A Quarter Buys Media Headlines or 1/3 of a Click

Liz Gannes at Giga Om has a great observation that pretty much mimicked my thinking after seeing numerous headlines in not one, but two Web 2.0 related blogs I follow for breaking start-up news.

Both bloggers made a huge deal (as did the resulting comments) about Guba’s affiliate scheme to pay $25 for 100 referred users. You have got to be joking me! At first, I was a little shocked because I thought it was 25 cents per visitor but, no, it’s 25 cents per registered user – a monumental difference if you believe any of this permission marketing hooey.

That works out to 10 million users for $2.5 million. Presuming that we’ve got a system that doesn’t pay for fraud (something affiliate marketers deal with regularly), you’re looking at mass market numbers for a fraction of the big market VC money that’s funding these video plays – fully ignoring any monetization returns that might be expected.

For anyone out there in the affiliate world, you know that affiliate programs can often pays $0.75 to $1.50 just for an e-mail address, $3 to $8 for an e-mail address and (gasp) a mailing address and the sky’s often the limit for sales, subscriptions and the like. It’s not up to me to determine whether these are fair numbers. But I do know that true affiliates won’t be sending traffic to Guba for the money.

I think this is just really an example of two different worlds. The Web 2.0 crew thinks that YouTube crowds falls out of trees and the marketing crew knows that it doesn’t matter what you pay, so long as it works out in the long run. What boggles my mind on the Web 2.0 side is that paying for users is so taboo that the fact that the sheer cheapness of the program is what probably will make this scheme fall on its face is being ignored. As Liz said, PEOPLE, IT’S A QUARTER!

Google CEO Eric Schmidt Joins Apple Board of Directors

Wow! It’s some fun news in the world of computing when Google and Apple seemingly tie together to take on big, bad giant Microsoft. Press release here.

Both Google and Apple are the leading examples of technology making lives better, easier, cheaper and more fun.

When business aspires to these goals, you have to applaud, which is largely why people love Google and Apple so much. The latest news of Google Office is only the beginning. A dismissal is looking too short-term – Microsoft does have lock-in *for now* – I’m in the camp that probably won’t switch for a while simply because I’m locked in. As the world moves to be more networked, more wired through wireless and more mobile, these web-enabled applications will win, not just because they’re portable but for another big reason – because they’re cheap.

In a world that’s getting too complicated, people love their iPod’s and their Google because of their front-end simplicity, so complexity of bloated software no longer matters. In this world, these two look extremely well poised to capitalize and who knows how they’ll aim to do it together.

Downloading Movies – The Big Debate

For a variety of reasons, I’ve been very intrigued by the downloading movies debate. The latest salvo was launched by Mark Cuban here. I give him an enormous amount of credit for doing it – there was sure to be push back coming through strong. From the consumer side that I’ll focus on, Cuban basically expounds, in so many words, that it’s too difficult to download more than 1 movie or movies for other people. Two main counterpoints come through in the comments:

Counterpoint #1: “No, it really isn’t that hard to download over the Internet.”

This is really just a matter of opinion. It’s very clear in Cuban’s post that he doesn’t believe that downloading won’t suit the needs of many – it just won’t suit the needs of the majority.  It’s not important that YOU don’t think it’s inconvenient, rather that there’s a huge majority that it’s just easy enough for yet.

It’s just not easy enough right now, period. Two mouse clicks and 24 hours to get any movie through the mail (rent, maybe a few more clicks and/or hours to fully buy the movie) – doesn’t get much easier than that right now.

Counterpoint #2: “You’re coming off as a technological nincompoop.”

Who cares? I’m a techie at heart, but I only like technology that makes my life easier, saves me time in the long run or gives me something that I wouldn’t otherwise been able to experience. Maybe that’s a personal philosophy. A cell phone (preferably smart phone) and a bluetooth headset – how brilliant and convenient.

There’s a technology aspect that idealists would like to see. I would love to see that too – 60,000 movies truly on-demand, who can argue with that? The truth is that we’re not there yet – and the basic point is that there are many stumbling blocks that will take forever to knock down until we get to this idealistic point.

I’m really a convenience freak. Ultimately, make my life easier and better and you’ll win my business. I recently debated the merits of tagging. I get tagging, but it’s just barely loses out on my convenience test. I’d rather rely on Google to tell me what’s what instead of having to attach words to everything from photos to e-mails to links, etc. I’ll punt on this point for now.

Apply this now to movies. You have to apply the mother test for ease of use, but another (and actually LESS important – because it’s my preferred test and my test is not as important as the general population test) test is the convenience test. Is the time/trouble spent doing the task worth the pleasure/enlightenment/education/etc that results? For most, this is another test that generally doesn’t pass…

As an idealist, I do believe that keeping the status quo should never be the end goal. I don’t think that overall Cuban is making that point, but he is recommending that movie marketers understand not to make downloading an alternative to buying the movie. I think this is true from a business aspect, but a consumer-centric philosophy says that each and every person can now choose the delivery options that make the most sense for them. Right now, it’s just easier to buy or rent the movies.

Another related, weak argument would be defending a longer timeline for movie download domination in the false belief that you’re core business won’t change. Again, I don’t think Cuban is doing this and major (and smart) players don’t really do this either – they’re just pragmatic for the time being until there’s a game-changer (and maybe someone is inventing it).

As great as the iPod is – even the CD business demise is overstated. And the movie busines is a bigger beast – screens just get bigger and bigger. Until the experience is easy, convenient and magic all at the same time, movie downloading still has a way to go…

“Imitation is the sincerest…” – Web 2.0 flattery abound

Om Malik and Niall Kennedy on ONPodsessions have an interesting podcast “Snakes on a Business Plan” here.

My rules surrounding the discussion:

- Don’t go after markets where you’re #51 into market. This is where “curve jumping” is really necessary to stand out – if you can’t jump the curve, you’ll find it difficult. There’s no use duking it out on a past curve where you’re already at a disadvantage. If you think you can do something better, I suggest doing it with 5 competitors around (even if one is Google) instead of 50 competitors – it’s only realistic that the more competitive the market, the more you’ll have to do to differentiate yourself.

- Don’t just be a feature. This one’s certainly up to interpretation. Om and Niall mention the example of Flickr, which is not just a feature. A calendar is an application (but there might already be 50 online calendars), but it might be #51 on the radar screen. 37Signals says that you shouldn’t shy away from Google-entered (or other competitors) markets, but further comments more accurately state that you shouldn’t shy away from these markets when you can differentiate yourself appropriately. In 37Signals’ case, the calendar is part of an overall more useful application, BackPack – this point is slightly understated on their site.

Features can be ripped off easily – something you can be fearful will be ripped off quickly and often. Real applications with real uses and real businesses are much more difficult to replicate.

- Be focused. If you scale down your expectations, you might be able to cater to a niche need within a crowded market. Generally less lucrative, but can lead to a level of success that is perfectly fine for many people.

- Know your customers. Find your customers. Make a profit from your customers.

Seems obvious, but there’s a lot of Web 2.0 companies that ignore these rules. Those that don’t ignore the rules and then execute appropriately (the difficult part), succeed.

P.S. There’s a link in the right sidebar for our new start-up, iLetYou, where you can sign up for a private Beta invitation when it becomes available.

AOL CTO Resigns – Heads roll

CTO Maureen Govern and two other AOL employees have left AOL for the data lapse that exposed the private search data of over 600,000 users. More info here.

It’s truly unfortunate that this happened, but if nothing else, the positive is that this casts the light back onto Internet privacy and the hit big companies can take if they aren’t earning the trust of their trusting users.

Great technology companies can use this data to better the overall experience, but it’s worthwhile to understand the implications – you are putting a lot of trust in the hands of search companies, software companies and more. I do not believe that anyone should be paranoid, but this shows that it’s not impossible to imagine your data (and effectively, your life) breached. I hope as the Internet continues to reach its full potential that companies large and small continue to understand the importance of this.

Vice Chairman Ted Leonisis and AOL’s General Counsel are overseeing a committee to review their data collection and retention policies – a good start from the very top, hopefully it’s the first of closer looks at AOL and elsewhere.

MySpace Widgets: Too dependent?

Clearstone’s David Stone has a good post about “Will MySpace eat its young?”

David has a unique perspective, being founder of M Networks operated within the eBay ecosystem and Clearstone being an investor in PayPal. David has every reason to be nervous as he states, given that MySpace does not make its position on companies leveraging MySpace entirely clear – it has taken steps against these companies, but also allows them certain freedoms at times. It certainly seems like a difficult path to take from a venture capitalist’s point of view.

From my standpoint (bootstrapped venture, makes me part entrepreneur, part investor), it makes me equally nervous to see a company unable to see the big picture. Granted, the YouTube success is largely based on MySpace embedding – they’ve certainly never limited themselves to just MySpace (they’re huge all over the blogosphere) and, more importantly, their vision extends far being just being a MySpace Widget.

I would contend that you will see nearly ZERO Web 2.0, Internet success stories based strictly on MySpace. Like David also mentions, these companies typically are not fully aligned with MySpace interests – they have certain incentives to eat their children. Although some disagree referring to specific cases, overall eBay’s overall vision is to develop partners that overall support their prime directive – growing revenue.

If you want to ride the success of great Internet successes before you, you’re just being smart, but don’t strictly ride their coattails for better or worse – seems like a recipe for disaster to me.

24 minutes on Web 2.0

TechCrunch has a great 24 minute video on what a Web 2.0 company is, discussions about a possible bubble, business models, user-generated content and the early adopter crowd.

One of my favorite quotes is from David Sifry from Technorati stating that getting to a million users is the easy part.  Of course, the term user is used loosely.  This is just doubly true from a free user standpoint – it really is easy to get people to use your software if you’re building something free, useful and freed of the majority of usage friction.

We think that our new start-up is something that will be truly useful and beneficial to people’s lives, not just techies – and that gives us enormous confidence that we’ll get to the “easy” million user mark, then on to the mass market, if we just keep our heads down and plugging away.

There’s more acknowledgement of the general market in this piece, which I think is always a positive thing.  Often times with smart Silicon Valley CEOs, there is a lock-in to that way of thinking – superior technology is not always the key to success, mass market adoption is.  The simple comparison between Firefox and IE as the default browser to develop for (not make work for) is the most convenient example used in the video.  A mass market CEO defaults with IE regardless of his personal preference.  I use FireFox and IE only when forced as well, so I easily fall into the same trap.

I think David’s statement acknowledges the mass market as the difficult market – most of the CEOs featured here say the early adopter market is around the single millions.  While to change the world, you have to have a unique proposition – something that is uncomfortable and follows the early adopter to early majority and so on, leaving crossing the chasm into the mass market the difficult part.

Reserving my specific opinion, there are some companies in this group that will cross and some that won’t.  Some is random choice, but there are lots of conscious decisions made along the way that will truly be the deciding factor.

MySpace lands $900 million deal from Google

Google and MySpace have just reached an agreement that will pay Fox Interactive Media, parent company of MySpace, a MINIMUM of $900 million in revenue share payments from the first quarter of 2007 through the second quarter of 2010. Here’s the press release that just hit today.

If you do the math, you’re looking at a minimum of $250 million per year over the 3 1/2 year period. As a result, this will no doubt strengthen the great deal that Rupert Murdoch made by purchasing MySpace for $580 million. The deal includes other FIM properties, but MySpace is the real driving force here – recent reports put MySpace traffic above that of even Google itself.

Thus ends the speculation of which search engine company out of Yahoo, MSN, Google or others would receive the MySpace advertising business. My gut reaction would be that MySpace wanted to align itself with the hands down hottest search property out there – thus restrengthening its position in the elite top web sites given all of the negative press regarding downtime issues and questions about MySpace’s web site architecture. While MySpace gets its house in order regarding technology (and as a wild aside, what if Google’s datacenter plans start to involve MySpace hosting), this certainly puts MySpace in the Google camp – still the poster child of technological superiority on the Internet right now.

Google, itself being a smart, smart competitor, knows that aligning itself with MySpace continues to keep it ahead in this race towards Net dominance.

A related side effect is in the land of feeding the MySpace beast. This reasserts that the free ride on MySpace by way of widgets, photo slideshows and especially those selling goods or aiming to make a profit will likely be at odds with MySpace interests. Essentially, they’ll want the revenue for themselves – not being siphoned off through various widget makers and into the hands of its users. Unfortunately, this is completely within the realm of reason for MySpace to do this – after all, someone has to pay for all this bandwidth. However, it will come at the expense of some of the neat start-ups that might have been.

Throw in Google checkout and it becomes more apparent how this will take aim at e-commerce, cost-per-sale programs, and payment processing as well.

This has got to be one of the biggest big Internet company deals of all time – not all of the far reaching implications have revealed themselves yet that I’ve only briefly touched on here. I’m sure we’ll be seeing the aftermath of this for years to come.

Great speeches from TED

I’m now a big fan of Tony Robbins simply based on this speech – engaging, funny and inspiring. TED (Technology Entertainment Design) has made many of the talks earlier done earlier this year in Monterey.

Here’s the Tony Robbins Talk and you can get the entire set of speeches here, including Al Gore’s speech and Majora Carter’s speech, referenced by Guy Kawasaki as being as good as Steve Jobs.

Always On recently also released its Stanford Summit online. I’ve heard it wasn’t the overall best conference ever, but the speed at which high-level conferences are reaching the Internet is great (the main conference was presented by live webcast) and you’ll likely find something of interest to you.

Building the next MySpace

There has been a lot of attention lately over “building the next MySpace”, both referring to some website replicating the incredible viral success and reach of MySpace and also whether someone in the social networking space can topple the giant MySpace has become.

For the former, there will be another MySpace – there are always cultural phenomenon and that’s truly part of what makes life so interesting.

For the latter, the short answer is: No. The longer answer:

MySpace has a network effect just like the one that keeps eBay in a dominant position. The switching cost is not necessarily that high, but you have to pass that switching cost for tens of millions of users before it tips towards any other social networking provider.

There are rafts of imitators – MySpace for pets, MySpace for cults (jokingly), MySpace for older people, so on and so forth. There’s just so many that they usually often fall into one of two categories, either there’s certainly a niche to fill there for a specialized enough network or the niche targets are too small to gain any useful traction.

There’s Friendster (although they missed their chance – more on that in a sec), Bebo, TagWorld and many, many more. Without knowing many of the details of each and every one of these networks (I’ll leave that analysis to more qualified Web 2.0 pundits), I’m going to go out on a limb and say that TagWorld is the best chance to topple MySpace.

However, this is going to happen because it has an extremely experienced team – not simply because they are there, but because they seem to recognize an interesting cross section between the MySpace world and the blogging world.

Much has been made out in the press lately about MySpace outages (frustrating to say the least) and overall shoddy architecture and design of the site.

I had an argument about whether MySpace succeeded because of its shoddy design or in spite of it. I think the answer is largely in spite of it – a better design is better, period. Sometimes it’s a matter of opinion – but in the case of MySpace, the metric is whether is helps recruit and activate users. Could a “better” design have helped it? Sure, but it’s hard to tell exactly what that is – it’s success is partially due to the approachable look of the site.

MySpace does need to get its act together with uptime. Regardless of past architectural issues – they’ve now got the resources to fix it or they will suffer the fate of Friendster. Downtime is not all or nothing, which is why I think the reports of MySpace’s demise may be slightly overstated, but continued downtime and slowness will eventually eat away and, left untouched, destroy MySpace.

MySpace succeeded because it got one thing very right – it leveraged music acts with large followings, which became the model for large or small followings to track what their favorite groups, bands or organizations were doing. It was a very natural way to allow people to do what a social network does best – let people see what others are up to, whether it’s a band, old friends or even strangers. Whether that was strictly intentional or just one of their strategies doesn’t matter, this is what made them what they are. This point is well-documented, but it happens to be one that is very, very true.

TagWorld is something of a MySpace clone, but I think what people are missing is that this team knows its technology – it’s built what looks like a great platform. So I see TagWorld as more of a mainstream blogging platform – marrying the simplicity and mainstream features of MySpace with the sophistication of blogging platforms. They have to be careful – the technology has to hide behind an approachable platform – something MySpace also succeeds at.

This marriage of approachability (MySpace has this) and sophistication (MySpace does not have this) could be one thing that TagWorld gets right and pushes it into true success. I don’t know how truly big they’ll get, but this will largely be why. But they will have done one thing right – and that one thing is not “copy MySpace”. “Copy _____” is never the right answer. Microsoft copied, but they got one thing right – opening up the OS to anyone that would buy it.

You can call it curve jumping, paradigm shifting or whatever else, but the key is that it does not have to be so significant to be useful and successful that it’s the first computer, first operating system, first refrigerator or first telephone.

I call it just “getting one thing right”. Sometimes there could be more than one and sometimes it’s not necessarily easy to get that one thing right, but there are rarely more than a few key things you must get right. You can get everything else 80% right and it doesn’t so much matter. But you must get 100% of what matters right.

In my new start-up, I constantly have to remind myself of this fact. I’m inclined to think about what matters most which I think overall is a net positive, but also recognizing the need to overly stress about what doesn’t matter.

Do you know what your one thing is?