Thursday, October 22, 2009

Traffic Jam

One of the most profound changes I have seen in the shift from client, or server based software companies, to the web, is the construct of the sales/marketing function. The shift of massive dollars and attention to marketing (GOOG); and away from direct sales and marketing support is astounding. Yet, recent experiences with a few portfolio companies has given me pause to think about where we are, and where's the market heading.

One of the laws of large markets is that, when they hit a critical size, they fragment. This is playing out, in spades, with Search. Not from the perspective of GOOG vs Yahoo vs Bing et al, but from the view of looking at, or for; people, places and things. Now that Facebook and LinkedIn have hit the magical tipping point, GOOG is no longer my 411 for people search. Likewise, the duo of TripAdvisor and Zagat handle my place inquiries with less clicks and more relevance. And for the mother of all categories, 'things', Ebay, Amazon, iTunes, and that great commoditizer, Craigslist, have my dial tone.

MSFL (My Smart Friend Larry) suggested that I run a chart comparing traffic for GOOG, Facebook and Amazon. Fascinating to see how FB has passed Amazon, and has GOOG in its sites. Though not on the chart, and amazing for a couple of year old company, Twitter is at a level near 50% of Amazon, and LinkedIn is 50% of Twitter..

Traffic, make that relevant traffic, is the 'coin of the realm' for internet companies. Heretofore, many firms rightfully obsessed with buying (Adwords) or 'stealing' (SEO) traffic from Google. But a couple of factors should shift the status quo. First, the aforementioned tipping point sites, and they're not the only one's, should continue to improve their price/performance faster than GOOG, which seems to be getting less relevant, in absolute terms, due to the 'optimizers' breaking it. At the same time, Adwords is getting so price efficient, where so many well capitalized companies are bidding for keywords, that the toll on the traffic ramp is just getting too steep to build a sustainable, capital efficient, business proposition. It's almost like where we were ten years ago in pre-paying for a sales force and SE's in the Enterprise space.

The good news in all this is the rapid maturation of social media. The potential for companies to offer a thrilling value proposition which their constituents (I am really shy about calling them 'users') enhance their personal value by inviting their friends/co-workers/social supply chain is astounding. When properly executed, the savings in sales/marketing expenses that companies can now devote to their products is tremendously exciting for entrepreneurs and as they say in Wharton, 'juicy' for investors.

The airwaves are full of Tweets, posts, and videos over what this means for the venture, angel and expansion asset classes. I am sure there's room for all, and the relative opportunities will inevitably ebb and flow between them. As they say, stopped clocks are right twice a day. If you choose one area, and stay with it, no doubt that you'll be least once per decade.

Friday, October 16, 2009

How many people does it take?

There's an industry parable that I often quote:

A VC in training asks "How many people does it take to write great software?"

The sage CEO responds "two, one to write the code, and the other to shoot the programmer when it's done".

I've been actively working with an entrepreneur towards seed funding his new venture. He's been actively speaking with potential employees, business partners, and surveying the target demographic. We get great feedback, and incredible ideas which keeps expanding the product requirement list. And that's the good and bad news. Without his active pruning of the product branches, the Product Requirement Document surely would've collapsed long ago.

This set me to thinking about the product experience we see as consumers, or as professionals. Too often I have been involved with or seen products/sites that are beautiful, yet with so many irrelevant features which burnt precious capital, time, and focus. In many ways and markets, the great progress in LAMP tools and vast open source resources, the art of product management seems to have overtaken the impact of the science of architecture/programming in determining success.

For grounding, I try to hearken back to simple principles such as Google's home page, devoid of everything but its search box. Why? Because the site is all about speed...get the visitor off to their destination ASAP. Management product folk determined that it's to sacrifice near term revenue to optimize the #1 distinguishing site feature, speed. For long, this was a contrarian approach scoffed at my industry sages.

It's not only search. Look at the comparison of three large players in the dating vertical below:

The UI for Plenty of Fish is enough to give any respectable UI designer angina; but it works fabulously well.

How about the mother of simplicity; Craigslist? In many ways, you have to admire a self-professed 'geek' like Craig Newmark, who has consistently rejected 'cool' in favor of effective navigation. Check out the graph comparing traffic on Craigslist, Ebay and Amazon.

The Wii, with it's pedestrian avatars and antiquated graphics slaughtered Sony and MSFT in this generation's console battle. The essence of a site's success may be 'cool', but it's not a prerequisite for success.

You can't judge a book by it's cover.

Friday, October 9, 2009

Aaron Patzer, Mint founder

Skip the first 1:30 and you'll listen to his unvarnished perspective, in detail, on the phases of starting a web based company. From prototype, to alpha, to beta and launch. The building of a company and the transition of a nerd to CEO.

Interesting points (some tongue in cheek):

* Each engineer is worth $500k and each marketing person subtracts $250k from valuation
* Concentrated on efforts building a great application
* Initial revenue projections are bull; revenue/user (in his case) was more important

Mint CEO Aaron Patzer on Startups from Techcrunch on Vimeo.

Thursday, October 8, 2009

Latest fund raising figures for VC firms

It's no surprise that LP's are still 'stressed' and unwilling/unable to make VC commitments. The malaise is affecting new, and existing funds.

Here's the link

Thoughtful (and negative) Google Wave review

I think there's a tremendous opportunity around more efficiently bringing real-time attributes to many applications, including multi-media. The silo's of mail, IM, Tweeting, etc are getting too clumsy and unwieldy to manage. That's why I like the appeal of Wave.

Executing on a market opportunity is, of course, a distinct step from seeing it. Here's a well thought first impression of Google Wave written by Orli Yakuel.

This is an early beta and it will be interesting to see how the product evolves. On that topic, and as a stunning contrast, I just downloaded the most recent version of Powerpoint viewer (2007). Imagine freezing a crippled application for 2+ years? MSFT's DNA is totally different from successful web based companies. I suppose if I was charged with protecting a $58b revenue stream and 36% operating margins, it would stifle my innovation too....notwithstanding the MSFT haters, I would love to see the passion return.

Tuesday, October 6, 2009

Mike Moritz interview

Guy Kawasaki interviewed Mike Moritz of Sequoia and Paul Graham of YCombinator on the MSFT Campus back in July.

Much of being an entrepreneur is figuring out what to do, when to do it, and getting others to help. If you're interested in a framework it's worth a view...

Thursday, October 1, 2009

AAPL Tablet vs Kindle?

We have 2 Kindle's in our household and have experienced mixed reviews on its utility. On one hand, it is a great device for traveling, on the other, it's just so parochially just a reader (a good one) that, along with the Blackberry, I feel Internet and application disabled when compared next to the iPhone.

Amazon has been testing the Kindle in a few Universities (wonderful idea for backpack laden Middle schoolers too). Unfortunately, the initial review from Princeton is not too compelling. The need is there for a tablet sized real internet device (sorry MSFT, still suffering from buying your Gen 1 OS). Between smart phones, tablets, PC's and the iTouch, there seems to have been enough trial and error to collect solid information for product managers somewhere to hit one out of the ballpark.