Monthly Archives

December 2006

Widgets and business models

By | Advertising, Blogging, Entrepreneurs, Social networks, Venture Capital, Widgets | 11 Comments

Widget 

This is the second post inspired by Fred Wilson’s 2007: The end of the page view.  This one is about widgets, the atomisation of content and the separation of value and revenue.

To take a definition from the Apple Store, widgets are:

mini-applications that let you perform common tasks and provide you with fast access to information

They sit on desk tops, blogs and personal profile pages  – the MyBlogLog rogues gallery on my sidebar is a good example.   

Widgets are starting to become big business.  Ivan Pope of Snipperoo is a leading player in this space and his post on the progress of widgets through 2006 is well worth a read if you are interested in this space.

This is a great development.  It is another step forward in using the web to drive efficiency in our lives.  Giving us quicker, easier and more configurable access to the content we want.  Netvibes can be thought of as a personal efficiency widget company.

It is also part of a larger trend towards the atomisation of content.  Content used to come in aggregated bundles – newspapers, TV channels, now using the internet we pick off individual items and create our own bundles.  RSS feeds are a good example of this with written content.  YouTube is a good example in video.

To repeat, I welcome this development.  But it is resulting in a separation of revenue and value

Aggregated content bundles were consumed by aggregated audiences and advertising and subscription models were relatively straight forward.  In a widget world things are more complicated – the content provider doesn’t control the real estate around the content any more. 

If my blog is viewed in Netvibes then my options are limited to putting ads in my feed, the white space around it belongs to Netvibes.  At least bloggers have that option.  For most widgets – a weather widget would be a good example – there is no advertising option available.  Given that there are lots of weather widgets available for free it is hard to see how the writers of weather widgets can make any money.  The value of the widget is turned into revenue not by the widget owner but by the owners of the sites where the widget is embedded – via advertising or subscription.

Value and revenue are separated.

MyBlogLog is a good case study of this playing out in practice.  Their rogues gallery widget is everywhere, so they have created something of value.  Yet they don’t get any money from the sites where it is embedded.  I haven’t seen the numbers, but I would guess that the number of times their widget is displayed is huge and growing really fast, but that click throughs to their site are much lower.

The challenge for entrepreneurs and VCs is figuring out where the value will lie on exit.  Will ‘widgets served’ numbers become sufficient to drive a big exit? 

Your answer to that question will have a profound impact on your strategy.  If yes then your plans are all about distribution.  If no then you need to focus more on click through rates and time on your own site.

Experience has shown us over the last couple of years that massive value can be generated on exit without proving a revenue model out.  Think Skype and YouTube.  But both of those companies had a clear logic that linked users to potential revenue.  That logical link is missing for widgets and until it arrives my gut says we won’t see a big exit for a pure widget company.  But when the link is found that exit could come round very quickly.  After all, good widgets spread like wildfire.

UPDATE:  On reflection YouTube was at least half a widget company – so they found a model to make this work.

Traffic, measurement and the end of page views

By | Advertising, Entrepreneurs, Social networks, Venture Capital, Web2.0 | One Comment

Fred Wilson wrote a great post about the increasing problems with page views as a metric for websites.  His words have stimulated two post ideas for me.  Next I will write about widgets and the new challenges for VCs investing in web2.0 companies, but today I want to stay on the topic of measurement.

Much has been written about the problems with page views as a measure of the success of a website so I won’t repeat it in detail here, but in summary three developments all pushing in the same direction are making page views a very unreliable metric for measuring and comparing websites:

  • AJAX and Flash interfaces are delivering more content and functionality on some pages with less page views
  • Atomisation of content – e.g. feeds, widgets and customised home pages – is allowing people to read content without visiting the original website
  • Page views on social networks per hour are very high as people flit from profile to profile

So where does this leave us?

I get asked all the time how I analyse growth in sites and services, and unfortunately there is no easy answer. 

Alexa gives a useful ready reckoner abut where a site is and what sort of trajectory it is on, but is a bit volatile and unreliable as a measure.  It is free and very convenient though, so that is the first place I look.  If a site has a high ranking (popular sites have low rankings) then it is unlikely to have much usage.  Google rank is another (very) crude measure that is free and convenient.

Moving beyond that there is a basket of measures that are available and different combinations will be appropriate for different sites.  Page views is certainly one of these measures (no matter how much AJAX or how advanced your widget strategy if your service is popular you should be getting some hits..).  Others include time on the site, number of registered users, number of subscribers, number of times people come back, page views per member and contributions per member.

Figuring out which metrics are important is critical – the key thing is to demonstrate your site is getting used a lot, by the right type of users, and that usage is growing.  If your business model is advertising then volume related metrics are going to be up there, but if you use a lot of flash then you will be looking more at time on the site than page views.  If you are about subscriptions then acquisition costs, subscriber numbers, conversion rates and churn are likely to be your key measures.

My advice would be to figure this stuff out and put it on your site.  Admob do a great job of this – their key metric is ad views (they are a mobile ad network) and they put the number right up there on their front page.  Putting your key metrics in the public domain shows a confidence that is appealing to investors and customers alike.  It also puts you in charge – you decide the metric rather than having to explain why page views isn’t right for you.  Going through this process with sufficient rigour to publish will be a good discipline as well.

If you are a young company (and you have a good story to tell) then this can be your best way of getting noticed.  You can’t do this stuff when you too small though, and judging the point when your numbers and growth go from sounding tiny to sounding exciting in the context of a new market is part of the art of marketing.

Second Life and real products

By | Second Life, Venture Capital, Virtual Worlds | No Comments

Second Life log

As many of you know I love ‘Second Life gets real’ stories.  As part of our 21st century Christmas I was wandering around Second Life yesterday with my dad and I was struck by a few things about the game Tringo.  Tringo is a popular multi-player skill based casual game that was developed within SL.  All the players put some Linden dollars in the pot at the start and the winner takes the lot.  It has been described as a cross between Tetris and bingo.

It is interesting because:

  • The owners of the IP behind the game licence the ‘game unit’ to landowners who then operate casino style areas where people play the game (the game we were at had 20-30 players)
  • Host avatars are present – real avatars driven by real people who are equivalent to hosts/hostesses in real casinos who we believe get paid for their services 
  • It is the first game developed within SL that has then been licensed outside it (now available on the Game Boy Advance)
  • People play it in SL instead of on purpose built sites where the interface could be more efficient

I am on the lookout for SL based product companies and this sort of thing is encouraging evidence.

On the downside signs of scalability problems within SL were clearly visible.  The main scoreboard struggled to keep abreast of events, there were problems starting a new game and avatars were being discouraged from having moving features (like hair that moves in the wind) because they slow the game down for everyone.

Agencies – more English than tea and crumpets?

By | Aggregators, Real estate, Venture Capital, Web2.0 | 2 Comments

What is it with us Brits and agencies?

They are everywhere in this country, much more so than in the US, for example.

I`ve been feeling it most in advertising through our investment in Buy.At, and estate agents have been figuring prominently in my thoughts about the property sector (of which more below and in a later post). Then yesterday I had lunch with an old friend who runs a company that sells candidate assessment tools and he was complaining that recruitment agencies are a problem for him in driving innovation in his sector.

Don’t get me wrong, good agencies can offer tremendous value add, and my friends at Blue Barracuda are a great example of that. Unfortunately, however, not all agencies were created equal, and some can be a real drag on innovation.

The power of the web is that it can offer a lot of the services we typically rely on agents for. Two of the main services – finding stuff and pricing it are really done bettter via the web – that way you can be more sure the search is exhaustive and the benchmarking accurate. 

The other thing an agent does for you is help you figure out what you want. In this area the agency model is conflicted. The service here is really consultancy, yet the payment is typically a percentage of what you buy. So incentive for the agent is to get you to make a purchase quickly, without wasting his time. It is this dimension that can get in the way of innovation.

This is a bit of a rant, but I hope our love of agencies doesn’t hold back our internet sector. For example zillow.com in the US property sector has an innovative model of building a permanent database of properties that the owner can simply mark as for sale when they choose (or can show a `make me move` price). This wouldn’t fly today in the UK because estate agents control 99% of the market, but it has a chance in the US where a much greater proportion of homes are sold direct.

Enterprise2.0 – bringing it back down to earth

By | Enterprise2.0, Innovation, Web2.0 | 2 Comments

Enterprise2.0 

After yesterday’s rather cerebral post these passages might help ground things a bit.

This sentence is probably redundant, but if not it is well overdue.  At the highest level, when I talk about Enterprise 2.0 I am talking about enterprises using of social software, like blogs, wikis and social bookmarks.

These two sentences from the FastForward blog help explain what enterprise 2.0 is all about:

The paradigm-shift from content-focused architectures to user-centric models

Web 2.0 and how its exploding consumer-oriented applications are relevant for the enterprise

Also from FastForward Ten questions companies should be asking themselves about enterprise 2.0

1. How do we find the people in my organisation that get this stuff and get them to trust us enough to help make it work?

2. How do I get my IT guys’ heads around the technologies without scaring them off?

3. How do we balance the possibilities of greater networking capability and openness with the constrictive reporting legislation we are currently subject to?

4. How do I capitalize on the female qualities of this new world and move away from the dominance of male characteristics in the workplace?

5. How can we increase the chances that the behaviours in these new environments will be better than those that have gone before?

6. How can we ensure that we achieve the diversity and engagement required for the wisdom of crowds to operate?

7. How can we ensure that our legacy “knowledge” is accessible enough that this connected world can breathe life into it again?

8. How do we get over the fact that this stuff doesn’t cost much money?

9. How do we attract the right people with the right skills before our competitors do?

10. How can we be honest about the impact on our business to enable it to reinvent itself before current business models collapse?

And Top ten management fears about enterprise 2.0

Technological Barriers

1.  How can I be certain that the information that is gathered and shared behind the firewall stays behind the firewall?

2.  How do I control who has access to particular levels of  information and databases?

3.  How do I protect the integrity of the information from malicious tampering by disgruntled employees or managers?

4.  How can I be sure that information is being “tagged” properly for efficient retrieval later? 

5.  What kind of training do employees need before they can effectively use the technology?

Cultural Barriers

6.  How can I monitor the system to make certain that what individuals are saying and sharing reflects company policy?

7.  What are the legal dangers in saving and sharing so much loosely supervised input?

8.  How do I distinguish “productive” use of the technology from horsing around?

9.  How do I “manage” the gathering and disseminating of so much unstructured information?

10.  How do I know if I’m getting my money’s worth out of the investment in technology?

And finally from Euan Semple‘s personal blog talking about consultants helping companies implement Enterprise2.0 technologies:

In the same way as managers are going to have to move from command and control to the much subtler art of influencing so too those involved in helping organisations from the outside need to be much subtler in their approaches and a million miles away from the learned dependency of traditional consulting.

These passages capture several issues which will be important over the coming year as Enterprise 2.0 starts to break out into the mainstream (assuming it does), many of these I have mentioned before:

  • Enterprises re-organising around people with a culture of true delegation
  • Management struggling with a change from control to co-ordination and as a result resisting enterprise 2.0 technologies
  • Early adopters struggling to demonstrate the value of their new tools (kind of like conferences – hard to prove the value, but you know its there)
  • IT struggling with the lack of certainty that is a feature of this new paradigm

 

Vecosys replaces TechcrunchUK

By | Blogging, Entrepreneurs, Venture Capital, Web2.0 | No Comments

I’m pleased to see that Sam Sethi and Mike Butcher have moved the work they used to do at TechcruchUk to a new home – Vecosys.  (You can view their profiles here – not sure how recent Sam’s photo is though….)

Good work guys, and good luck with it.  We need you out there beating the drum for the UK scene.

Their first post was to report on the funding of Revoo by Eden.  Good deal with a good fund.  Congratulations all round, and to Paul Fisher of FirstCapital for his part in making it happen.

 

 

 

Enterprise 2.0 and emergent behaviour

By | Blogging, Enterprise2.0, Innovation | 3 Comments

Emergence 

The inspiration for this post was Dion Hinchcliffe’s review of enterprise2.0 in 2006.  He cites the blog of Harvard Professor Andrew McAfee who posts a lot of intelligent thoughts about enterprise2.0.  It caught my attention when he said enterprise2.0 is about:

Emergent Structures, Rather than Imposed Ones

This fits well with my notion of enterprise2.0 being about the adoption of new technologies from the edge of the enterprise inwards, replacing the old model of imposition from the centre out.

The notion of “emergent structures” is a complicated and slightly counter intuitive one, yet I am thinking it will be very important in understanding the importance and power of enterprise2.0 apps.  Emergent structures are patterns of intelligent behaviour which emerge bottom up from the independent actions of agents with no central control.  They are common in nature – ant colonies are an oft cited example.  This notion is counter intuitive because it is hard to see how the agents know what to do.  The slightly unsatisfactory answer is that this knowledge somehow forms by natural processes of evolution and the agents somehow learn their role.  I guess you could make an analogy to the roles people play in teams.  If you want to read more try this definition of emergence.

The beauty of this notion is that emergent structures could govern employee’s behaviour, replacing central control with a more dynamic and flexible set of rules, formed and modified at the edge – making your company agile and flexible but without introducing chaos. 

The scary part is for management – the CEO will sit in centre and need to just trust that appropriate structures will emerge – this will require a big leap of faith.

Blogs are a good example of this happening in marketing.  Blogging best practices and codes of conduct have emerged and as a result companies are increasingly trusting their employees to write blogs and tailor their own marketing messages.

I am currently reading Emergence by Stephen Johnson (thanks to JP for putting me on to it) so I may be getting carried away with this stuff, but it seems to me that herein lies the value of social software and its power to facilitate a shift in culture from control to co-ordination.

If any of you have seen examples of new behaviour patterns emerging as the result of social software I’d love to hear about it.  I scoured Andrew McAfee’s blog eagerly and whilst he talks about companies that have adopted social software he doesn’t describe any emergent structures.

Custom development

By | Entrepreneurs, Innovation, Venture Capital | No Comments

I am a fan of using off the shelf sofware for managing internal processes wherever possible. Custom development nearly always comes back to haunt you in the end, tempting as it might be for talented programmers to believe that for them it will be different. Requirements
change, maintenance becomes a chore, and the solution gets brittle. Then the customisations that were so valuable become restrictive.

For example, a couple of years ago one of my companies struggled to improve sales team performance because the customised CRM system made it difficult to get decent pipeline information. We now run Salesforce and things are much better.

This quote from a white paper I’m reading captures what happens when things start to go wrong:

“What happens when short-cut solutions are overlaid on a rigid structure is that the cement sets harder.”

I like that.

Small businesses change all the time as they grow, and that means new processes and constant improvement in execution. Cement is the enemy.

Reviews – how useful are they?

By | Advertising, Amazon, Reviews, Web2.0 | 16 Comments

Review picture 

There has been a lot of talk about reviews recently.  I’m a big fan, the web is a great efficiency tool, but it lacks the personal touch of a (decent) shop keeper and reviews go some way to solving that problem.  That much is clear from the way they increase conversion rates.

There are still some issues that need to be worked through though.

  1. Guy Kawasaki reported that the average score on a review is 4.2.  By and large people only bother to rate and review products they like.  In fact on a five point scale the result is a j-curve.  A few people are pissed off enough to rate a product one.  The twos and threes simply don’t bother, and then the evangelists rate 4s and 5s.  So the numbers don’t tell you much.  Finding ways to get a more even distribution would make the numbers more useful.  Using words instead of numbers could help – e.g. at U-Lik for content rating they use “Hall of shame”, “Dislike”, “Interest”, “Like”, and “Hall of fame”.  The site is French and the translation could improve a little, but you get the idea.
  2. Looking beyond the numbers to the text is fine, but simply seeing millions of reviews listed isn’t very helpful.  It is pretty inefficient trawling through them all.  Finding a way to draw out the intelligence in text reviews would be great – the way Amazon pushes the reviews that people found useful to the top goes some way towards this.
  3. Revenue is not always following value – people research on review sites and then buy where it is cheapest.  This is probably the most important point for start-ups seeking to monetise a review base.
  4. Combining editorial content from experts with user generated reviews would be interesting.  Too many sites seem to be either one thing or the other, but not both.

There are some great companies out there working in this area – and there should be rich pickings for the winners.  Getting the answers right will help us take e-commerce to the next level.  Companies I like that have reviews as an important part of their strategy include Crowdstorm, Trusted Places, Revoo, and TouchLocal.