Today LinkedIn is the professional identity of record, with BI/Insight tools built around it. The business has three core areas:
Hire (the bulk of the business today)
Market
Sell
Mobile is now 25% of weekly uniques, higher if you count m.LinkedIn
Initial Vision:
Mapping professional connections across the globe with 3 degrees of separation
Revised Vision:
Moving to leveraging people to mapping an economic graph so there will essentially three graphs; a Digital profile for people, companies and opportunities. With an objective to remove the inefficiencies preventing the flow of capital to opportunity
This morning, I downloaded a relatively large file from YouSendIt The company does a nice job in solving the 'attachment problem' where mail systems restrict the size of files which you can send to others. Besides offering transport, they also wll sync and store your files in the cloud.
This highlights an issue for me, and I suppose others. I just looked at my applications and it seems as if I am swimming in cloud storage and syncing. I am now using Box, DropBox, iCloud, Live, Evernote, Amazon, Google Drive, and now have a YouSendIt account. Of course, I am using the system for my personal mail, my investing activies and for some entrepreneurial things too. As such I am Charlie@xxx in many different places.
Each of the applications have a bit of a different personality with differentiation more around the workflow than the efficacy of the storage and access which are at the core of what I am now looking for. While I am thinking it's about time to consolidate into one or two vendors, the one's which appear to be at the head of the line are the largest cloud players. Apple makes it compelling to use iCloud within its platform(s), Google Drive does the same with its integration with the formerly named Docs.
Our Thanksgiving routine is probably a typical scene with four distinct phases:
Pre-game/pre-dinner bonding around the kitchen table or football couch
The main event
Dinner clean-up and dessert presentation time out (back to football)
Dessert
Around yesterday's table/couches the inevitable 'what phone are you using' conversation came up. While the family favors Apple by 3:1, Android has made some inroads and the lone Blackberry holdout is no longer derided, but now viewed as the eccentric uncle.
What was missing from the conversation, however, was the word 'cool'. Past years phone purchases/plans were punctuated by arm waving and passion. Now, iPhone buyers spoke about 'my other devices are....' and Android folk were about pricing and screen size. In other words, over the past year, at least for us, phone innovation has taken a breather in favor of a platform and pricing.
If we are a representative sample, the consequences for Apple are dramatic. As a premium priced vendor, they are at a disadvantage in garnering market share in the incredibly price sensitive, and fast growing Asian and African regions. Of course, their growth, through line extensions to their platform and sales of high margin products (software commissions), should continue. But growth will no longer be torrid. 2012 is notable for Apple losing its cool.
Cool isn't necessarily gone forever, heck, Apple's taken a couple of cool vacations and it's not like other vendors have replaced its cool. Microsoft's cool with Surface and Windows8 feels like a parent trying to be cool at a kid's sporting event or Sweet 16. It's forced and unnatural...untrue to the brand. Google's products are really pragmatic, but just not cool. Pinterest's UI was, at first, cool. Now it's expected. *
Innovations on the horizon with LTE networks, NFC, faster chips, and innovative user interfaces are the basic ingredients for cool. They are waiting for the chef with the right recipe to whip up something that gets a 5 star rating. Someone who people first laugh at, then ignore, then fight, and finally lose to (a bastardized Gandhi quote).
All the best for a great Holiday weekend.
* kudos to cousin Ken for coming up with a 'cool' suggestion....he noted that when ordering pizza, you can get crumbled sausage (which he and most people around the table prefer to sliced sausage, but he's never seen crumbled pepperoni., only sliced. Here's to you Ken....bring it to market!!!
Being a part of the explosive growth in earned media through SparkRebel and tracx has been exciting. I've now also joined the board of advisors for one of the fastest growing companies you may never have heard of, WeHeartIt (WHI).WHI, with more than 1B montly page views and a commanding position in the under 25 year old female demographic is an explosively growing company in the social curation arena.
I love the company's devotion to the simplicity of their user interface, with the minimization of clicks to get things done. It's one of the key principles which has made Amazon so successful.
Tradionally, brands and agencies focused their efforts on helping clients gain attention through two major media outlets; paid and owned. A thrid wave, buoyed by the rise of social networks, earned media is the core of the creative and technical internet commerce and discovery wave.
A paid outlet is where a brand pays a provider to deliver impressions to a consumer (or 'user'). TV, newspapers, billboards and radio are the most popular paid outlets. Most of the paid money is delivered to the provider who delivers the impression (has assembled the audienc). While agencies and other helpers recieve a relatively small share for planning, creating, and measuring the results.
Owned media represents a brand's own assets, a web-site, mobile application, or newsletter. The primary cost here is assembling a relevant and meaningful audience for the produced message
Earned media is the fastest growing segment. While traditionally focused on public relations, the growth of social networks, especially vertically oriented ones, has created places where consumers are now the creators of 'earned media' (e.g. Starbucks now has more than 10mm likes on Facebook). Posting content which is automatically shared with friends, discovered by people with similar tastes and acted upon by those with similar budgets reflects dramatic change. Leveraging these channels has greatly expanded the role of agencies and creation of firms which provide the front-end infrastructure (e.g. Pinterest) automated tracking, analysis (e.g. tracx), or security and placement services.
Here's a nice chart from Forrester Research
McKinsey Quarterly argues that five forms of media exist, adding Sold and Hijacked (when people hijack the comments on your site), to the aforementioned categories, need to be managed.
Though these three areas are distinct, by no means are they separate. Just look at Sunday football commentators now publishing their Twitter addresses, or billboards promoting company Facebook pages. Earned represents the most dynamic ecosystem that, for now is additive to the other two. It is possible that they coopt them too.
I read an interesting piece in ReadWriteWeb regarding why Web Publishing is changing. It makes some great points about the lowering of the barriers to post, explaining the rise of discovery, and the importance of an easy viewing experience (e.g. the continuous scroll of Pinterest or Tumblr). All fueling an explosion of new sites and probably paving the way for e-commerce to really come into its own. Here's some additional perspectives:
The
Web is drowning with content, photos, videos and text. Search is breaking under its weight and that drove the rise of Discovery. Discovery, via tags or categories, provides a level of organization that straddles chaos and the hyper-organization which is Search (of course, being gamed via SEO)
Such organization is best accomplished in a casual way, where it's near painless for people to post to, or view their streams, in a multimedia way
In this paradigm, vertical market players should have an advantage over horizontal platforms, only if they want to concentrate on content quality (and they should want to change this as the content is the ultimate driver of viewers....especially repeat visitors). Quality begets quality, having schlock devalues the brand.
At
its heart, many sites are vertical market custom publishing systems which become content platforms that address specific markets. Today, much of the content is community curated. This will be complemented via algorithms which understand what is of interest to whom (e.g. personalization via behavior and the social graph).
The 'free lunch' of ripping off content from artists will eventually come to an end. Tumblr, Pinterest, et al, will have to reach an accommodation with copyright holders (often independent photographers or videographers).
Silicon Alley Insider posted a chart last week showing the dismal performance for the initial wave of consumer oriented social IPO's. There's no doubt that initial public investors, as well as late stage private equity firms are feeling some trepidation. Nonetheless, the comparison with the market collapse of internet stocks around 'the bubble' of '00-'01 is just not applicable.
The other day I was speaking with the CEO of a company, where I sit on the board of directors. We were reviewing the three key issues, and the resources which he's applying to solve the issues. Interestingly, one of the points he raised was that he would like to hire a senior officer to handle the 'small market' opportunities which the team has decided are worthy to pursue.
'Small market opportunities?' I asked, while raising my eyebrow and voice an octave. 'Yes, small market opportunities', he replied.. He then launched into a deeper explanation.
As a sub $100mm fast growing company in a rapidly transforming industry, he sees the best shareholder wealth opportunity is around participating in markets as a leader. At our size, that means entering markets while they are small, without large competitors, or for that matter entrenched competition. Today, the company sees 3-4 areas which today are still small but each has the potential to positively explode. We just don't know exactly when, or for that matter if, but if they do, then we will be a market leader in another exciting related market.
Not too dissimilar from the venture business where a portfolio of small bets hopefully leads to a few large winners.
I read a fascinating piece in Slate today which was about Amazon's push to offer same-day delivery. Essentially, it examined the strategic shift from fighting local sales tax to settling with municipalities. The reasoning for the change seems to be that the shift on taxes is that Amazon has determined that same-day service will open a vast market opportunity. They are prepared to open a vast network of warehouses to support this effort.
This will have a seismic negative effect on local retail if Amazon (and its leading affiliates), via its low cost model, with savings shared with customers, can pull this off. For consumers, it's a huge win, especially if Amazon extends its Prime bundle offering free shipping to members. Local main street retailing seems to be heading towards three shopping categories:
Experiential- Where the shopping experience is really special (e.g. Nike or Apple stores)
Just in Time- Need a band-aid and need it now
Personal services- your nails look lovely dahling
This move should also strike fear into the big box retailers such as Walmart, Target and Costco. Which, if history is a guide, will pour billions of dollars into trying to blunt the effect on their stores, without cannibalizing them. I wish them well as they walk the sword of Damocles
Promotional services, such as Groupon, will help mask the shift. But for how long can businesses who don't have budget pay for 'helpers'?
On the occasion of the iPhone's 5th birthday, I thought it would be interesting to reread the Apple press release introducing the device. Some reviewers, and most competitors, highlighted that there was really nothing new there and, the press release reinforced it by noting it's a "widescreen iPod, an Internet communications device, and a revolutionary phone". Of course, the revolution was combining these elements behind a UI which redefined the way people interacted with their phones. Point and tap replacing hunt and click captured the phone business, undermined the laptop world, and has stalled the desktop market.
The Atlantic published a great graph (similar to Mary Meeker's) detailing which medium people spend their time, and the dollars spent per medium. With all its troubles over the past decade, print still commands a nearly 3.5:1 surplus of dollars to time and emerging mobile has a dollar deficit of 1:10. TV and the Internet have close ratios.
The graph measures time, but not effectiveness. I suspect that with tools such as re-targeting and use of cookies, the internet applications outperform TV. Mobile is behind the web in deploying personalized tool sets, but probably leads in innovation, especially when location data is factored into the equation.
AGC just published its May Capital markets report which has some terrific data on the state of M&A in the technology segment of the market. Here's the highlights, and I would suggest going to the report to cull data for your specific interests:
Q2 2012 saw 85 M&A transactions. Flat for the past 3 quarters and a drop from a busy Q3 '11, which saw 120 deals
Software & IT Services was the busiest area (33% of deals), followed by Digital Media & Internet (17%), and communications (16%)
Google (26), Facebook (16), EMC (16) and Ebay (14) were the most active buyers in the last 18 months
Over the last 4 years, the most active buyers were Google (60), IBM (48), EMC (44) and Oracle (39)
The median premium to the 30 day valuation, prior to announcement, was 29%
Enterprise value/Last 12 month revenue was 3.6x (caution, this covers all segments and growth trajectories, so is best used in aggregate for gee whiz purposes)
39 Technology related IPO's were priced in the trailing 12 months, though new filings seem to indicate a slowdown in new offerings
I've been thinking about the Facebook broken IPO and the ensuing ripples around the valuations and value of many web and mobile based companies. For now, let's leave the topic of valuation for another time as, ultimately, I believe that valuation is a derivative of customer value, and this is what's on my mind.
Three weeks ago, one of my investments (still in stealth mode) opened a Twitter account and the Community Manager began tweeting relevant subject matter, gaining followers, and following others. At the end of two weeks we had 1,000 followers, were following 2,009 people, and found ourselves suspended from Twitter for aggressive following behavior. Twitter rationally put rules into effect which limits spam, churn and other activities which may hinder the community's trust. By growing so fast, in large part through aggressive following, we violated the rules and were put in a 10 day penalty box.
The team felt an acute loss from the suspension. We lost the ability to communicate with a growing group of adherents, lost their feedback, went dark on them and were at a loss to find a suitable replacement. Though only live on this free service for a matter of weeks, it became the fabric for our community outreach.
They say that you only appreciate the value of things/people when you lose them. Twitter has serious value.
A few months ago I posted about an investment round in Tracx and its participation in what we expect to be a fast growing market; social media management. In the 5 months since we closed the round, the company has performed quite well. However, quite recently there has been a huge upheaval in the surrounding competitive environment. Oracle acquired Collective Intellect, in response to SalesForce acquiring Radian6 and Buddy Media, which, of course is an area which SAP is dabbling in via its endorsement of Netbase.
Odds are that at least one of these transactions will not proffer the returns which the acquirer hopes to garner. Nevertheless, no doubt that the product, customer value, and distribution dynamics within this early stage market are in disarray. As an investor, I am accustomed to early stage companies making a 'left' turn as they discover the real market opportunity is a 90 degrees adjustment from where they were heading. It's not too unsettling to see the value proposition, which customers need to evaluate suddenly change too.
This is why I think it's essential to have faith in the team you back. Markets, competitors, and your target customers change oh so quickly. The team is my port in the storm.
One of the nice outcomes derived from hitting 'critical mass' is the benefits from the ecosystem that come your way. Over the past three years, New York has clearly put itself on the internet map and the hundreds of concurrent internet related panels spread throughout the city this week is a great indication of the depth, health and diversity of the industry.
Following are top level notes from the Big Data Panel this morning:
The challenge 5 years ago was around storing and sharing vast data quantities, now it's around interpreting for insights
A silo data approach breaks the model of having holistic insights
As
an industry, data intelligence players need to develop applications
which can be used by a variety of data, across multiple business areas.
Moreover, understanding there's many partners (usually silo reated) who
need access to the data, there's a need for a common
platform/application to fulfill the enterprise vision. The challenge is
to develop something that's comprehensive, yet not overwhelming and easy
to implement.
Data is an enterprise asset; used properly its key insight into
a customer's or prospect's journey (as step one). Step two is to apply
the data towards a personalized and customized approach to a
prospect/customer where the data enables a 'needs based' message to be
delivered. Another aspect is to understand what action influenced the
prospect/customer to get them interested in the first place, then to
efficiently replicate
Today, the CMO seems to be the point person for assembling the
multitude of data suppliers/needs. By the way, data is being used here
to include analytics, dashboards, etc.
Best practice is to take
something you already know and see if there's a way to apply it in a
different way (e.g. by integrating with CRM systems)
The role of the agency is to be a partner to the agency in putting into place the systems to analyze and act on 'big data'
I am often asked about the theme around my investments and for the past couple of years have answered that I invest in great people in emerging growing areas and the rest takes care of itself. Based on the quizzical responses, that explanation has been inadequate. As I use this forum as a way to flesh out my thinking on points and as a way to communicate with others, here's a stab at a deeper and more nuanced reply to the 'what areas are you investing in' question:
As an overview, the other day I was on a panel with Lawrence Lenihan of FirstMark and in response to a question about how things are different today from five years ago, he said that the entrepreneurial paradigm has switched to 'it's now easy to start a company, yet so hard to scale it'. He's so right and that remark set me off to thinking much more deeply about what's driving some of the fundamental changes in the market. To illustrate his point on scale of users and infrastructure, here's some recent statistics showing 60 second activity across some major sites:
Facebook 695,000 status updates
Skype: 347,000 calls
Craigs list: 12,000 new ads
Twitter: 98,000 Tweets
Tumblr: 20,000 posts
As a frame of reference, ten years ago investors and entrepreneurs were broadly categorizing their companies as being B2B, B2C, then a hybrid B2B2C. In the last five years, however, the social, broadband, mobile and visual waves have upset many entrenched players (e.g. Yahoo), while driving extreme user and shareholder satisfaction (e.g. Instagram). Thinking about what's behind this has led me to a conclusion that the fundamental market and technology trends have opened greenfield C2C and C2B opportunities. YouTube really was the first notable example of a firm that was born around the recognition that aggregating consumer files, to be distributed to other consumers, could be a massive market opportunity. The founders of YouTube did not have traditional broadcast experience or capabilities, instead, they took an outsiders approach to disrupt an existing market. They validated the notion that there's an opportunity in building consumer to consumer platforms, where the value-add to users is easy self-expression, psychic rewards, and entertainment. For the business, it's a new channel to reach millions of consumers with like interests/demographics, or a vehicle to gain instant insight. Insight is really important as, I believe the John Wanamaker quote of 'I know 50% of my marketing dollars are wasted, I just don't know which 50%' is no longer valid in a world where you can sample
More instances abound, for example, when you hear about 'big data companies', most often the conversation points to an entity that aggregates (FacebookAirbnb or LinkedIn) or creates (Instagram) massive amounts of unstructured data and distributes it (Youtube), or analyzes it (Tracx), redirects it (Pinterest), or adds value to it (BillGuard) in a way that could not have been done a scant few years ago. The initiation of the value chain is with the consumer, a solitary individual, when massed together has incredible value. The difference in the technology necessary, the road map of key success factors, and capital capital deployment differ markedly from the prior generation. In fact, given the state of technology deployment (smart phones with cameras, social deployment, and 3G, these companies could not have existed five years ago. For this reason no entrenched competitors exist in an opportunity that has sprung up overnight and is tremendous.
As Lawrence so rightly pointed out, building the technology behind these firms is not a herculean task, but scaling the traffic and the systems when you deal with hundreds of millions of identities, or records, is indeed huge and the scaling, not the starting, is what can get to be capital intensive. The good news is that, it does not take that much capital to know if you have caught an express train, and when you do, it's not that huge a risk factor for the follow on investors either.
I've been struck by the massive adoption and now returns earned by the Instragram shareholders. It's just about as staggering as the incredible momentum around Pinterest and both are so notable for the reality that they delivered great user (and shareholder) value with around one dozen employees. Each has about one dozen employees, think about that. We last saw this so visibly when Yossi Vardi led a group of innovators who created, then exited, ICQ (and have seeded more new companies than I can count).
Engineering and UI cultures, no sales forces, field customer service reps, hordes of system admins. Nada.
On one hand these are screaming advertisements for capital efficiency, fundamental changes in the way companies can deliver value and innovative entrepreneurs. On the other hand, there's no doubt that Steve Jobs was only hitting the tip of the iceberg when he noted that the jobs exported from the US to overseas locations are not coming back. In fact, many of this generation's companies won't be creating those jobs in the first place.
Somewhat obscured by the iPad announcement the other day is the speed to which Apple has led the 'post-PC' vanguard noted for its mobility. Here are some of the stats for Apple:
172mm "post PC devices" (e.g. iPads, iPods, and iPhones) sold in the last YEAR
In the past quarter 85% of company revenue came from these devices.
Apple is now the largest manufacturer of computing devices
The iPad sold more units than any other computer manufacturer
40.5mm iPads were sold last year
These stark numbers represent the five year mobile paradigm shift, starting with the iPhone, that will only gain momentum as 4G LTE networks proliferate. With the realistic potential for 10Mbt/s on the upload and 15-25 Mbt/s on the download, it represents substantial improvement over existing 3g networks. No doubt software and media players will be enhancing applications and content (e.g. more video) to take advantage of the enhanced connectivity and giving even greater utility to mobile users.
The new iPad has been introduced, a worth successor to my increasingly pokey iPad Classic. Over the past couple of years, each new software update and next 'can't live without' application, has brought it to its knees. The march to pokiness was greatly accelerated when the iPad2 was released and developers optimized for the faster processor and took advantage of the improved graphics. The new iPad with an even faster processor, more RAM, a 'retina' screen and LTE communication capability will be too tempting for developers to again optimize. So, good-bye Classic iPad, you really were magic.
Yesterday, Tracx announced that it raised its first institutional venture round. Led by two quality venture firms with complementary experience; Flybridge and Revel Partners and joined by Crossbar and existing investors. Over the past twelve months, the company has literally come from the garage to securing more than 100 Enterprise and Agency customers.
Tracx has built a service which enables Enterprises, in real-time, to monitor what people are saying about their brands. Amongst its many attributes, it lets them identify sentiment (+/-), influencers, and trends. It helps firms filter the 'signal from the noise'. Looking at the market, here are the reasons why I am bullish about the opportunity:
In an era of instant communications ranging from customer support, to sales, to marketing messages, all brands will need to have a component of their behavior to be like media companies. Today, they don't have the tools or experience to actively manage real-time communications involving millions of comments. Specifically, today I see; pent up demand, home grown patchwork systems, and many disparate point solutions cobbled together to address the growing issue. I've seen this happen before and know these quick solutions often don't scale and integrate well.
Community management is going to be an essential part of the brand
The opportunity is Global and knows no geographic boundaries
Technology can be a real differentiator when you need to scan hundreds of millions of conversations and categorize the data to present cogent information
Enterprise web presence now extends beyond their web sites, beyond Facebook, Twitter, Tumblr, Pinterest, Instagram etc. Brand content is everywhere, placed directly and re-purposed by the public and edited with a human element. There is no control over content, but there is a response to it.
User generated and re-purposed content is not controlled by the brand, but it's essential they know it's there, who are the key positive and negative influencers, and the trends associate with their actions.
Crisis Management. It's essential to get a handle on issues, when they are still small, and get insight into the one's which spiral (e.g. McDonalds and the spilled coffee scandal)
John Wanamaker said that he knows that he wastes 50% of his marketing dollars, but he didn't know which 50%. With real-time data, there is now no excuse for such a high ratio of wasted resources.
Companies need a common framework to communicate progress, best practices and challenges across various divisions
Of course, the Management team, led by Eran Gilad, is a huge part of any investment. They see the potential to seize a market leading position through product innovation, which has the potential to fundamentally disrupt the competitive dynamic within this nascent, but potentially huge market.
We believe that we’re on the face of the Earth to make great products.
We believe in the simple, not the complex.
We believe that we need to own and control the primary technologies behind the products we make.
We participate only in markets where we can make a significant contribution.
We believe in saying no to thousands of projects so that we can
really focus on the few that are truly important and meaningful to us.
We believe in deep collaboration and cross-pollination of our groups, which allow us to innovate in a way that others cannot.
We don’t settle for anything less than excellence in every group in
the company, and we have the self-honesty to admit when we’re wrong and
the courage to change.
My buddy Robert is a proven CEO, an amateur historian, and keenly concerned about the political environment. Over lunch, he was lamenting that what's missing from today's political rancor is a sense that the candidates are really interested in the 'greater good' for us all. Instead, each seem to be archly tuned to their own interests and are unyielding in their approach to others.
Sadly, sometimes I get the same feeling on boards where members, with good intent to execute their fiduciary duties, are overly concerned with protecting their own interests. Without balance, a board culture can rapidly devolve so much so, that members lose site of what's really building value for shareholders. Moreover, it places the CEO in a can't win position, sapping passion and obscuring the Company's direction....looking after the greater good would have been a good New Year's resolution; it fits for Valentine's Day too.
