Category Archives: Web 2.0

It’s a buzzword, but an effective one.

Will Yahoo’s Cheap Acquisition Strategy Lead to Long Term Success?

January 16, 2007 2:57 pm / Leave a Comment /

Yahoo! LogoRead/Write Web has a nice post detailing Yahoo’s cheap acquisition strategy over the past couple of years. The implication is that although Yahoo was hammered by the media and investing community for not spending billions on YouTube and Facebook, they actually may have a good strategy in investing in cheap acquisitions that turn out to be big and very important down the road.

One could easily argue that Flickr and del.icio.us were very smart and cheap acquisitions, and that MyBlogLog and others could be much bigger than they are today.

Additionally, it’s nice that Read/Write Web was positive about Yahoo’s investment in my employer Right Media for our ability to monetize display advertising now and what innovations we may bring in the future.

Posted in: Acquisitions, Advertising, Right Media, Web 2.0, Yahoo

Netflix to Offer Streaming Movies

January 16, 2007 2:14 am / Leave a Comment /

One of my favorite web applications and companies is Netflix. Even though I don’t get to watch as many movies as I’d like, and perhaps not enough to make my Netflix subscription a smart financial decision, I enjoy using their site and service so much I’ll keep paying for it regardless of if it makes financial sense.

It’s always surprised me that financial analysts and the media have beaten Netflix down and figured it’s a dying business due to the impending wave of downloadable movies. First, I think people underestimate the staying power of DVDs as they are a very portable format that can be exchanged by people easily and moved from location to location easier than a huge movie file on a computer. But second, why does everyone assume that Netflix won’t be able to partcipate in the downloadable movie world? Since they’ve nailed their website and business already, I’ve always thought they’d be a natural leader in getting movies through the internet.

It looks like we’ll start to see that in the coming weeks as Netflix is set to release a streaming downloadable movie service. And what’s more, is that it’s basically free to their current customers. If you have the standard Netflix subscription of three movies at a time, you’ll get 18 hours of free streaming movie watching time. That’s essentially 9-10 streaming movies per month.

Why streaming? Well, according to Netflix it’s instant gratification so you don’t have to wait hours for a movie to download. That’s nice, and it also allows you to start a movie and sample it before deciding if you want to keep watching. This sounds like a great way to browse movies to see if they’re worth watching in full. It also makes it easy that if I started watching a movie on one computer and had to move to another, I could pick it back up later. The downside I see to this is I couldn’t download a movie to watch on a plane or while offline. I guess that’s why a DVD is still useful!

Good luck to Netflix in the internet movie space, I expect them to do well based on how they’ve handled their current business.

UPDATE:
Netflix has a press release up about it, the service seems to be winning back Michael Arrington, and Hacking Netflix has screenshots.

Posted in: Random, Web 2.0

Jason Calacanis Says Digg Needs An Advertising Sales Team, Is He Right?

January 6, 2007 12:23 am / 1 Comment /

In a word, yes, Jason’s right in his blog post when he suggests Digg may need a sales team of 20 people to reach the amount of revenue they need to justify their latest investment valuation.

His post suggests Digg can’t break out of the technology (young male) demographic with their current brand, and he references another post wondering if “vertical niche” Digg-like sites will eat away at Digg. While I suspect Jason is right about Digg struggling to break out of their young male community, I’m not sure the vertical niche sites will really damage Digg at all. Either way, the thing that was most interesting to me was this paragraph:

The real challenge for Kevin and Co. at digg now is that they probably raised their $8.5m round at 60-80M post-money. That means that the latest round of investors are going to look for 10-20x that amount as an exit. That’s a 600M -1.6B exit. That means they have to get to $30-50M in revenue. That means that Kevin is right when he says they have no interest in selling the company–they’ve got 4-5 years of work to get to those revenue numbers… start building the sales for now because to hit those numbers you need a 20-person sales team.

So, to satisfy the expectations they need to be generating $30-$50 million in ad revenue per year, which is a healthy order. Not only do you potentially need a lot of sales people as Jason suggests, you need a heck of a lot of good traffic as well. I think it will be a struggle for Digg to reach the amount of revenue and profit to justify that valuation, but crazier things have happened.

Another question is the role that Federated Media can take in this, as they are currently acting as the hired sales arm for Digg’s advertising. Jason has theorized in the past that Federated is in a tough spot for a site like Digg because they’ll help Digg grow and get bigger to the point where they can hire their own sales team and not need Federated anymore. There could be some truth in that, if not, then Federated has to be looking forward to the opportunity to keep scaling their sales operations and advertiser relationships to be able to sell the amount of advertising required to make their publisher sites like Digg reach their goals.

Posted in: Advertising, Publishing, Web 2.0

Digg Raises 8.5 Million, And Three Interesting Threads

December 28, 2006 3:43 pm / 1 Comment /

Venturebeat reports that Digg has taken a second round of financing for $8.5 million from it’s original set of investors. There are a few different threads surrounding this that make it interesting.

1. Gaming Digg
The Venturebeat story along with other blogs and media have focused on the controversy of people and businesses trying to game Digg. While it is an interesting story, Venturebeat seems to make a big deal out of the fact that the CEO of Digg denies that it’s happening or been successful. My thought, who cares? If people gaming Digg hurt the results of Digg, then users will notice and stop using it. Or, the more likely situation is that Digg keeps fighting it and will always have to keep fighting it but will keep it squashed enough to continue on as a valuable web property. There are far more people trying to game Google, Yahoo, eBay, and other sites. Has it stopped them from being successful?

2. Digg and Numbers
Another thread being talked about is questioning of Digg’s reported number of 20 million unique visitors with Comscore’s 1.3 million unique visitors and then how Alexa’s ranking of Digg holds with this. This is fairly important because it helps quantify Digg’s value and importance on the web. As Digg fairly points out, Comscore isn’t including much international nor RSS subscribers. Digg believes their traffic should be at least 3-4 times what Comscore reports because of this, but isn’t that still less than the 20 million they previously reported? Additionally, as Pete Cashmore at Mashable points out, Digg’s Alexa ranking of 76 is way overinflated as it’s a technology heavy crowd and many loyal Digg users apparently downloaded the Alexa toolbar all at once which drove a huge spike in the Digg ranking. He even has a handy Alexa graph pointing out when this occurred.

I think what we get when we look at all the data is just another example of how web measurement is so flawed, and we basically have to take the whole picture when trying to analyze Digg’s place on the web. The summary I get is that Digg is very popular in the technology news space, very popular with Alexa users, and not a top 100 site by any means when it comes to Comscore and the mainstream web. How does this affect Digg’s value? Well, it means they still have a big opportunity to go more mainstream, but it also means that they may have an audience that is very ad averse which makes it hard to drive a ton of ad revenue. Digg is not yet profitable, and that could be a reason why, but I’m guessing they’re still spending a lot to try and grow.

3. Not getting their $150 million offer
Techcrunch also brings up that Digg supposedly tested the waters looking for a $150 million offer or more, but when nobody was biting took the second round of capital instead. I’m not sure this is a huge deal, if it’s true it’s likely that potential acquirer’s saw that Digg’s numbers weren’t as impressive as the hype that surrounds it, and that $150 million was just too rich for their blood. By no means though does it mean Digg is in trouble, they’ll just have to keep working hard to grow into a bigger company that drives real profit.

Posted in: Advertising, Random, Web 2.0

Adobe Apollo Is Going to Be Big in 2007 and 2008

December 28, 2006 3:21 pm / 1 Comment /
San Dimas Project Screenshot

I refrained from doing any sort of predictions or year in review posts this year, but one thing I am excited to watch in the next year or two is Adobe Apollo and what types of applications are built from it. If you aren’t familiar with Apollo, this blog post does a nice job explaining it and going through the history of it. In short, it allows the bridging of web applications with the desktop in ways that are beneficial.

When I first heard about Apollo, it didn’t immediately strike me what kind of applications these would really be, but I had a feeling that some cool stuff would be done with it. I just ran across a post about eBay developing an Apollo application using eBay’s APIs for working with their auction marketplace that looks very cool. Bridging the web with the desktop allows for a quick and powerful auction management application that can tie into local storage on your desktop along with desktop notifications of things happening with your auctions.

While San Dimas makes managing auctions easier for the hardened eBay veterans, it’s also an experiment in using Flash to make it easy to get started on eBay. You can create an auction and then use the Apollo to connect to your web cam and take pictures of the item you are selling. Those pictures are stored on the hard drive and can be added to the listing. In addition, it allows buyers to search and monitor your current bids. It can also give you desktop notifications for your auctions so you can track it and make sure you win the Wii that you’re overpaying for.

So, Apollo is making things faster, more powerful, and yet also easier to use and simplifying the use of eBay. Sounds pretty promising if it delivers. Imagine what other applications could be developed for Amazon, Google, Yahoo, etc.

Posted in: Random, Web 2.0

TechCrunch NY Party Results

November 17, 2006 8:05 am / 2 Comments /

TechCrunch PartyWe sponsored the TechCrunch 8 Party in New York last night, so I had the pleasure of trying to have meaningful business conversations over loud music provided by partyStrands.

Actually, the partyStrands system was one of the highlights of the evening, as the interactive system that allows users to search and select music on the projected on the wall interface, as well as send text and photo messages to the same interface was very cool. People not at the party could also see that screen in action through the web.

Another sponsor I got to check out in detail was Gotuit Media, which has a cool form of metatagging video content which makes it easy to both jump around video playlists extremely fast without all the rebuffering, as well as allowing for search within video content and to jump to specific spots in videos.

The scene was pretty good, it was crowded for a while but not as crowded as I expected, and I talked to an interesting mix of entrepreneurs, tech observers, established companies, and quite a few venture capitalists. We’re not looking for venture capital, but I still got a lot of brain picking from them asking me numerous questions about advertising and where it’s headed. It actually made for some decent conversations.

Perhaps the highlight/lowlight of the evening was when Mike Arrington took the microphone to thank people and do a little presentation. As he started to talk, many people continued their conversations. After a couple of attempts to ask people to be quiet so he could speak, he said “You know, the crowds in Palo Alto are a lot more polite.” This was met with a round of boos and “Screw you!” comments. I’m sure Arrington was partially kidding, but the whole incident came off as funny, yet uncomfortable.

Overall I feel it was worth the sponsorship, but there wasn’t really anything revolutionary about it either.

Posted in: Right Media, Web 2.0

Top 10 Things I Learned at the Web 2.0 Summit

November 14, 2006 1:02 am / 3 Comments /

After a weekend to reflect, I’ve come up with the Top 10 Things I Learned at the Web 2.0 Summit that was put on by O’Reilly and hosted by John Battelle.

1. Google likes it fast.
While the results and point of her talk wasn’t surprising, Marissa Mayer did an efficient 10 minute talk with great examples proving that the speed of a web application is one of the most important things to users, and it often has a very direct correlation to traffic and revenue.

2. Everybody is chasing Google.
Essentially every interview and session I attended featured a question along the lines of “How can you/we beat/compete with Google?”. Again, not really groundbreaking, but when you see numerous CEOs and powerful people at all the major web companies trying to answer that question without really having a great answer, it makes it all too clear that nobody knows yet how to deal with the 800-lb gorilla.

3. Jeff Bezos is on to something.
Amazon’s recent move into web services has befuddled analysts on Wall St., but after listening to the energetic Bezos talk about their new initiatives on this area you can see that it is a good opportunity for Amazon, and one they intend on dominating at. I like the move.

4. Advertising is being thrown on it’s head.
The Advertising 2.0 session, as well as other sessions and talks helped show that advertising online is far from being set in stone. Ideas are still coming from everywhere, and many large players are still not yet embracing some of the new and better ideas. Video advertising is a big opportunity that’s being attacked from many different angles, and nobody knows what the right one is yet.

5. There aren’t as many innovative startups as I thought, at least not there.
After hearing that there were over 250 companies that applied to be part of the Launchpad 13 where startups got to launch themselves with a 5-minute presentation, and after seeing who the panel of judges were, I thought we were in for an exciting set of companies. I was underwhelmed, and a bit bored by the presentations. One-quarter of them seemed useless, one-quarter of them didn’t seem very innovative, one-quarter were actually interesting and promising, and I’d read/used about one-quarter of them long ago (how is that a launch?).

6. It feels like a bubble.
It was a really nice venue, very crowded, the parties were pretty lavish, and it seemed like a lot of people were walking around hoping to get bought by the big few in the industry. Just had a bubble vibe.

7. You can hack a conference.
Recently-launched Mashery hacked the conference by booking a conference room for a party right in the middle of the action. It was cheaper than sponsoring the event, and may have gotten them more attention.

8. Basic problems still need fixing.
About 40% of talks and sessions seemed to have problems with the wireless connection, computers screwing up or crashing, or power not working. And the conference wireless connections were hit and miss all week. It’s ironic we’re all trying to build these new revolutionary web applications, when we still suffer from such basic infrastructure problems.

9. Talking to random people you don’t know is still socially awkward.
I’ve been to many business conferences, I feel confident about myself and my employer, and I feel I’m a social person. Yet, there’s still something very socially awkward having conversations with people at these events. They’re either trying to sell me something, I’m trying to sell them something, or you’re both generally not interested but still are in a situation where a conversation needs to exist. Sure, every once in a while a common ground is formed and a real conversation ensues, but it’s still pretty strange.

10. Eric Schmidt talks through an API.
Read the link for more details, but it was fascinating listening to Schmidt talk intelligently, dance around tough questions, and jab his competitors without explicitly doing so. Very well done.

Posted in: Advertising, Blogging, Conferences, Google, Web 2.0

What Marissa Mayer and Google Knows: It’s Speed

November 9, 2006 2:38 pm / 4 Comments /

images1.jpgMarissa Mayer from Google was up next at the Web 2.0 Summit to talk about a key point Google has learned.

She started off telling us about an internal email list called Googlers, and they discuss things like the latest things in the snack kitchen, and if anyone can get Tivo Series 3 to work with Comcast.

In 1999 there was a ton of discussion about the Google Results page. What color the links should be, how many results should there be, and other things.

She was picked because she had no design experience to improve the results page

She set up A/B tests on the results page.

The first test showed that the more results they added to the results page, the less searches those people would do. There was a 20% drop in searches when they showed more than 10 results. Since their revenue has a strong relationship to traffic and search queries, this was bad.

The first theory was the paradox of choice. That users were getting frozen by too much choice. They found out that people who would get 10 results would get their results in 0.4 seconds. The experiment of more results took 0.9 seconds to get their results.

If you tracked how fast a search took, it hit 300 to 700 machines before getting back to the user. So Google learned very quickly that speed was important, and this is one of the reasons why they’ve done so much more in AJAX.

One of the product managers came to her to talk about Gmail, and said they wanted to do it in Javascript. Marissa thought they were crazy because it was buggy, slow, client side, etc. The product manager said she was right about all of it except it being slow. They moved on to really focus on speed with Gmail.

They did a similar thing with Google Maps. It was bloated at first, and they put it on a code diet and managed to trim it down and speed it up. They saw traffic results rise in direct correlation.

She pointed out that instant feedback leads to a steeper learning curve. She pointed to digital photography as an example. People are becoming better photographers because they can get feedback on their photos so much faster. They can look right after they take them, they can post them to the web quickly and get feedback from others, and improve their work. In the old days, it took much longer to see your pictures, so photographers improved slower.

This theory holds true for Adwords as well as users could get their ads approved and running right away, which was a key reason they gained market share vs. Overture which had to approve ads that often took days.

A negative example for Google was Google Video. Which initially took 24-48 hours after you uploaded a video for it to show up. YouTube on the other hand posted it instantly. Which one rocketed in growth? YouTube!

She pointed out the mobile space is suffering a bit because applications on mobile are still too slow. After we see more advanced in mobile hardware we’ll get more usage.

It was a really fascinating 10-minute talk from Mayer. Man she’s efficient!

Posted in: Google, Random, Web 2.0

What Kevin Rose and Digg Knows

November 9, 2006 2:25 pm / Leave a Comment /

ft2-kevin-rose-small.jpgKevin Rose got a brief ten minutes to talk at the Web 2.0 Summit about what Digg knows and has learned in the last year of their amazing growth as a darling of the Web 2.0 world.

Some Digg Stats
Kevin started out by mentioning that the 100,000th story to reach the front page of Digg occurred with the story about Rumsfeld stepping down. It hit the AP Wire, and three minutes later was submitted to Digg. Four minutes later, it had hit the front page. In contrast, it took 25 minutes after it hit the wire before it hit the front page of Google News, which is an automated process. Humans were faster than machines in this case.

Another interesting fact was that 37% of diggs came from the Digg Swarm and Digg Stack tools. They are now working to give these tools to web publishers to see the data for their site in this format, so you can see through Swarm or Stack how stories on your site are being Dugg.

They are also releasing a Flash toolkit to allow developers to create similar tools with flash interfaces. He showed a funny (and admittedly lame) example of stories being flowers in a field, where honeybees as Digg users come and land on the flowers when a Digg occurs.

Gaming Digg
Another big effort is fighting the gaming of the system. They have one full time employee who is in charge of this, and they are trying to build more tools that allow the community to flag and get rid of the spam.

There are services like the SpikeTheVote coming out to try and game Digg in organized ways, but Kevin says that they don’t know what they’re doing behind the scenes to identify these things and defeat them. He showed a few internal tools that graph what a healthy story looks like compared to unhealthy ones that have suspicious behavior. They’ve created baselines that make it easy to find the trash.

Where They Are Going
Digg is making a strong effort to bring more features together that suggest and recommend stories you may like as well as introducing you to people on the site who share your interests.

Also some efforts are being made to show upcoming stories and make them more obvious to people early on.

They have 20 new features coming out next in the next week or two, their biggest release since their version three launch.

Posted in: Random, Web 2.0

Update From Entrepreneurs at Web 2.0 Summit

November 9, 2006 11:54 am / Leave a Comment /

This session at the Web 2.0 Summit was a visit with four entrepreneurs who launched in the last year and had involvement in the last Web 2.0 Summit.

Zimbra – Satish Dharmaraj
Launched the Zimbra Collobration Suite last year, and they started selling the suite in March. They just passed 4 million accounts.

Today they are launching the Zimbra offline AJAX client. It works just like Zimbra online, and basically sent messages just stay in the Outbox. When you get back online, you just hit the synchronization button and it syncs up and sells your email.

They are also starting to sell a white label solution. Satish gave a funny demo where they skinned and made Zimbra into an exact replica of the Gmail interface.

Zimbra raised $15 million and hasn’t really touched it. They are trying to disruptive stuff and thought it’d be necessary, but they’re doing pretty well.

Zimbra knew a bunch of developers, so it hasn’t been a big challenge.

Their biggest mistake was asking for an all or nothing on their product suite.

Veoh Networks – Dmitry Shapiro
It’s a peer to peer network, but uses the Netflix queue idea combined with an Internet Tivo. They’ve started dealing with long form high resolution video, and think it changes the way TV work.

They got a Series B round of $12 million, and are doing over 3 million unique visitors. Initially they raised $2 million in a Series A, and they haven’t used much of the Series B yet. They feel they need a warchest because this is a big opportunity and aren’t planning on a quick exit. Their business is very capital expensive.

Finding good developers has been a challenge for them.

One problem they’ve seen is knowing where to stop with features and opportunities. They get presented with many opportunities to extend their video platform and white label things, and they need to keep in control.

Wink – Michael Tanne
A social search engine that launched late last year. They feel that the web is getting more social (no kidding!), and they take user input and help turn those into relevant search results. They put an early beta out earlier in the year, and a month ago they did a major upgrade to the product to take into account all the feedback they got. They also added “collections”, which allows people to put links together that belong in the same community. He gave a nice demo of a Ramones collection.

You can also do an Advanced People Search across social networks, which is pretty cool, and also probably makes for a great stalker tool. You can search social networks for specific interests, filter by gender, filter by age, and filter by dating status.

He thinks people should start with an angel investment for a consumer web application, and see where it goes from there. They took $6 million and have only used $1 million of that.

He thought their biggest mistake was probably releasing their product too early before it was ready.

Weblogs Inc./Netscape – Jason Calacanis
It’s been a big year, they sold Weblogs Inc. to AOL, and have now integrated that into AOL. He’s still running Weblogs Inc, but when he got to AOL they were wanting to do something different with Netscape.com since it had been stangnant for a few years. Jason liked what was going on with Digg, del.icio.us, and other sites like that and rolled with the Digg model with an added editorial layer and did meta-journalism.

He thinks they had a rocky start, but things are going well now. He thinks they are less susceptible to gaming, and have vastly different demographics. Digg is 94% male, and Netscape is split pretty evenly between male and female, and they have a more balanced audience. So while tech stories dominate Digg, Netscape sees a mix of general news, politics, and family stories.

To start Weblogs Inc. Jason and Brian Alvey put in their own money, and Mark Cuban then invested low six figures which they didn’t touch.

Finding developers has not been a challenge for them because Jason feels that you just need to have something they believe in, and to find them working at jobs. He said good developers have jobs, so you just need to recruit them away.

He’s felt his biggest mistake is probably six or seven blog posts he’d like to take back. He was used to a transparency and fast acting style, and many in AOL were uncomfortable with that. But they’ve found a good balance and he and other new companies in AOL like Userplane our working with the old guard to push AOL forward.

He also mentioned one problem was parallel entrepreneurs who take on too many projects or get too wide on their main project. Mark Cuban always told him “remember what got us here”, which was a reminder to focus on their profitable blogs and don’t move out into all the other opportunties that were popping up.

Posted in: Blogging, Conferences, Web 2.0