick this past year, and we could see more ad networks either rolling up into each other, or just getting acquired by larger companies who want in the space.
January 1st, 2006
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