Wednesday, December 8, 2010

A Lion in Winter

Carol Bartz gave a freewheeling interview at the 92nd Street Y last night. I like her straight forward style and think it was what Yahoo needed to untangle itself from too many weak strategic initiatives which left the once proud company listless. The jury's still out on whether, after two years of clean-up, she can ignite a growth story. I suspect, the answer to this will be her legacy at big purple. Following are selected snippets from the conversation:

Vision- "To be the supplier of the Internet of 1" She went on to explain that, with over 240mm web sites it's impossible for a person or a company to effectively gather information. She views Yahoo's primary mission to be the curator of information and add further value by personalizing it in a format that maximizes the relevance for the user and the value for the advertiser.

Timing- She was a bit defensive on the period of time it has taken for the company to show real positive revenue growth (1.6% trailing 12 month rate) and noted that it took Steve Jobs 7 years to reignite the growth engine at Apple click here to see APPL's chart to see that, outside the '00 bubble, the company was basically flat from '87-'04. Be that as it may, she's optimistic that the initiatives in place should get them back on the growth track shortly.

Competition- She views Facebook as their #1 competitor. I was surprised by this as I don't view FB as a curator of information from other web sites

M&A- She confirmed they did try to buy Facebook 4 years ago. The bid was $1B and the ask was $1.5B. She was not asked, and did not comment on the rumors that they bid on Groupon last year. AOL was mentioned a few times and her dismissive response was "hahahhaha". When looking at transactions, they first look to buy users, content, then advertising technology and finally engineers.

For comparison, here's the trailing revenue and profits for the top 5 public internet companies:

Company Trailing 12 month revenue Profit margin %

Yahoo $6.5B 16

EBAY 9.0 29

AMZN 30.7 4

GOOG 27.6 29

AOL 2.6 NA

Here's a link to an edited version of the interview

Tuesday, December 7, 2010

Conversation with a pirate

I had a chance meeting yesterday with a young lady in the local neighborhood take-out joint. While waiting for my order she saw me playing with my RedLaser barcode reader on my iPhone. She took hers out too and asked me if mine was jail broken. Mine is pure Apple, so I didn't have anything to really contribute as, she enthusiastically showed my hundreds of her free downloaded applications and a customized interface screen (ATT replaced with her name).

I suppose I'm a bit naive as I never realized the pirate infrastructure was so well formed for the device. Of course, I also did not know that Apple provides tools for jail breaking as noted on GigaOM. Cydia is a GUI for jail broken iPhones and an extensive repository (aka a store) for applications (mostly free). It's incredibly popular with 170,000 people liking it on Facebook

One reason for the popularity is free. The other is a spate of really cool hacks, a top 10 list is noted here.

Great Expectations

With all that's being written about investment bubbles, I have been thinking about a key difference between '10 and '00 in New York. The foundation of my thinking is based on a wonderful book on Urban Planning by Jane Jacobs "The Death and Life of Great American Cities".

In this seminal work, she explains how a city's lifeblood is its diversity. She highlights diversity in its broadest sense, diversity of housing stock, income levels, pathways to commute to work, etc. In short the combination of diversity and people density leads to a dynamism that makes cities great. I believe this thinking can be extended to markets too.

In '00 the NY Internet economy was precariously perched, like an inverted pyramid resting on three fragile letters; C P M. We had an advertising centric model that collapsed with the implosion of advertising based metric. Today's market is stunningly different. Of course, we have a host of firms in advertising related businesses, however, it's a diverse group of video, infrastructure, SEO, and PPM oriented technologies. But it doesn't stop there. Complementing the advertising arena are paid mobile applications, free to play gaming, communications and payment firms. Adding to this are destination sites in commerce, banking and pharma. You get the picture, diversity in its broadest sense of business models, customers, technologies and infrastructure.

In the past decade a combination of diversity and density has emerged that's led to a dynamism which is making the NY internet market great. Of course, markets will continue to ebb and flow, but with thousands of young companies, complemented by thousands of GOOG, AOL and Gilt Group employees makes today far different than yesterday.

Wednesday, December 1, 2010

A tale of the tape and the ghost of '06

Groupon is the fastest growing commerce company the world has seen (33mm subscribers, est 2010 revenues $350mm). Similar to Facebook, it has little proprietary technology, yet has emerged as the preferred place people are using to connect with local commerce. Also, similar to Facebook, pundits first denied the opportunity, derided the founder, sniffed at the VC valuation, admired their success, and are wondering how they missed it.

I think Groupon is now, in part riding the 'we missed Facebook wave'. They deserve it as in an environment where demonstrated growth, a dominant market leadership position in a huge untapped market is at a premium, it's no wonder GOOG is rumored to be in deep discussions to acquire the company. I am just surprised that other companies, noted below are not visibly in the fray....especially after they all 'missed' Facebook (well, Yahoo did try in 2006.

Market cap Growth %

MSFT $216B 25

GOOG $177B 22

Amazon $79B 39

Ebay $38B .5 (no typo)

Yahoo $21 2

Tuesday, November 30, 2010

3/5 of a mile in 10 seconds

Following are some numbers which have a common link (posted after the video).

Coca Cola 19,806,778
BMW 3,793,208
Walmart 2,572,429
Microsoft 204,500
Google Chrome 4,094,906
ExxonMobil 213

The above numbers represent the number of people who 'liked' these corporate pages on Facebook. Social based applications have obviously exploded due to their ability to connect people on a common social dial tone (it's happened so fast that 'Facebook' still comes up as a misspelling in Blogger). It's now obvious that this dial tone is rapidly expanding its coverage into the business sector too. Tens of thousands of applications are tapping into the 'open social graph' concept introduced only in April '10 and bringing incredible depth and value to their extended relationship chain. It took less than 5 years from the introduction of the browser for virtually all companies to establish a web presence. I can't imagine it taking more than 12 months for the same to happen using Facebook's social graph.

This is a huge opportunity; using relationships as the base to rewrite the rules used by vendors of services ranging from communications to commerce and search. Moreover, it's being embraced by a community of 500 million strong. Of course, the graph is fraught with many risks (beginning with control of the dial tone by one vendor)...but it's an ecosystem with the potential to be far deeper and rewarding than that supported by the Google search utility and its army of one lonely algorithm.

Think about it, Google, for all its incredible success mostly stands alone. There's little relationship (and zero passion) between me, GOOGLE, my applications and my personal ecosystem (Buzz has been an abysmal and rare non-beta failure). Instead, GOOGLE is surrounded by a cadre of companies employed by the likes of you, me, and Wal-mart, determined to legally break its black box search ranking via search engine 'optimization'. We seldom, if ever, spend any energy or resources to improve GOOGLE as its mostly a remote abstraction. On the other hand, we are, and will volunteer to become far more invested in our personal and professional dial tones.

Monday, November 29, 2010

A short tale of three cities

Rumors of a $+3B Groupon acquisition have been rife over the past few weeks. The attractiveness of the company is centered around their pioneering an efficient 'call to action' for local advertising, which is such a positive win/win for advertisers and consumers that the 2 1/2 year old Groupon's revenues have surged to more than an anticipated $500mm this year.

With this background of how innovation is creating a virtuous cycle of value creation, I thought it would be worthwhile to take a 30 day 'innovation' look at three of the internet's larger players:

Let's start with AOL. It's mission is "To inform, entertain and connect the world" and touts its brand as something that "stands for creativity". In the past 30 days, here's the innovation they've announced:

AOL Disrupts the Inbox with Project Phoenix by AOL Mail


AOL Grant Program

Yahoo's vision "is to be the center of people's online lives by delivering personally relevant, meaningful Internet experiences".

Yahoo is in the midst of a multi-year turnaround effort and Bloomberg ran a piece here where they mentioned Yahoo's interest in buying Groupon and voicing concerns about the company's direction and growth prospects.

Here is their product related announcements from the past 30 days:

Local Offers (Groupon competitor)

Contributor Network An extension of their Associated Content acquisition for self-publishing

As a contrast to it's senior brethren, here's what Facebook's remarkably similar mission is:

"Facebook's mission is to give people the power to share and make the world more open and connected." As background, more than 4 Billion messages are sent through FB every day.

Two important product announcements made in the past 30 days were the outline of their imminent messaging product and a commerce engine "Deals" which fits with their 'check-in' facility 'Places'.

FB Messaging

Facebook Deals

Finally, a tribute to Leslie Nielsen..RIP

Thursday, November 18, 2010

Bulls, Bears and Bubbles- how wrong we can be

Yesterday, I posted on the 'investing bubble' which many participants and analysts feel is building today. We obviously won't know if they are right for a couple of years. This thinking sparked me to dust off the Sequoia Capital presentation which they presented to a gathering of portfolio companies during the height of the financial crisis in October of '08. It was well thought out, reflected the cold sentiment of the time, and lauded by the press and pundits.

It was also dead wrong advice. It missed the 'change' in the financing environment, missed the 'social' business model basics of building an audience and missed the drivers for exit (growth vs profitability). In hindsight, the time was right to be contrarian; use capital to fund innovation to gain market share and seize expanding opportunities.

Sequoia is a great firm with decades of success behind it. Sometimes, smart and informed people just get it wrong.

Here it is:

Wednesday, November 17, 2010

Bulls, Bears and Bubbles

Much has been written recently about whether we are approaching, or are already in an investment 'bubble'; it's enough to conjure the ghosts of '00. Rather frightful musings, but I think it's valuable to refrain from blanket 'bubble' statements, and instead look beneath the waves at some market fundamentals to determine if the valuation spikes we are seeing is the cause, or the effect of market shifts.

The technology industry is an ocean of trial and error, failure and success. Participants learn lessons, test theories and derive principals. Such principals often are not transportable across shifts in markets and technologies. For example, the harnessing of 'eyeballs' was the watchword of '99, the cussword of '02, and the mantra of '10. There is no economic inevitability of a company's success or failure. Market conditions, execution challenges, and competitive hurdles contribute to a sea of uncertainty which must be navigated to achieve success. Much of the industry's uncertainties can be tied to a decade of overall failure, where, despite some shining moments, we have produced negative returns for investors.

In large measure, we are still paying for the disappointment the technology industry gave shareholders at the beginning, and the end of the past decade. The public markets continue to punish companies with a skeptical attitude towards financing the next generation of leaders. The probability of securing Company investment/shareholder liquidity via an IPO is, and has been, a difficult path. According to VentureDeal, a scant 6 software/digital media/internet companies went public during the 1H '10, resulting in $612 million raised. (A contrarian view, recently posted by Bill Gurley is here)

Moreover, the venture market is shrinking. Here's a quote from Mark Heesen President of the National Venture Capital Association:

“With funds sizes getting smaller and fewer firms raising money, we are experiencing a
period of time in which venture capital investment is consistently outpacing fundraising,
creating an industry that will be considerably smaller in the next decade”

With this background, you would expect a universal slowdown in funding by venture firms. But that's not happening, and in some areas, the bidding for investment is reaching a pitch that sober people, such as Fred Wilson are lamenting:

"I think the competition for "hot" deals is making people crazy and I am seeing many more unnatural acts from investors happening. If it were just valuations rising quickly, I'd be a bit less concerned. But we are also seeing large deals ($5mm to $15mm) getting done in a few days with little or no due diligence. Investors are showing up at the first meeting with term sheets. I have never seen phases like this end nicely."

Moving to a lower level in the funding food chain, I recently did an analysis of the NY Angel and Micro funding environment. I tracked 24 funds/groups which have completed 406 seed/first round transactions in the past 30 months. Assuming that 20% of these companies graduate to an institutional expansion round, and 20% of these again raise a growth round, then NY will have a requirement for more than $800mm of expansion capital in the next 18 months. All the while the institutional investment pie is shrinking. Perhaps, people are looking at these investments the same way as they invest in the lottery?

This begs the question of who is being irrational? Are funds/people over investing in mirages, or are the institutional backers of venture funds not seeing the full picture? While it will take hindsight, viewed from at least two years out to judge these actions, a few things are clear today.

1. Self-publishing/expression by the masses can and is no longer a questionable value proposition. It's being monetized today and has huge potential for tomorrow. Facebook, at least for now, has done the industry a service by establishing the de facto social 'dial tone' platform for others to plug into. In doing so, they have created massive wealth for shareholders and a huge opportunity for fast followers. Unlike Amazon, eBay, AOL and Yahoo, their ecosystem seems to leave opportunity for others akin to MSFT's OS in the '80's.

2. Tapping into the social dial tone enables companies to hyper-scale. Union Square Ventures has done an admirable job finding, nurturing and realizing great returns for shareholders by executing on the social trend. For example, courtesy of here's the traffic graph for Zynga

And here's one for Tumblr

Finally, Twitter's growth has been widely documented (here's the Wikipedia post with citations)

'Twitter had 400,000 tweets posted per quarter in 2007. This grew to 100 million tweets posted per quarter in 2008. By the end of 2009, two billion tweets per quarter were being posted.[citation needed] In February 2010 Twitter users were sending 50 million tweets per day.[25] By March 2010, Twitter recorded over 70,000 registered applications, according to the company.[26] In the first quarter of 2010, 4 billion tweets were posted.[citation needed] As of June 2010, about 65 million tweets are posted each day, equaling about 750 tweets sent each second, according to Twitter.[27] Twitter has experienced rapid growth as noted on, Twitter has moved up to the 3rd highest ranking social networking site in January of 2009 from its previous rank of 22nd.[28]'

To date, Twitter has raised $57mm in three rounds of fundraising. The last round, completed in September, and reported by Bloomberg to raise $100mm valued the company at $1B

In May '08 the company raised $15mm at a reported $80mm pre-money

In February of '09, Twitter raised $35mm. The pre-money was not reported, but company benchmarks were 29 employees, minimal revenue and 900% growth year over year.

The first round of capital was raised in July '07. I can assume the valuation was not more than $10mm.

3. We have seen a first wave of social commerce embodied by the 'flash' commerce sites such as Gilt group and Groupon. I believe the stunning success of these firms will be dwarfed by successors who harness relationships, in a positive way, to recommend and sell goods and services. Think of Amazon or Ebay's star system, but from people you actually know, respect, and can easily verify. This arena can support many firms with a large market capitalization, and a host of successful 'satellite' firms too.

4. Predictably, most of the leading Web 1.0 Companies have become stagnant. Just compare the innovation behind the concept for Facebook's new messaging product, vs AOL's way overdue facelift of 'you've got mail' as a prime example of incremental vs fresh thinking. The incremental product advancements of AOL, Yahoo, eBay et al (with the notable exception of Amazon), has opened the gates for this new generation of entrepreneur and funding sources (e.g. Spark, Union Square, Andreessen Horowitz) to ride and expand upon the social dial tone within established, large markets.

5. The mobile web, better screens and upcoming tablet form factors will fuel a dramatic increase in engagement and time on site. Key metrics which will accelerate the move of advertising from desktop to phones/tablets.

In the past few years, we have seen great innovation in the three bedrock internet arenas; Communications (Twitter), Commerce (Gilt and Groupon), Community (Facebook and YouTube). The only laggard bedrock segment is search. Wolfram tried something new, and a host of others are challenging GOOG, in much the same way GOOG challenged Yahoo, which vanquished Alta Vista and Lycos.

Putting the pieces together....

1. I really do not see a bubble in the growth/expansion arenas. Instead, there's a stampede of homogeneous players looking to invest in a few hypergrowth companies. Valuation here involves more art than science and the law of supply and demand trumps all. Definitionally, with so few transformational opportunities, the few which achieve hyperscale will be valued quite dearly. The NPV and efficient market theories of Finance 1 go out the window when you are presented with companies with less than 30 employees, growing 900%/year, are in multi-billion dollar markets and only requiring minimal capital to fund its operations. Phenomena like Twitter are special, and deserve to be treated so.

2. The market today seems balanced in the more 'normalized' 50-100% growth per year expansion stage firms. I do, however, suspect valuations will decline in this arena as less capital supply will meet enhanced capital demand. Of course, if Bill Gurley is right, and a vibrant IPO market is around the corner, this segment will ignite and be the biggest beneficiary of the public largess (heaven knows, the industry can use a refresh of middle market M&A buyers).

3. The Angel/Microfund arena seems to be too active. While many fresh and innovative opportunities have arisen, they are in danger of being overwhelmed by too many 'me too's'. Consistent with history, but magnified by scale, I expect the vast majority of firms funded by Angel groups and Microcap firms to fail. The combination of too little capital and too little innovation are a killer cocktail.

4. Great returns were garnered by investments made in the ashes of '00, Venture firms will find great opportunities recapping worthy opportunities from #3 above. They could, and should 'steal' start-up capital as this category will be less risk, lower hold time, and equal reward to their start-up brethren.

Friday, October 29, 2010

Yahoo's culture and it's outcome

Paul Graham highlights that a company's culture, set by it's leadership team, are one of the key intangibles that determines sustained success.

You never see this in an analyst report.

Thursday, October 28, 2010

Demo of unlocing the implicit web from the MIT Media Lab via TED

The last couple of years has brought great strides at unlocking 'implicit' information for the display and consumption by people in an 'explicit' way. An example is the way Facebook/LinkedIn display friends of friends, so that you now know who knows whom, and have pointers from to to knowledge. In the video below, the folk at MIT's Media Lab demonstrate a wonderful computerless way to access, store and display information.

Tuesday, September 28, 2010

Hello, goodbye

Yesterday, the CEO of a fast growing fashion site, Polyvore, (which the team at Plumwillow closely watches) announced she was leaving the Company. She led the organization for all of 7 months.

Well connected and experienced in managing fast growing operations, on paper she must have been an ideal fit. As was the former president of Google's Asia/Pac and Latin American operations she must have been vetted by such well respected Polyvore VC's as Matrix and Benchmark, it makes you wonder how did this happen?

I've made this type of mistake before too. In my case, the error was in placing too much emphasis on background and experience, and not enough weight on fit with the current culture and team. I have found that when an 'outsider' is brought into a leadership role in a fast growing situation, it's so tempting to come with a perspective that the growth is 'in spite of doing so much wrong'. Rather than embracing the things that are going well, arch focus is turned to being a change agent. Lacking context, this can be a dangerous approach to having the founding team follow your vision and execution. It leads to a growing cancer which must be excised. Either the founders, or the new recruit must go.

In Apple's case, they fired Steve Jobs. Eric Schmidt deserves great kudos for navigating this dynamic at Google. John Shirley did the same at Microsoft.

Tuesday, September 21, 2010

MobilEco Summit

I attended/spoke at this series of round tables put on by Plugged In Ventures. Speakers from Google, MSFT, the WSJ, Time, and Hot Potato were there too. Following are some of my recollections of interesting observations:

Mobile adoption by brands is being slowed by lack of access to reliable data which is compounded by the difficulty of combining with legacy CRM systems into a holistic data store.

Mobile ad spending is still in the 'experimental' bucket for major brands. Initial euphoria over landing a major brand should be tempered by the fact that today, thousands of mobile vendors are now vying for less than 5% of the budget.

Mobile, is the 'connective tissue'. For advertisers, the promise of combining buys across multi-mediums is alluring (e.g. per Time, Inc, 2/3 of their sales invoices involve cross platform buys:

*in store promotions

Google says that 1 in 5 searches from computers are location related; 1 in 3 on mobile devices.

The tablet is a wild card, participants were split as to whether behavior is more like a phone or a computer. The WSJ says that its tablet subscriber behavior is most similar to physical reading, than the phone.

For corporations building a mobile application is a fraction of the cost commitment to maintaining, tracking and updating the ecosystem associated with it.

With the recent debate over whether the web is dead (supplanted by the resurrection of applications) many comments were made about the role of applications. As expected, with nearly 300,000 applications in Apple's application store, distribution/discovery were cited as real issues. This discussion brought me back 10 years to early internet and debates on how will people find your site....probably the same solutions.

Thursday, September 16, 2010

Steve Jobs is right to not pollute the iPhone with Verizon

I have had second thoughts about moving to the Android based Samsung Galaxy phone on Verizon. In fact, I made a mistake and will soon drop it and am destined to become yet another iPhone fan boy. Let me explain why.

For the past 9 years I have been a Blackberry user but as my usage moved from one centered around inputting data (email) and towards consumption of information (the web), it was time to move to a device with a modern browser, a robust application store, and a screen supportive of reading average web sites without performing unnatural contortions.

I watched the Android's market share explode as they steadily improved their OS and was enthralled by the Samsung Galaxy demo where they showed the Avatar movie in great splendor. With all that love, however, I was brought face to face with the Verizon UI monster. It takes three separate steps to reach your first main application screen, there you are greeted with a 4x4 of 16 icons, none requested by you, and none removable by you. For me, only 4 had any relevance.

Tetris, at one point was of keen interest to me, however, to have a free to play and pay to version on my page one...with no option to kill it is far worse than Dell loading my PC with removable 'crapware'. Joining Tetris, is ThinkFreeOffice, VCast Music, NFS Shift and other 'essential' applications that are designed to make Verizon money, while polluting my experience. People may not like Apple for deciding what's good for you by denying companies permission to post in the Application Store, however, I contend that it's far worse to have someone dictate your applications and leave you with no recourse.

I won't even get into the reality that Bing is the default browser and you have no obvious way to switch providers. This is sorta counter to what Android is all about; open software, choice, the bazaar over the cathedral. Android's freedom to customize met it's Master.

While writing this, I received a call from ATT wireless, it was a survey about why I left. In the midst of answering the questions, I interrupted the surveyor and asked her to refer me to a salesperson as I have reconsidered and want to reinstate my standing. Well, to no surprise, it was not her department and I was given an 800 number to reach a rep.

Sigh, back to the frying pan from the fire.

Monday, September 13, 2010


While the number of venture capital firms shrink, and a double whammy is upon the industry as the dollars allocated to the asset class are reduced at a greater amount, we seem to be in the midst of a profound change in the Information technology industry which is poised to create great value for users and shareholders too. As the micro revolution dwarfed the mainframe market, and the internet blew the doors off the micro software equity returns, the shift to mobile and social seem predestined to greatly eclipse its ancestors.

Here's some data from Morgan Stanley Research to support the magnitude of the shift:

The tablet forecast for '11 was just raised from 37mm to 50mm units; this is a market that really did not exist 6 months ago.

Tablets are slowly cannibalizing PC's in the consumer market and vitualization is attacking the enterprise numbers (albeit with 375mm units expected to ship in '11). Importantly, iPad users view 3x the page views of iPhone users, a rate which is nearly equal to the page views presented to desktops.

Bberry internet usage is 10% of iPhone usage...

Daily Android phone activations have reached 200,000 worldwide, Yes, daily.
Daily iPhone activations have reached 150,000 worldwide...daily iPad shipments are near 100,000

Per IDC:

In the past 7 quarters, Android's mobile market share has gone from zero to 16%; Blackberry is 18%;Apple is 15% (They are the only folk only on one's really hurting them now and the opening of the platform to Flash and other applications is but a minor course change).
Symbian (Nokia) is the leader with a 40% market share....but it's in free fall.

Oh, MSFT is mired at a 7% market share. Worse than that, I can't imagine folk are downloading a host of their applications or web properties to non-msft devices. Despite massive internal investments, they've lagged for 5 years and, if they don't act, will lose the window (hehehe). Therefore, I really expect them to use their capital to change the game, and to do it quickly; and smartly.

The platform changes predestine application shifts that are even greater. Today's New York Times speaks to the shift from the web back to applications. Mining location, relationships and history to deliver relevance is a real win for all. Exposing the 'implicit' web is scary, yet energizing. I suppose you don't have to look much deeper than Coca Cola's page on Facebook to see the unrealized potential. 13mm 'friends', and a whole new challenge how to create a win/win for these relationships to thrive.

Monday, August 30, 2010

Gossip and whining

My ex-business Partner Eli once said something that really struck me. We were discussing 'back-channel' gossip that was swirling around a company we invested in and he observed 'if you find that people are approaching you with gossip, be careful, as it probably means you enjoy hearing it and passing it on'.

This was a wonderful observation and led me to an insight around whinning. We've all experienced the 'I wanna' garden whining best illustrated by 5 year old children, they really have little effective means to communicate what they want/need so on some level it's ok. However, I must confess that I've been guilty of the adult variety too. This is when you are stuck on something (for me, usually business oriented) and find yourself complaining to most comers. It's not that the hapless folk you lay your burden on are really interested in the topic, but it just feels good to 'express' yourself.

My college freshman nephew recently lectured me on this topic and his implicit advice was that the bothersome situation is my own gosh darn fault. You see, 'stuff happens', so he explained, and it's not the 'stuff' that's really significant, but what is important is what you do about it and how you react to it. If you are going to sit back and whine, then you deserve the outcome as you sat back complaining, rather than solving the issue. Whining, so he explained, is a sad excuse for inaction.

"Solve it and tell me about how you did it" is far more interesting and rewarding than sad complaining.

He's right.

Thursday, August 26, 2010

A losing fight

My buddy Elad once told me something that's so true and obvious, that it's surprising to see his point played out time and again. He said that it's foolish to fight against fundamental technology trends. Yea, it's as obvious as predicting 7 quarters ago that Android would be heading to the #1 market share in smart phones, Intel would buy McAfee, and Gilt would be valued at more than $1B

The latest RIM product, the Torch, is a hybrid touch screen and keypad device which compromised the keyboard to the point of making it meaningless and has a screen that's at least one generation behind the competition. It's not competitive, but it's totally understandable what drove their product decisions. They are a company defined by its keyboard, it's their reason for being. Every reviewer for the past decade lauded the company for its sleek design and competitors strained to equal it. The problem is that RIM is now fighting against a fundamental technology shift.

Screens are getting much better (the Samsung Galaxy series is amazing...a blow away). But there's more afoot here. A relatively new program, Swype, fundamentally changes the metaphor for text entry. It's not perfect, but it is a step above pecking, has much better predictive words than previous generations and highlights another innovation sphere.

If you look at the innovation sphere's around the smart phone (or what's really a little computer that dials), you see processors, screens, communications and software. You do not see any meaningful innovation around physical keypads. If anything, they are getting worse as vendors strive to incorporate the above. The hybrid devices we see today, with full qwerty keyboard,s are an interim generation, akin to 8 track tapes in automobiles...and destined to last as long.

Jim Balsillie, RIM's CEO is an incredibly resilient and driven executive. Many folk know that you don't pull on Superman's cape, and you don't mess with Jim. For RIM's shareholders, I hope this still holds true.

Saturday, August 21, 2010

Tom Kelly of IDEO on Innovation and design

A counter intuitive approach to solving problems from the CEO of Ideo

Monday, August 9, 2010

Aliens approaching

My RIM is dying. The trackball is shot, the battery holds a fraction of its charge, the tiny screen scratched and, well, Froyo is here (on Nexus now). Froyo, also known as Android 2.2, is the seventh update to Google's Android OS since its launch in October 2008. That's better than an update per quarter. Performance, the UI, SDK's, adoption and just about any measure you use to gauge success are there in spades.

Of greatest import is that I now understand my use patterns for smartphones. I purchased the Bberry as it was best in class for texting, BBM and mail. Inputting information easily was paramount. Now, however, I desire a phone that's a great output device as I consume far more information than I input today....and the gap is growing as it's fueled by video, social applications and real-time news/event postings. Therefore, my next device needs an up to date browser, superior connectivity (goodbye ATT) that's fast and secure and a killer screen. RIM's Torch is a step in the right direction. Unfortunately, they needed to take a fundamental leap from the input to the output age.

When it was first introduced, I must confess to being more than a bit skeptical about Android. I was concerned that it was outside GOOG's core competence and a testing toy (like Wave turned out to be), that the mobile carriers would bastardize (fork) the OS, and the developer community would test and test, without committing. I was wrong. It is a real alternative to Apple and the Android devices are now outselling iPhones

The beauty of the iPhone and the curation by Apple are important points too. Unlike many of my peers, I sorta like Apple approving software as it adds a level of security that I'm not adding code that will mess with a device which is really important to me. Moreover, as we are moving towards being a Mac household, universality of devices is a big plus. Also, the App store is great; so easy to navigate and install a myriad of applications.

With that said, however, I am looking a couple of Android phones. It seems as if the ecosystem is similar to the old GM adage 'there's a phone for every pocketbook, or primal function required'. The pace of innovation is just so much faster on Android devices. Apple's schedule for yearly hardware upgrades and semi-annual major software updates fits them, and many consumers quite well. However, it does not match the speed to which the mobile market is morphing. Heck, Google is already talking about their roadmap for Android 3.0. I like the pace of innovation; I love the transparency/road map. They are talking my language.

Saturday, July 31, 2010

Escape velocity part II

I sent the previous post about my frustration with my new computer to the CEO of Velocity Micro. Admittedly, it was a plea for help and on Saturday at 1PM, 15 minutes after sending, the CEO sent me a note back inviting me to call him to discuss/help resolve the issue. Wow.

He agrees that I probably have a bad drive, and that's not good news. However, there's a real person on the other end who really cares and wants to help and seems really committed to building great product and a good company. His attitude exactly mirrors that of the sales and support reps I have worked with at Velocity. A good customer driven culture is in the air.

This customer's benefit of the doubt is given to Velocity. Next step is to send them my hard drive and, hopefully, get a new one (with my data re-installed) rapidly back.

Kudos to the CEO (For the skeptics, I am not just kissing up on this one).

Escape Velocity?

I set out to buy a new PC last week and intended to buy a Dell. However, their 'advisor' chat was so bad that I figured if they can't answer a simple question in the selling cycle, the support must be even worse. By the way, the selling issue began with 'are you a business or consumer account' and ended with them transferring me to someone who asked the same questions as the previous person, then barraged me with questions about past purchases, before I was cut off as the chat failed.

Seeking refuge, and a better quality experience I went to Velocity Micro and bought a well reviewed Z35 with a 1Tb 7200 rpm hard drive. Unfortunately, the system arrived with a drive that sounds like horses galloping. I called customer support who had me take off the covers, disconnect drives, interfere with fan(s), and take off the front panel. The tech was really helpful and polite and diagnosed the offending issue as a faulty front panel. They immediately sent me a new one; unfortunately, it did not solve the problem. the horses are still galloping, just like Caligula heard them.

Today, an outsourced technician arrived to diagnose/repair the issue. He noted the galloping sound and told me "this is a fast drive which the chassis is not properly designed to handle". Not what I wanted to hear. But, I am not sure he's right. At least I really really hope he's not right. He can't be right, I just spent too many hours transferring data from my old system onto this one, for him to be right. As they say, I am now invested. I trusted a company that seems to take its products more seriously to do this to their customers. But, the alternative is that they shipped me a bad drive when their brand image is all about quality components, and extensive pre-ship QA.

This is a problem that should not have happened. I am frustrated that I've spent too many hours on this issue and am [ ] that close to returning it and taking my chances with Dell again. Or, maybe, I should throw my lot in with the Applehaulics in the household.

BTW, Velocity only has support M-F 9AM-10PM (these are posted on their site for caveat emptor)

Tuesday, July 27, 2010

Flipping it around

I am now the lone MSFT holdout in the family.

I recently upgraded from a Dell XP based machine to a Velocity Windows 7 based system (shame on Dell for having such a terrible site with horrendous advisor workflow; otherwise I would have bought their XP 7100), I am now an Island in a sea of Apples. It happened over the past year, first with phones, then laptops, iMac's and now iPad's. It got me thinking about a broader trend we are seeing.

For the past couple of decades, technology paradigm shifts have rested on a three legged stool:

* Processing power (e.g. Moore's Law)
* Bandwidth speeds
* Software innovation

Each leapfrog one another but, when two move radically, you tend to see a wave of innovation that augers a fundamental change in the information technology business. The now ubiquitous move to 3G wireless, coupled with broadband to the home are rapidly moving many applications to the 'cloud'. This move is coupled with innovations in software development, led by open source movements ranging from the LAMP stack to Wikipedia to Google's Android. The pace of innovation is staggering.

The great strides in bandwidth availability and reliability, plus the progress in advancing the software infrastructure is impressive, however, it seems to me that these are the forerunners of a bigger phenomena we are about to see.

Oftentimes, advances in processing power have been nearly invisible to end-users. Sure, photos edit quicker, but for the most part, absent gamers, the mainstream has not seen wonderful improvements in computing capability. Mom still has a devil of a time dealing with this stuff. Except if you use Apple computers. A large measure of their success, certainly in stark contrast to MSFT, is the massive investment they have made in making the interaction between their customer and their devices as seamless as possible. The iPad is magical. It powers up in no-time and the gesture based User Interface defines intuitive. This takes serious processing power to pull off. While many vendors in the Wintel orbit have invested billions of dollars in software 'plumbing' and expanded features, Apple has poured their money into changing the 'face' of computing.

The intuitive nature of gesture based computing has been embraced by more than 100,000 programmers offering more than 225,000 programs on Apple's Application Store. But I think the innovation is just starting. Having recently downloaded an iPad product Flipboard or seeing the interaction between me and Zinio, the standardized, yet now static Windows interface, that served us so well for nearly 2 decades is now obsolete. This is a change as profound as MS-DOS moving to Windows.

Of course, Apple does not have a monopoly on gesture based computing. We are seeing a two horse race between an open Google OS based world (Android and soon Chrome OS), soon to be flooded by a myriad of computing devices from phones to tablets to systems, vs a 'curated' (e.g. closed) world of Apple. HP will soon join the fray with recently acquired Palm OS based systems. I suspect MSFT is not too far behind.

The effect of investing processing power in making more intuitive User Interfaces will be to greatly broaden markets, upset the status quo in existing industries, and fragment users in Hatfield vs McCoy camps. Fortunately, due to widely accepted standards (e.g. HTML5) we won't step back into the tower of babel. Instead, we are poised for a great leap forward.

Thursday, July 1, 2010


My neighborhood tennis joint is blessed with clay/dirt courts and, during this time of year, ant hills are a common site along the service lines. Marching over to verify the mark for a line call, I was struck by the way these little guys scamper around in a seemingly irrational way; wondering how they get anything done in a world of such micro disorder. Yet the length of the court has at least 15 ant hills, perfectly aligned; order amid seeming chaos. It set me to thinking about what we are now seeing in the Internet Commerce space.

Today brought news of an investment in fast growing Modcloth by Accel and First Round. Yesterday's news brought the acquisition of Woot by Amazon. Earlier in June, Ebay bought bar code scanning infrastructure from Red Laser. Of course, funding stories abound from places such as Gilt, Ideeli, and elsewhere.

On the surface it seems as if there is a mad ant scramble in the commerce side of the internet. Hmmm, I suppose there is a mad ant scramble in the commerce side of the internet. I think it's justified. Let me explain.

In an area I've recently been looking at (and a microcosm of the vast commerce arena), teen commerce, enjoys less than 6% of all apparel sales online. It's a number that is probably appropriate given that most of the leading commerce sites were built and implemented prior to the social revolution, massive broadband acceptance, mobile search (which is fundamentally changing as people increasingly tend to search from within applications, as opposed to via the browser), real-time alerts/buying, and the prevalent use of video for presentation of items. In other words, the legacy sites were implemented more than two years ago. The change in the infrastructure and supporting technologies, individually, may seem like ants running about, but stepping back, there's a method to the building.

We are at the beginning of a fundamental platform shift in commerce. It has the appearance of a random ant walk, but I am convinced there's a method to this capitalistic ritual. The leading economic indicator I can point to is the rut that same day store sales are in, coupled with the double digit growth of internet sales by the same brands. I don't think we are in an economy induced retailing rut, and think the move away from physical stores will accelerate as the innovative factors mentioned above are adopted by mainstream sites, optimized by independent vendors, and embraced by savvy consumers. Now, I don't think remote sales will totally replace physical shopping, nor do I think the 95/5% ratio is justified.

Consumers are benefiting from better prices passed along to vendors who are far more inventory efficient, but the benefits extend beyond 'permacheap', into enhanced selection, real-time curation by your peers/experts, emotive real-time offers, far more efficient promotion and many other attributes which passionate entrepreneuers will uncover.

Wednesday, June 9, 2010

And the winner

Last night I was given the opportunity to judge the Sam Zell Entrepreneurship competition sponsored by Techaviv and held at Nixon Peabody in NY. The IDC School, located in Herzliya Israel, has an entrepreneurship school named for Sam Zell and each year they graduate 20-30 students. Their senior project is to create a new company; many go on to extend their thesis into careers.

Given Israel's penchant for cultivating technology entrepreneurs, it's no wonder that 4 groups selected to travel to the US and present their early stage companies had internet related ventures. Not to bias you, but I was really impressed by the people, quality of ideas and implementation, the audience participation and the organization skills of the Meet-up host, Yaron Samid.

It's interesting, and upon reflection, not surprising that three of the presenting companies shared social based internet applications, while the fourth is concentrating on internet video. The presenting companies were:

Hobnob (not yet live)- Are developing a mobile application optimized for real-time networking around business events. The application searches your social networks, finds people of relevance nearby and then moves into scheduling mode.

The Gifts Project recently launched (Angel funded by Yosi Vardi). They enable people to come together to buy gifts. The business is around an affiliate model with a recommendation engine that grabs data from the recipient's FB profile.

Wibbitz converts static web content and converts it to an interactive video. Initially targeting the newspaper industry as customers (I really liked this company, but not the target market, preferring to instead go after a market with budget....e.g. I think it would be great for commerce sites)

Trip Angels an online social way to tap into a network of locals to assist in planning a trip. Quite similar to Bitwine in terms of the thesis (e.g. Ebay for services), but in an area where garnering traffic will be prohibitive. With that said, impressive folk presenting.

As noted before, the school and students should all feel proud about a job well done. Watching the presentations gave me a chance to reflect on a couple of things:

FB social graph is rising a sea wave of acceptance. The dream of the implicit web seems to be at our doorstep. An environment where implicit relationships are exposed, and linked in ways only limited by your imagination. On one hand, this is terribly exciting, on the other hand, with so many companies linking to my 'social dial tone' will it make me long for the days of simple phone interruptions? Perhaps, a cloaking device will be the next big hit.

Another point is the changing nature of company creation in Israel. Heretofore, entrepreneurs with rich technical training endeavored to push the technical envelope by developing chips, languages, bandwidth optimization; really anything that required brainiacs to master an algorithm. Now, the best and brightest are building sites to find travel buddies, or give group gifts. Computing power has advanced so far, so quickly, that there's little value in lessening the complexity of building consumer systems. Of course, Enterprise environments, certainly in the Financial Services field, where milliseconds are an eternity remain a rich consumer of traditional infrastructure enhancements.

Finally, being on the panel with Avner Ronen of Boxee and Tal Chalozin of Innovid shows how deep the Israeli ex-pat technology community has grown in NY. There is a vibrant up and coming generation of 20+ and 30's aged experienced entrepreneurs who are serving as mentors here. It's wonderful to see.


Friday, June 4, 2010

3rd and 1

I played tennis with my shoe selling buddy Jack the other day. He's an in the trenches fighter (in a good way) who regularly sends me to a head sagging defeat. But in doing so, he shares some street wisdom garnered from growing up in the Bronx and earning a living each and every day, totally dependent upon his personal results.

On the court, he missed an easy shot to a wide open court and, in great frustration, yelled 'Jack, it's 3rd and 1, why did you go for such a showboat shot, all you needed to do was get the ball into the court'!! That got me thinking, this is business.

Business Insider had a great chart showing the market share of computing devices (including smart phones), in year 2000, today and projected for 2011. It vividly shows the way smart phones have paved the way for a platform software shift away from MSFT and towards Apple/Google/RIM. In my mind, this chart is the result of strategic, and product thinking that contrasts a 3rd and 1 mentality from a go for the long gain.

For most of the decade '00 MSFT product planning has been around an incremental extension of the Windows platform to other devices. The thinking was wherever there's a processor, there's a need for a double tapping invoked Windows operating system for your Tablet, phone, set top box,automobile, etc. For many reasons, the device was made to fit Windows and not optimized for the market's potential. The environment of the day, exerted absolutely no pressure or reason to invest in, or to undertake a task, that required thinking about a new metaphor. The market share numbers in any of these markets did not justify the risk to earnings, 'forking' of development, or mission clouding that go with taking a long shot. After all, phones were not like the existential risk Netscape posed to the desktop franchise. No need to turn the ship and embark on an 'embrace and extend' product driven strategy. For devices, extend was good enough. For Microsoft, it was 3rd and 1 thinking.

On the other hand, post IBM PC, Apple (until the later half of the decade) has been forced to think out of the box and to go for the long gain/game changing play. A 5% market share is just not a sustainable business. They have built this franchise by fundamentally disrupting existing markets (e.g. the moribund mobile arena), or by creating a new market (iTunes). With the impending announcement of the next generation iPhone, it's appropriate to look at its success being as much attributable to its initial ground breaking design, as well as the drive to continually improve the device by offering enhanced value for the customer.

As an investor in many young software/internet companies, I often look at ideas and try to focus on whether the prospects real value represents a fundamental new way of doing things (a market), or does it represent a nice enhancement to an existing market (a feature). If the later, then it's greatly exposed to being rapidly subsumed by larger players and the potential/mindset for a near term exit is critical. As an example, I think the market will shortly determine if Foursquare's location based implementation represents something fundamentally differentiated, or is it really a '3rd and 1' feature that will be subsumed by Yelp, Facebook, and a host of others. Time will tell.

Friday, May 28, 2010

Stepping out

I had the opportunity to attend the 15th annual Ira Sohn Investment Research conference the other day. The conference, in NY, brought together many leading lights in the hedge fund segment of the private equity business; an area of the world where venture seldom treads. What attracted me was the combination of a great cause (proceeds for pediatric cancer research) and a line-up of all-star speakers including David Einhorn (known as the courageous guy who took on Lehman), Sam Zell, Steve Rattner, and David Tepper.

Unlike the venture business, where you often don't know if you placed the right bet for a few years, the hedge arena gives more immediate verification of your thesis and execution. Trades have two sides, and one is often, but not always wrong. This industry is full of colorful and polemic figures. I will concentrate the points shared below, along the lines of the extremists (which were roughly 2:1 over the rationalists). This does not make their views any more correct, but certainly makes for more interesting reading.

Here's the highlights:

Jonathan Jacobson of Highfields Capital Management

Expressed that the current Obama administration is "anti-business", therefore, he is factoring in adverse legislative risk into each of his investments. He reaches his conclusion about the administration when looking at the 'interference' in the Automotive industry, followed by the Health plan, into statements affecting the Energy and Cable markets. Not even Soft drinks are immune from the opening salvos in an escalating 'class warfare mentality'.

Sam Zell, legendary investor and Chair of Equity Group Investments feels the president was elected under a change mandate and is executing such a strategy. He feels the changes being put into motion are 'huge and extreme' and we are entering a time of great volatility due to it.

Daniel Arbess of Perella Weinberg sees an upcoming debt crisis predicated by massive government overspending and now duress in the credit markets. His opinion is that investors should short weak currencies (just about all Western currencies are weak) and go long on China. His thesis is that we are seeing a rebalancing of the world's economy between west and east. Consumption is increasing in the west, while productivity is declining. An activist and heavy handed government, referred to as "Government comes to a market near you" is interfering with market forces and we will see great negative ramifications when built up market forces overwhelm this interference. He noted that 70% of Wal-Mart's inventory is comes from China; he wants to invest in companies that sell things made by emerging market economies and sold to the west. To those long-time readers, another example of permacheap.

David Tepper of Appaloosa Management contrasted the previous comments with a perspective that people and markets do adjust to change. He's not prone to extremist perspectives, as evidenced by the successful investments he's made in distressed companies that have adopted and prospered.

David Einhorn of Greenlight Capital gave a wonderful presentation entitled "Good News for the Grandchildren". For full disclosure, I think he's a courageous investor whose a great, and sometimes highly contrarian investor (here's a copy of his Q4 '09 letter to investors). But, back to the presentation.

He is disappointed that the Administration has 'socialized' losses in the housing market. Now, there's an expectation that if many people live to excess, they will be bailed out by the government and this action was a bright line to cross. He really sees little political restraint or incentive for government to operate in a rational way. For example, last year studies by the Pew Institute noted that government salary scales, for the first time, exceeded that of comparable workers in the private sector. Despite enhanced job security and great benefits, the pay is higher. It only makes sense to him in an environment where, for example, one-time and shovel ready stimulus spending went towards preserving government jobs, while adding little to the private sector.

He sees the US Civil Service arrangement as galloping at a rapid pace towards that of Greece, where workers are paid 14 months salary for 12 months of work. The open question is 'how long will the credit markets fund this'..... insanity? The rating agencies have proven themselves to be both behind real-time events, conflicted, and guilty of shoddy research. Government numbers also can't be trusted. He cited the way the Government calculates inflation as a point to ponder. This calculation has changed numerous times in the past two decades, always to the advantage of the current administration who is able to boast of high(er) GNP. low inflation rates, and a rising stock market predicated on suspect numbers.

Today, we seem to have passed the worst of the financial crisis, but the Fed is holding interest at close to zero rates as a political, not an economic decision. Another market distortion; another moral hazard. All strangely similar to past failures of the government to intervene around LTCM,the S&L crisis,the '07 equity crunch and onward. The Government is now in the habit of saving people from their foibles (except for Lehman), and this distortion only encourages bad bets and irrational behavior.

We may reach the point by saving the Sovereign nations that are 'too weak to fail', we may be setting up the economies that are thought of as 'too strong to bail' as needing rescue, but by whom?

Thursday, May 20, 2010

Apple just may be right on this one...Adobe Elements

I have spent the last few evenings preparing a photo montage for a family event and have been using my trusty Adobe Elements 7 program. It's a user friendly photo editing/storage program that is lighter than Photoshop and more featured than many web based programs. However, much to my surprise, it comes with a huge, customer unfriendly feature.

Let me digress a moment. Over the past decade, many software/web companies have pursued a 'freemium' business model, whereas a user receives some crippled functionality, in a 'try and buy' mode, towards a hoped for later conversion to a paying customer. Adobe has pursued a similar strategy, preferring a limited time free offer, then charging $79-$99 for this program. They also offer a companion program, referred to as a companion program for video editing called Adobe Essentials. Essentials adds tools for enhanced photographic effects, enlargements, etc.

What Adobe does NOT tell you is that if you happen to prepare a slide montage in Elements, you can only output it to a CD, and only in the .wmv format. Outputting to a DVD is a crippled feature that requires a purchase of Essentials. I can see how this decision was a classic product management debate where one side said something to the effect of 'gee,we can get all this upgrade revenue by hooking the customer with all their data, giving them a crippled output facility that will force an upgrade. Oh, and let's be 'careful' about messaging it in the product as the focus groups didn't like it.

The other side of the argument would have highlighted how this will probably attract more revenue but is totally customer hostile. Customers expect real value for the incremental purchase price and this feature is such a no-brainer that we will only upset our customers and present a really bad picture to the press.

Adding to my frustration, and that of many of my peers is that when you try to download Premiere you are caught in an Adobe/Akamai endless loop of problems. Why Adobe decided to put someone between themselves and their customer who only adds to the problem is beyond me. In fact, it gives great justification, from a users perspective, why Steve Jobs is loathe to do the same with Flash.

Too bad the wrong guys won these product battles at Adobe....probably the same folk who decided not to support the Mac 5 years ago.

Any suggestions on the best way to wean me from my Elements addiction? Household moving to Mac's shortly....

Wednesday, May 19, 2010

Home, home on the page

During a bout with insomnia, invoked by the foolhardy move of beginning to play with my iPad around midnight, I came to a realization that after hitting nearly 15 sites, I had yet to encounter a 'real' homepage. Instead, I was surfing between installed applications, or going from social induced link to link.

As an investor in PlumWillow, I was looking at various commerce affiliates who sell or promote apparel from brands. When on their sites, you search for an item of interest and are most often sent to the brand site to complete the purchase. As I was in browsing/learning mode, this just kicked off another round of browsing and hitting various promotions which sent me to 'personalized' inducements to buy various products.

With my eyes wide open, it was time for news surfing. I now usually do this via applications installed on my device which offer a customized (David Rosenblatt ex-Doubleclick called it a 'curated') experience. On a PC I tend to go from homepage to homepage, but on Apple mobile devices, I go from personalized application to application. It's a different, and for me, a much better experience.

With eyes reddening, I turned to the social 'link' sites, Facebook and Twitter for a more micro perspective of what's happening and to whom. This brought to mind a statistic that I have not verified but will repeat. Supposedly, the head of commerce at Walmart said that 30% of his traffic never sees his home page. I believe that, and think that this number will only rise as sites optimize/personalize to give their visitors a better experience...and themselves more revenue/time.

Thursday, April 29, 2010

Strange bedfellows?

Yesterday was a really interesting M&A day. Palm's acquisition by HP and Siri's acquisition by Apple seem to redraw battle lines across many historic boundaries.

Siri is a mobile application that's pursuing a lead generation, transaction oriented, business model. The application uses natural language, speech or written, to refer you to places, things or actions. Rather than being a search engine that refers you to information, it's more of an action engine, that short-cuts search. Combined with it's acquisition of Quattro Wireless, it seems as if Apple is girding for a fundamental change in which we interact with phones and search. Rather than going from web page to web page, an application to application metaphor is building. It is really similar to our relation with Facebook, where Facebook Connect, and its native applications keep someone engaged for extended periods, within a common framework. If search is invoked, it's within an application and, due to the deep vertical nature of the apps, offers incredibly relevant results. Better than GOOG can naturally aspire to.

This application to application metaphor is also easily translated to the mainstream computing market with tablets, or netbooks, being a natural bridge between the two. I have been using Siri for the past few months, and though impressed with the promise, must opine that today the results are just barely competitive with a host of similar applications, such as Tellmewhere, Searchit, and AroundMe. Don't be surprised if one of these are next in line to be acquired too.

I don't think this change replaces traditional search, but if adopted, will clearly cap the time spent searching via a traditional search engine. Combining Quattro and Siri has great potential to move advertising dollars away from search results and into applications. Now, if Apple can only figure out, or have the desire to open this up to more platforms, perhaps, they can be the MSFT of this decade. Or, paying homage to Dave Winer, perhaps they should just publish an open API and let anyone use it on any platform.

Palm's acquisition is noteworthy, not for the innovation, or leadership that's being shown, but for how far the industry is moving away from Microsoft. I simply can't imagine, 5 years ago, any PC maker building, or buying any operating system, other than Windows. Heck, even selling a dated version of the OS was enough to get you into scolding water. But now, HP is boldly saying (it takes revenues of $120B to be bold) they plan on using the soon to be acquired WebOS as a foundation for a series of computing devices that will take it beyond phones.

I am not sure that we really need yet another OS, but if HP can follow up it's tag line of "Let's do amazing', it may be worth playing with a few of those devices. On the other hand, till writing this post, I must confess that, for the past 15 years, I never would have associated 'let's do amazing' with HP.

Finally, speaking about Amazing from an unexpected source (besides the 'Amazin' Mets winning 9 straight), grab a look at this MSFT link to their work on Natal (courtesy of my buddy Zak). If they can really commercialize this, Redmond will again assume a lead part of the conversation.

Wednesday, April 28, 2010

Burning down the house

Goldman Sachs has been in the news much more than they would like and are bound to stay in this uncomfortable position for sometime. I have no idea whether this scrutiny is justified, or not, however, the age old conflict of interest monster is resurrected yet again. Over the past 20 years, much of the profits of Wall Street have shifted from gathering data, transforming it into information, which is then actionable by the firm's client. Today, much of the benefit from this data flow inures to the Wall Street firm, acting on its own behalf. With full disclosures, there is nothing wrong with this, and in many ways, it's the capitalistic way of life. But that does not make it right when you, as a client, find yourself on the opposite end of a trade, a transaction, or a bid from your advisor.

It's a trust issue. Plain and simple. In these cases, clients are not too interested in 'Chinese Walls', bolstered by regulations, when fundamental issues of self-interest arise when your competitor is your advisor. It gets your gander up enough to even think about uttering praise for the plaintiff's bar. Perhaps, all jokes aside they do serve as a conscience for the 'little guy'? At least, we know where they stand.

The subject of self-interest and trust comes up frequently in the venture business. One area, in particular, is around a M&A exit. Let me explain. Assume, as a VC, you have backed a CEO who owns 10% of the company and is 50% vested (with full acceleration on an exit). A private equity buyer approaches him and, with your consent, enters into sale discussions. The PE buyer, seeing the wonderful job he's done, puts on the table a wonderful CEO compensation package that post transaction refreshes his equity package (with options set at a value that reflects the acquisition cost).

The CEO, who works for shareholders that includes the VC firm(s) has a huge conflict of interest. He is charged with maximizing returns for existing shareholders, including himself, but has a MUCH greater incentive to gain personal liquidity and 'roll the dice' for another payday by serving a new group of investors. His self-interest is a conflict that the buyer recognizes and in many ways counts on to secure a favorable transaction. It's human nature.

If you've been through this before, a way to save the CEO and shareholders much angst, is to appoint a director as the point on valuation and structuring discussions. Remove the haze of conflict and replace it with a 'clean' transaction where everyone knows where self-interest lays. Understanding that most M&A approaches never reach consummation, it's also a good way to save the Company from much distraction, and the relationship from Burning Down the House.

Wednesday, April 14, 2010

Simple twist of fate

Coming back to the platform/application debates swirling around Twitter et al, I recall the old rhetorical question which my ex-partner Yuval Rakavy used to cite: what differentiates a smart person from a wise one?

The simple answer is that the smart person knows how to get out of the problem that the wise person would never get into.

When entreprenurs build a company that, by definition, has a single point of failure, they are vulnerable to a litany of potential catastrophic events. They may be regulatory, a systemic vertical industry failure, or a competitive blow. In the mobile space, the Telecom players were notorious single points of failure, and wiped out billions of dollars of capital exercising their prerogatives over a decade, blocking innovation.

Today, entrepreneurs and investors have much to gain, and lose with involvement with Apple, Facebook, Microsoft, et al. It's really imperative that they plan for the single point of failure to actually fail. If no fall-back exists, be prepared to have a war story of how great things were going, until....

Monday, April 12, 2010

Platforms and applications and tensions; Oh My

Much has been written and said over the past few months about the 'nefarious' intentions associated with three high profile conflicts. The Apple/Adobe rancor, Twitter's war with its developers over its acquisition of Tweetie and Google taking on its parters with the launch of its own Android powered phone.

Taking a step back, the presence of these debates signals a healthy and evolving ecosystem, fraught with turbulence, opportunity and danger. I really can't ascribe 'nefarious' intent to any of the actions taken. It's all about corporate self interest and fiduciary duty and far prefer this environment to a staid world which developers have abandoned. For example, I am sure that a once proud firm formerly at the center of such debates,Yahoo, would just love to recapture this type of caring attention.

Two decades ago, Microsoft showed us all how a drive for ubiquity in applications can be leveraged into a platform that offers value for users, partners and shareholders. When applications become ubiquitous (Facebook), they inevitably morph into platforms as supporting firms, usually with the cooperation of the platform owner, drive to fill in opportunities left vacant by the mothership. But danger lurks as the platform evolves, it consumes those who are too close to the ever shifting center. Twitter, showed that in spades last week with the acquisition of Tweetie. For now, I use Tweetdeck, who must unleash some great innovation to keep ahead of its former best friend for life.

Likewise, the Apple/Adobe debates are really not about optimizing user experience. It's really about legitimate corporate interests and has many twists and turns that were well documented in this blog post at Daring Fireball. I have a suspicion that if Adobe can show Apple how it's in their corporate interest to support Flash, then an accommodation will be reached. For now, the whining really is not an adequate substitute for good product management.

Dave Winer, who with Living Videotext knows these battles so well (here's a copy of the letter he posted where MSFT terminates their Letter of Intent, as they decided to buy his competitor, PowerPoint...full disclosure,I was involved in this transaction). He notes, and I agree, that the closest place in the software/web world you will find to a utopian world is in open source stacks. I am not here opining on what is better or worse, but I can't escape the reality that these stacks are usually ubiquity driven, without the profit incentive that drives self-interest to pitched conflict. Of course, (with apologies to Los Angeles) all is not LALA land in the open source world. Groups do pitched battle and debate rages, but common sense usually takes hold before mutual self destruction is assured.

Monday, April 5, 2010

Spitballs and the signularity vs diversity

Last week I had a spirited conversation with Yaron Samid, a co-founder of Pando, and now the founder of an interesting new company, CrowdSpot, which will launch later in 2010. Yaron is a spirited serial entrepreneur who, not surprisingly, rightfully prides himself on thinking differently. Our conversation was around business models and rapidly centered on the merits/trends of free/freemium vs free/don't worry about revenues (yet).

On the call, I found myself advocating a position with great certainty (as my friend Peta says 'always certain and sometimes right), citing a raft of new companies that are pursuing a certain course of action, popular today, but was in deep disdain a few years ago. Now, I can cite all the great reasons why things have changed, and today a company just 'has' to adopt the popular, but, on reflection, the reality is closer to what I tell my daughter; 'popular does not mean right, or good'. With the rich mosaic of niche markets available to technology companies, there's plenty of room to craft a customer winning solution that just happens to be different from common thought.

Looking at many of the successful princes of the software and internet businesses, the founders reached plateaus by not doing what's popular, but by thinking business different. For example, Apple's wonderful creativity aside, a great reason for the success of iTunes is it's business simplicity around $1 a la carte songs. Microsoft commoditizing, and greatly expanding the desktop market with its low cost productivity suites, and now Google leading the way with free web based applications.

Each of these strategies, were initially criticized by the status quo seekers, and each was wildly successful. The reality of our crowd behaviors is that we mimic success and strive for the popular, adopting a singularity of execution, until someone launches a spitball that happens to stick. Thereby, shining a light on a different way that, with success, becomes a new singularity to many to now follow.

Thursday, April 1, 2010

Middle Fiddle

It's tough being a middle fiddle. Whether in birth order, batting order, or a nearly impossible position to build equity in the technology space. Take phones for example, on one hand, you can get a simple 'dumb' Nokia 1661 unlocked phone for $39 on Amazon, on the other hand, the Apple iPhone 3Gs 32GB is $299 (with a media plan). In between lives more than 500 models (just on Amazon), all fighting for the 'we are just like the iPhone but cheaper', or we are 'just cheaper' space. It's nearly impossible to build a sustainable revenue stream, and even worse to build, or sustain, a brand (e.g. Motorola). Moreover, being in the middle doubles the number of deadly competitors who seek to maim or destroy you.

The same is true for markets. It's hard to have more selection than Amazon and to be cheaper than Ebay in the commerce world. It takes a fundamental different approach (Craig Newmark) to mine diamonds. I love the rewards entrepreneurs and shareholders earn from their innovations. Whether by mining new markets (friend, check-in, or follow someone/someplace recently?) or by destabilizing a somnolent arena (online Flash commerce and retailing).

We are at the crossroads of tectonic shifts in technology markets with new hardware platforms, mobile, open source and world markets beckoning consumers and corporate customers not far behind. Just be careful to not be caught in the middle.

Thursday, March 25, 2010

Feeling social and wanting dollars

I participated in the Social Media and Monetization Roundtable put on by Plugged Inventures. Some of the participants (apologies for not having a complete list) included:
David Lifson, CEO Postling and ex-Amazon and Etsy
Eric Goldstein, CEO Amplify
Kate Gutman, VP Digital Revenue Riders Digest Interactive
Matthew Milner, VP Social Media Hearst Digital
Sarah Tevel, Associate Bessemer Ventures

As expected, the session was about the tie between creating an audience and the potential for creating near-term value (as opposed to equity value) from such aggregation. Here were some of the pithy statements which caught my attention:

"I think of sites, such as FourSquare, as small/medium business CRM"

"Social has escaped the marketing department and is now touching all parts of a corporation, ranging from ranging from development to sales through support"

"Flash commerce, through sites such as Groupon and Gilt will expand beyond fungible goods and into services and consumables"

"People who embrace social sites early tend to be 'me' focused and are deeply affected by psychic rewards. They provide the kindling that bring initial value to the later participants who seek instant gratification from the value of 'we'

In addition, emerging companies mentioned that brought nods of 'yea, cool' were:

Pushkart- Measuring social worth (and tying it to commerce)
Blippy- Uses credit card information to link folk to share and discuss things they are buying
Media 6 Degrees- Social targeted advertising
Groupable- Match sponsors with groups of people with common interests
Dotomi- Taking a personalized approach to display advertising; differentiate through remarketing

As a member of too many, or perhaps, not enough social networks, I am caught up in a cycle where my identity is fragmented amongst many domains.