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Slide, RockYou = Live By The Hit, Die By The Hit

A couple of recent posts discuss the new world of Web widgets, which are small programs which can be installed on a web page, and run independent of that web page. Jeremiah Owyang writes about The Many Challenges of Widgets, while GigaOm believes that Companies Can Make Money with Widgets.

The two best known widget companies are Slide and RockYou. Both have grown exponentially via the social networks, Facebook and MySpace in particular. Their bread-and-butter offerings let users post pictures in slide show formats. They’ve expanded beyond that for other hits, like SuperWall and FunWall.

There’s a quality to their business models that seems to require a regular stream of hits. For the sake of argument, let’s say there are two business models. One is to create products that are enduring, and have an established place in the market. Microsoft Office. Tide detergent. USA Today. Margins (non-software) may be lower, but the stability represents good cash flow.

The second model is to create a regular string of hits. Disney Studios, EA computer games, Donna Versace. Margins are higher, and when you’re on a roll, the money pours in. But it is hard to always have a hit.

Slide and RockYou do have some established hits. They have great install numbers for several of their widgets. But to truly be huge, they’ll need more. I see them as more similar to movie studios than anything else:

  • They need releases that people will want (mega-hits, niche successes)
  • They need distribution of their product (like movies need theaters, DVD distros)
  • They need to monetize (OK, this is where they fall down a bit. People aren’t paying $9.00 to use the widgets).

Slide and RockYou need to be tech savvy. Jeremiah’s post lists issues they have to deal with: multiple APIs (Facebook, MySpace, etc.); changing APIs. They need to have a flair for creating great interactive experiences. And they need creativity to come up with new ideas.

This isn’t to say that they won’t build up a list of hits that transcend the up-and-downs that mark creativity-driven enterprises. EA has a great set of franchises in its sports video game collections. But the pressure to create new stuff is always there.

Slide recently raised $50 million, on a valuation of $500 million. Nice valuation, but the company has some challenges ahead of it. There’s that annoying need to monetize its widgets. Also, unlike reliable movie theaters that need releases, Slide and RockYou are depending on consumers to install their widgets. I imagine they’ll target websites as well – a bit easier and more stable than those fickle consumers.

And just as important, both Slide and RockYou need to set up their creative shops and processes such that a regular stream of potential hits are rolled out. They’ll make their lives easier by partnering with other companies that have “widget-izable” content. Touring through the Slide site, I see TechCrunch, Engadget and HotOrNot with widgets there.

There’s a real opportunity in widgets, but it takes more than throwing sheep at people.

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In Praise of Inertia: MyYahoo Still #1

Over at TechCrunch, they’ve got a post up discussing the top six personal homepages. #1? MyYahoo. MyYahoo has been around for quite a while. 6-7 years? It’s an oldie, but still a goodie. It’s my homepage.

There are others on the list. #2 iGoogle looms as the big scary challenger. Given Google’s success over the past several years in other arenas, it’s surprising they haven’t taken the #1 spot here as well.

It’s a testament to inertia. Not inertia in any negative sense, like laziness or user ignorance. Rather, inertia as a reflection of human sensibilities and value systems. Something called the “9X problem“.

Harvard professor John Gourville put forth the idea of the 9X problem. The gist of his thesis: “a mismatch of 9 to 1 between what innovators think consumers want and what consumers actually want.” The mathematical term “9X” actually does have a little math behind it. And that math is key to understanding the 9X issue.

First part of the 9X equation is based on our comfort with what we have. Things we already know, things that we have invested time in learning and using, have a high psychological value for us. They satisfy some need. We’ve learned their strengths, and live with their weaknesses. When we compare something new to something we already have, we tend to overweight the value of what we already have by 3X. It’s a little scary to give up what you know.

Second part of the 9X equation is based on our natural skepticism about claims made for new things. This probably resonates for most of us. I know I tend to dismiss most commercials and advertisements. This is a healthy trait of people – otherwise we’d all be getting duped left and right. But it also means that we underweight the value of features for something new by a factor of 3X.

Multiplied together, this gives us the 9X factor.

This is powerful stuff. It means new things really have to deliver healthy gains in benefits. Some examples of “9X masters” come to mind. Google was such a leap forward in search relative to its competitors: very relevant results, clean interface. Apple’s iPod just blew the doors off other music players in so many ways. Honda’s reliability and fuel efficiency were miles ahead of Detroit in the 1980s and 90s.

But there are plenty of other cases where good products failed to dislodge incumbents. Supposedly, many other search engines have attained search results parity with Google. I wouldn’t know…I still use Google exclusively. And so do many others.

So there’s the 9X problem. It’s actually a really interesting concept. If you’re doing a startup, can you do in it a way that does not force someone to give up an existing “thing” they like? That way, you only have to deal with the 3X new product benefits underweighting problem?

9X is really about inertia. MyYahoo fulfills a personalized homepage need: news, email, stocks, sports, weather, etc. iGoogle, Netvibes and others have really nifty options for their pages. But have they delivered 9X the value?

The key is to hook your users. Once you get them, it’s hard to lose them. On that note, how about adding my little blog to your RSS reader? You can remove it any time you want… ;-)

Facebook Fatigue: Ten Reasons

TechCrunch has a post up, “Facebook Fatigue? Visitors Level Off in the U.S.” It appears the number of visitors to Facebook has stopped its inexorable growth, and even declined in January. This is newsworthy because that’s a real change in the trendline. Facebook has been on a tear the past couple years.

I personally enjoy Facebook very much. I check it a couple times a day, and I have activities and apps I like there. But I see some of the issues that afflict the site. Below are ten reasons for Facebook fatigue.

1. Friend activity junk mail: I love seeing all the things my friends do. I hate seeing all the things my friends do.

2. App invite spam: Yeah, too much of this. There are apps you really like, and apps that force invites. More of the former, less of the latter.

3. Lame apps: I got an email from “Compare Friends” detailing my “highest rated friends”. Inane.

4. Non-friend friends: LinkedIn is great for professional networks. Facebook is really best for friends. Adding non-friend friends reduces your interest in “keepin’ it real”. [UPDATE: Robert Scoble, with 5,000 "friends", expresses his lost interest in Facebook]

5. Is that all there is? Tons of apps. But the killer activity on Facebook hasn’t yet emerged. Amend that…the killer activity for the new joiners (> 30 y.o.) of the past year hasn’t emerged.

6. Backlash by the under-25 set: For the younger crowd, maybe the growth of the over-30 crowd has killed the cool vibe. MySpace making a comeback? Bebo growing?

7. Backlash on the under-25 management conceit: It’s true that Facebook came from college kids. But too much blah-blah about how they really “get it” sours the older folks.

8. Stop the presses: Is it possible for there to be too much media coverage? Facebook, and its ecosystem get a lot (e.g. Slide’s $500mm valuation). Too much talk about how members are making these companies rich.

9. Inevitable bumps: Beacon. Scoble raising hell over lack of contact portability. Inability to delete your account. Competitors’ responses (LinkedIn changes, MySpace API, etc.)

10. Heat always dissipates: Hard to stay hot forever. Google’s been the closest thing to that.

Let’s remember that Facebook still draws massive numbers of users, and continues to drive a lot of discussion and innovation. They’ve got money and smart folks there. Looking at the list above, several are within the control of the company.

As Mark Twain said, “The report of my death is an exaggeration”.

Welcome to My ‘Peanut Butter’ Visitors

WordPress provides some nice basic stats about activity on your blog. Total number of visits, specific posts clicked, referring websites and search engine terms that caused someone to arrive to your blog.

A couple of days ago, I noticed a significant uptick in visitors clicking on the post, Pay By Touch & the Peanut Butter Manifesto. They seemed to be arriving from the search term “peanut butter”.

Now, I don’t want to dismiss the possibility that these visitors were really interested in my post. The post uses a Yahoo executive’s exasperated email comparing Yahoo’s efforts to spreading peanut butter too thin, and applies that to Pay By Touch’s situation. All well and good.

But I’m not quite sure that’s what my “peanut butter visitors” were looking for. In fact, I’m not sure what they’re looking for. I didn’t realize there that many people searching for information on peanut butter every day.

And the other confounding thing. What search engine are they using? I’ve tried to search for “peanut butter” on Google, Yahoo, MSN and Ask. The post doesn’t show up anywhere in the top 100 results.

So if one of my peanut butter visitors happens to read this post, please leave a comment. Tell me what search engine you’re using, and why you clicked on my blog post for “peanut butter”.

Whither mashups…beyond Google Maps?

Mashups are a tantalizing concept. Put together two different apps, link some data and voila! A new hybrid app that doesn’t something incrementally valuable to either app individually. A good one that I recently enjoyed was the Super Tuesday Twitter map. It was one of two Twitter-related mashups covering Super Tuesday.

I will note that the Super Tuesday Twitter mashup used a Google map. And that’s not surprising. It seems that when people think of mashups, they automatically think of something grafted onto a map. Craigs List apartment listings. Megans Law sex offenders. Flickr photos of wineries.

It’s like that’s all anyone can think of. Now that’s actually overstating it. I took a look at the top 50 most popular mashups listed at Yahoo Pipes. Here’s my admittedly rough count of the categories (3 omitted from results):

  1. RSS management (14 mashups)
  2. Flickr service stuff (8)
  3. Online retail shopping tools (6)
  4. News search apps (6)
  5. YouTube stuff (4)
  6. Map (3)
  7. Persistent search (2)
  8. Combined search (2)
  9. iTunes (1)
  10. Upcoming.org (1)

So, obviously, there are some things beyond maps. RSS-related apps are showing good uptake.

However, it still feels like mashups are in their nascent stage. I think there are a couple reasons for that.

First, folks are still trying to get their minds around ways that they can be used. Web users are not all programmers. They aren’t thinking that way. They like to try out the things someone else has made.

The other reason is that tools themselves aren’t yet built out to allow more interesting apps. Or, it’s hard as hell to figure out how to use the tools if they are indeed there! For example, here’s a mashup I’ve tried to build both on Yahoo Pipes and Microsoft Popfly. Terraminds provides a nice search function for Twitter posts. You can convert the basic search function into a more persistent RSS feed for a given term. For instance, all tweets related to “enterprise 2.0″. I want to get the Twitter search results for “enterprise 2.0″ posted to a page. The tweets include the Twitter author. I want to see the associated blog site of that author, listed right beside his tweet. That way, if the person says something I find interesting, I can click through easily to his personal website to see what else he talks about.

I have had no luck in figuring out how to use Pipes or Popfly to make this mashup a reality. It’s just too hard, or not even possible. Mashups still have a ways to go before they’re ready for wider usage.

So instead, maybe I’ll put all the Starbucks locations in San Francisco on a Google map…

Pay By Touch and The Peanut Butter Manifesto

In November 2006, Yahoo executive Brad Garlinghouse’s email to senior management was leaked to the Wall Street Journal, and subsequently picked up by bloggers. In the so called “Peanut Butter Manifesto”, Garlinghouse decried the “lack a focused, cohesive vision for our company”. The email takes the company to task for having too many initiatives, and for failing to integrate various acquisitions. The money quote:

“I’ve heard our strategy described as spreading peanut butter across the myriad opportunities that continue to evolve in the online world. The result: a thin layer of investment spread across everything we do and thus we focus on nothing in particular.”

In light of Microsoft’s bid for Yahoo, the Peanut Butter Manifesto continues to resonate as an issue for the company. Which brings me to Pay By Touch.

Pay By touch raised a lot of money, a whole lot. And Pay By Touch went after “myriad opportunities”. Here’s a list that I am drawing from memory:

  1. Biometric authentication
  2. ACH payments
  3. Credit card processing
  4. Personalized marketing
  5. Healthcare
  6. Online authentication
  7. Online debit payment
  8. Loyalty card management
  9. Financial institutions
  10. Government
  11. Paycheck authentication

The above are verticals. There were also channel-specific efforts as well: multi-lane retail, single-lane retail, international. So there was a lot going on.

The problem with any Peanut Butter Manifesto company is that:

  • Engineering cannot satisfy all the requirements needed for the initiatives
  • The ability to focus on one area, try things out, make mistakes, correct and iterate is drastically diminished, which kills an emerging technology company
  • Senior management cannot focus attention on the various initiatives for funding, sales and strategic moves

One might wonder how Google pulls it off. They certainly are into a lot of things. Here’s the secret: they absolutely own a market (search & ads) that prints money for them. They then get the luxury of trying different things. Microsoft has the same thing with its Windows and Office franchises. GE owned…light bulbs? Well they owned something a long time ago.

So let’s look at these two Peanut Butter companies. Yahoo is subject to a hostile bid. Pay By Touch is in bankruptcy.

As Garlinghouse stated at the end of his email: “stop eating peanut butter.”

My First-Ever VC Pitch

I recently had the opportunity to pitch a VC firm. Hummer Winblad, to be exact. As someone who never thought he’d ever do that, I have to say it was all rather cool. Here are the details:

THE IDEA: Over the past couple months. I dreamed up an idea for online retailers to connect to social networks. I won’t say too much about the idea, because you just never know if it might see the light of day sometime. But I did take the time to lay it out via Google Presentation. That was pretty fun, I have to say. I had all these hack graphics courtesy of Microsoft Paint. Primitive, but it worked.

ASKING AROUND: Once the idea was written down, I needed to find out if it has legs. I didn’t worry about someone stealing the idea or anything. You can’t learn anything keeping the idea bottled up. So I asked a few friends to take a look at it. To my surprise, I got a lot of “great idea” responses. Followed by, “isn’t Facebook going to do this?” The feedback pumped me up, even if Facebook was going to do it.

CO-FOUNDER: I don’t code, can’t code, shouldn’t code. I needed to have a development partner. Well, I met a dev buddy and shared the idea with him. He liked it, and agreed to be a co-founder. So, good feedback from friends, and a co-founder who could actually make the idea a reality. Things were going well.

MARKET FEEDBACK: I talked with two different e-tailers about the idea. Both really liked it. Each had his own take on what he liked, and I was pleased with the responses. Good feedback from trusted friends, a dev co-founder, good response from potential customers. Check, check, check!

THE PRODUCT: Uh…we actually hadn’t built anything yet. Hmm…was this going to be a problem?

THE VC INTRO: I sent a link for my Google Presentation to a contact at Hummer Winblad. I had met with him a couple years ago to interview for a VC associate position (didn’t get it). To my surprise, he emailed back and said he’d be delighted to hear more details. I was thrilled, despite having no actual product to demo.

VC PITCH DECK: I needed to convert my original, handcrafted presentation into an investor deck. This was really pretty easy. First, a couple of VCs have written blog posts about what ought to be in a pitch (here’s a good one). Having spent several weeks researching the idea, the slide contents were pretty easy to pull together. The hardest thing was the financial projections. But even those weren’t too bad. See Glenn Kelman’s post on Guy Kawasaki’s blog for some very useful advice.

THE PITCH: My dev buddy and I arrive early for our pitch. We set up in a spacious conference room with a flat-panel screen. We’re a little nervous, but our attitude is “we have nothing to lose”. The VC runs late. Finally, my VC contact and an Associate arrive. We start the pitch. Good attention, questions are asked, dialogue is occurring. I’m feeling OK about it. Then they ask about what stage we’re at. “Seed. No product built as yet.” At that point, the pitch came off the rails. We were gracefully pointed toward the angel investor route. Alas, no follow-up meeting would be needed.

POST-MORTEM:

  • In this web 2.0 age of free software and services, it’s safe to say you’d better have some actual product to demo. Only well-known successful entrepreneurs could get away with not having an actual product while raising money, and it’s unlikely they would ever do so.
  • The entrepreneurs are the best prepared and most acknowledgeable people in the room when it comes to their idea. VCs can seem intimidating given all the pitches, investments and experience they have, but they’re generally learning in real-time from the entrepreneur.
  • Don’t sweat getting a ‘no’. Is it the idea, the company or the VC? Focus on your own view here. If it’s the idea, what needs to be fixed? If it’s the company, what can improve things (e.g. actual product)? If it’s the VC, there are many others.

So that’s my first-ever VC pitch. I’m noodling on what to do next. The product remains, as of yet, unbuilt.

Do Bankruptcy and Startup Go Together?

I just left my old company, Pay By Touch, after 2 1/3 years there. You may have heard about it. The biometric identity company that raised $270 million (or so) and subsequently filed bankruptcy. If you need a refresher, check out the Valleywag coverage. Some glaring inaccuracies, but a decent accounting of the company’s woes.

One thing Pay By Touch is endeavoring to do is emerge from bankruptcy, right the ship and move forward in its business. It’s an interesting process.

Some companies have done the bankruptcy thing, and were able to achieve a certain level of success. United Airlines is a somewhat recent example of such a company. However, is it possible for a startup to pull the rabbit out of the hat?

Having just been through it, let’s examine the effects of bankruptcy on an early-stage company:

  • Customers stop dealing with you
  • Vendors stop dealing with you
  • Existing employees spend a lot of time looking for new jobs
  • Employees leave in droves, voluntarily or through layoffs
  • New employees won’t come near the company
  • Senior management can no longer focus on execution, which filters down to everyone
  • Creditors, investors and management shift, sell or shut down company priorities and businesses, paralyzing most initiatives

An essential element of an early stage company, especially one in technology, is progressing forward on something the team believes in. A friend from college used to say that if you’re not moving forward, you’re moving backward. He’s right.

Bankruptcy robs a startup of the oxygen it needs to live and grow. Not money (although that is important). Rather, the esprit de corps and belief in the big future.

I’ve got a number of friends still there, and I hope Pay By Touch pulls through. What they’re trying to do ain’t easy.

Confessions of an Online Video Luddite

comScore says that consumers are watching 3.4 hours of online video per month as of December 2007, a report highlighted in this post on Silicon Alley Insider. That’s a 34% increase in time spent viewing since January 2007. Apparently we’re enjoying online videos more than ever.

Except me. I’m not a fan of online videos. Three reasons:

  1. Too long for the videos to load
  2. If I get impatient and start the video immediately, I get annoying latency
  3. Investing 2, 3, …10 minutes of my time is too much

#3 is the one that gets me most. After waiting for the load time or enduring the pauses in the video as it loads slowly, the payoff better be good for my time. And generally, it isn’t. I’m not talking watching episodes of Lost on my iPod. Rather, I’m referring to these home-built efforts. They just aren’t worth the effort.

The comScore survey indicates that average online video duration is 2.8 minutes. The shorter time for the videos makes sense. Longer videos will exacerbate the issues above.

Reading, on the other hand, is a great experience. With RSS, I can pretty quickly size up the article and determine how much time I care to invest in it. I learn more in 10 minutes of reading/scanning my RSS reader than I do with 10 minutes spent on videos.

Super Tuesday with Twitter/Twittervision/Google

Enjoyed using the Twitter mashup for Super Tuesday. Some algorithm (Google-created?) identified Super Tuesday-related tweets. Twittervision mapped these to Google maps. So you’d see comments pop up alongside someone’s picture, with their location on the Google map. Very entertaining.

There were plenty of Europeans and Australians chiming in that night. A few Latin Americans and a decent showing of Canadians. Demonstrated for this insular American how engaged the rest of the world is in our politics.

Also, by the end of the night, there seemed to be a 43-minute lagtime between posting a tweet and seeing it show up on the map. The typical comment display plus move around the Google map may have been ~10 seconds. So that’s roughly 258 tweets at any given time waiting to post.

Feed the Beast

My initial foray into blogging. Not sure what form it will take, nor can I establish a consistent theme for it. But the most important thing is to…

FEED THE BEAST

Blogs generally will not get much readership. Sad fact. This one may be lucky to get anyone beyond myself. But I know for sure that if the you maintain minimal content, infrequently updated, NO ONE will ever bother. So you need to keep the posts going. Just post, baby! If you do it enough, you’ll find your blog “voice”.

The great thing about Twitter is that it’s quite easy to build up content with those 140-character posts. Don’t overthink it, just type and go. And a hat tip to a blogger I’ve never read before today, Andrew Shuttleworth. His post about just getting going was an inspiration for me to just start writing.

Now, can I hook up my Twitter feeds to post here…?

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