Monthly Archives

January 2007

An awesome comment showing the power of online community

By | Blogging, Consumer Internet, Social networks | 9 Comments

In yesterday’s post Internet re-organising around people I finished by saying:

I think that people are turning to the web for a sense of identity and community.  Social networks and review sites are providing spaces for self expression and collective opinion formation.  These are basic human needs that used to be served in traditional communities but which are difficult in big cities and commuter towns.

In an awesome comment mspoke wrote:

A great post, really. My comment is mainly regarding your idea of how the internet is changing communities. 

It’s funny as I have recently moved into a new community, which is built in an area of regeneration. The people within this new comunity do not communicate with each other, at all, to the point where heads go down as soon as eye contact is about to be made when leaving the car park.

One thing has finally started to bring people together….the internet. A very simple online forum was set-up by one resident to talk about issues of property maintenence mainly. This has spawned into a place where people are organising social meet-ups, buying/selling unwanted goods and general community banter amongst residents, most of whom have still not met each other face-face. Within 3 weeks the site has over 60 members, which is a high-proportion of total residents. It’s not quite a social network in the myspace sense, but not far from it.

Fantastic.  Aside from the compliment, which is always nice, this is what I love about blogging – it’s one big extended conversation with so many people with great experiences.

But more importantly – what an incredible example of how the internet is moving to the centre of the social fabric

The other comments on the original post were great too.  Thanks guys.

A bit light on original Brisbourne content today, my diary is a nightmare, for which apologies.  Back to form tomorrow.

Internet re-organising around people

By | Consumer Internet, London, Social networks, Venture Capital, WAYN | 9 Comments

Social network graphic

I have written before about the internet re-organisng around people – and I even said a few words on the subject at an Internet People event in London last night.  (Great event btw – in his own inimitable fashion founder Robert Loch is really driving the London internet scene forward with this community – if you haven’t been to an event you have definitely missed out, aside from the fun and frolics Robert has also played an important part in a number of notable consumer internet VC deals, including our own WAYN and now I hear Zubka).

Back to the topic du jour – the internet started as a collection of sites – i.e. it was organised around content.  There is a very clear trend to s re-organisation around people.  There are a number of components of this meta-trend:

  1. Atomisation of content allows people to build their own internet with just the components they want – the old bundles (sites) are deconstructed and re-assembled by individuals.  Personal home pages like Netvibes are a great example of this, as are widgets on blogs and desktops.
  2. Social networks – by Alexa MySpace is now the 6th most visited site in the world and it is a collection of personal pages – again people are the loci of organisation
  3. Personal playlists for music and video – traditional bundles put together by bands (albums) and media companies (TV channels and radio stations) are being torn apart as people head straight for the tracks and shows they want and assemble their own bundles based on what they like (this is a bit like the atomisation of written content covered in point one)
  4. Reviews and recommendations are increasingly important on the web and they put people at the heart of purchasing decisions – the trend here is to include more information about the reviewer/recommender (more of this in a later post)

I guess what I am describing here is partly the general shift from mass production to mass personalisation playing out in media, but that doesn’t do it full justice.  There is something bigger going on as well.  I think that people are turning to the web for a sense of identity and community.  Social networks and review sites are providing spaces for self expression and collective opinion formation.  These are basic human needs that used to be served in traditional communities but which are difficult in big cities and commuter towns.  Or is that just the sociologist in me?

YouTube’s three second pre-roll and some thoughts about monetisation

By | Consumer Internet, Exits, Google, MySpace, Social networks, Venture Capital, Video | No Comments

YouTube is starting to get serious about monetisation.  As reported by Fred Wilson and the BBC they will be doing things like adding 3s pre-roll ads to videos and and using audo fingerprinting to prevent copyright theft.  Getting clean(er) from a copyright point of view is an essential pre-cursor to making money – if there is cash to go after and you are using stuff you don’t have the right to use you will get sued.  This explains the spate of deals YouTube did with content owners around the time of the Google acquisition.

They are also planning rev share deals for the people who upload the content – or at least those of them that own all the copyright (which is where the audio fingerprinting comes in).

There is a link to a good interview with Chad Hurley on Fred’s post and the BBC post has quite a lot of detail about what the plans might be.

For me it is great to see that they are getting serious about monetisation.  VCs have re-written the rulebook with many consumer internet investments over the last couple of years – and there have been some great successes – Skype and YouTube standing out as the biggest.  The awesome thing about those two companies is that they got from start-up to well over $1bn realised value in under two years and under one year respectively.  That is value creation at a pace we have never seen before.

It is the pace of value creation that has changed the rules of the game for investors.  There are two contributing factors here – the speed at which huge user bases can be built and the willingness of companies like Google, Ebay and News Corporation to place a large value on businesses that have huge user bases but have yet to prove they can monetise.

The Skype and YouTube deals were great news for the consumer internet ecosystem – VCs and entrepreneurs alike – but as an industry we are all about building big successful businesses and monetisation has got to be the most important part of that.  Big exits are fantastic, but at the end of the day they are a sideshow to the main act of building great companies.

The success of MySpace in monetising it’s user base after the News Corp acquisition has been great to see.  I have heard estimates for 2006 revenues of $280m and the $900m deal with Google bodes well (if anyone has seen a good write up I’d love to know).  Now hopefully YouTube will go on to do as well or better.

ebay is not doing so well with it’s Skype acquisition, so in a way it is even more important that YouTube justifies it’s price tag (or somewhere near it).  They will face some challenges – selling new advertising formats is always tough and it will be interesting to see how a 3s pre-roll goes down – but they have a great track record so far and hopefully we will soon start to hear some big numbers for 2007 YouTube revenues.

If not we may be re-writing the rules again.

HMV is one of the most shorted stocks in history

By | Business models, Music | 6 Comments

I wrote about the decline of record shops last week in The long tail theory is playing out well for music lovers and today the Sunday Times reported in HMV is ‘going to the dogs’ that

HMV, the high-street music retailer, has become one of the most “shorted” UK stocks of all time.   Almost 24% of HMV’s stock is now being borrowed as traders stake nearly £130m on the chance that its share price is about to fall.

HMV is a leading UK CD and DVD retailer.

Getting a consumer internet service to critical mass – some more thoughts

By | Business models, Consumer Internet, MySpace, Social networks, WAYN | 4 Comments

The following definition of a viral internet service is from Nisan of StartUp Review, but posted on Mashable:

A viral Internet service is one where each new user must involve friends to derive personal value from the service. This is best exhibited by communication and hyper-social services.

He gives Skype and Xfire (an IM service for gamers) as examples.  To get value out of either of those services the user must ensure that their friends have also downloaded the client.  Not just been told about the service, but actually downloaded the client.

As Nisan also points out:

the majority of consumer Internet sites don’t lend themselves to viral distribution ….. the user does not need to tell friends about the service to derive their own personal value from it ….. This is the same problem that I believe many new vertical search engines suffer from.

His solution for services that aren’t inherently viral is to leverage natural search.  Build up the inbound links so you rank highly in the organic listings and then you will hopefully get into a virtuous circle of good postion, more traffic, more links, better position etc.  Wikipedia is perhaps the best example of this in operation, although Digg did it much more quickly.

These are all very wise words.  The definition of viral is particularly helpful – it is a term that is much overused in business plans (almost as much as “social networking features”).

In a vain effort to add some value to Nisan’s thoughts I would add that the notion of marketing a service to critical mass is also important.

With social networks that has meant finding creative ways to have enough users on the site that the experience is meaningful for new arrivals.  I have heard rumours that MySpace paid ‘nice looking ladies’ tens of thousands of dollars to bring their thousands of online friends to their site in the early days.  Similarly as I have reported before WAYN used CPA advertising to get the initial critical mass of members and Bebo leveraged its common heritage with BirthdayAlarm to similar effect.

Distribution partners are also an important part of the mix – Indeed Nisan himself has written before about the importance of distribution partners for MySpace and Skype.

 

Consumer internet – the changing nature of the game – part II

By | Consumer Internet, Entrepreneurs, Venture Capital, Web2.0 | No Comments

Man carrying dollar sign 

This is a follow to my first post on this subject last week.

In that post I predicted that building web2.0 companies will start to become a more expensive business – driven by increased marketing and development spend. 

In this follow up post I will look at what that might mean for the way companies are built and how VCs think about investing in this space.

It might be tough to follow this post if you haven’t read the first one. 

If companies are spending more on marketing then it becomes more important that the product is right when the campaign dollars start flowing.  There will always be a trade off between waiting for the perfect product and wanting to get to market early, but when you are spending more on marketing the balance shifts more towards wanting to get the product right.  You are less likely to waste your advertising dollars that way, and there is always the feeling that your first shot is your best chance.

Getting it right probably means having high quality product design people on your team.  At the moment the dominant approach is ‘experiment and iterate’ – but if you need to open the cheque book before you can get traffic you will want someone who can get it right without iterating.

Another change is that distribution deals will become more important.  For example getting bundled Firefox could make a company.  Spending time and money on business development execs is an alternative to Adwords campaigns or offline PR.

For VCs things will change as well.  At the moment the general view is that consumer internet start-ups should be able to launch and get some good traffic before they need the sort of money we provide.  That has given us the luxury of being able to let consumers pass judgement on whether a product is great or not before we write a cheque (but it has also allowed many start-ups to get by without raising money from us at all).

If money is required before meaningful traffic can be generated we will have to find new ways of picking the best from the rest.  That will mean looking in more detail at the product and market.  We will also take confidence from having people on the team who have been there and done it before in this space – second time entrepreneurs, if you will.  The good news is that there are more and more of you out there.

All of which makes the financing and building of consumer internet businesses start to sound more like the building and financing of traditional software businesses.

That is the direction in which the world is moving, I’m sure of it.  The fact that it gets cheaper every day to launch a service will only increase the number of companies and make it more difficult to get heard above the noise.

Now major labels are thinking about DRM free MP3 sales

By | Content, Copyright, Music | 6 Comments

This is going further and faster than I thought, driven by fears that illegal file sharing is starting to hit the growth of digital music sales.

This is from the International Herald Tribune.

Executives of several technology companies meeting here at Midem, the annual global trade fair for the music industry, said this weekend that a move toward the sale of unrestricted digital files in the MP3 format from at least one of the four major record companies could come within months.

Thanks to Fred Wilson for the lead on this (but Fred, the NYT article you pointed to was DRM blocked).

The commercial logic for legal DRM free access to content on the web

By | Content, Music, MySpace, PCTV, Video | No Comments

Ebooks 

In a comment on yesterday’s post Indie labels to sell music on MySpace mspoke reminded me that a large and increasing proportion of music artist’s revenues come from live performances and merchandise (I have posted before in Experiences not products). 

As per the MySpace post indie labels will be selling unprotected MP3s on MySpace.  The hope will be that removing DRM stimulates more MP3 sales, but even if it doesn’t and instead there is rampant copying, bands and labels will know that simply reaching more fans will drive sales of t-shirts and concert tickets.

There are signs of something similar happening in the world of books.  James Boyle has written a long post on the FT blog about this.  (Ironically this is the first unprotected FT article I have been able to link to.)  He lists quite a few examples of authors and publishers making entire books available on the web for free under a Creative Commons license (under a Creative Commons license you are free to copy, print and share books without commercial purpose).

For example Yochai Benkler offers you the choice of paying 323.75 for his book about the networked economy The Wealth of Nations or of downloading it for free (I wonder how many people have downloaded it by accident, I just did).

James describes the commercial logic thus:

  • People hate reading a book on screen [or presumably on A4 printouts] but like finding out if it is worth buying – so allowing sampling should increase sales overall
  • Professional authors also make money from options on film production, commissions from magazine articles, consulting, teaching and speaker fees – all of these are aided by wider exposure
  • Digital distribution is almost free – the cost is limited to the gamble over lost sales

In the words of Boing Boing editor and science fiction writer Cory Doctorow this approach makes sense for authors “whose biggest fear is obscurity not illegal copying”.

Adopting this model makes sense then for up and coming authors, but not for established ones.

This also applies to musicians.  Mega stars have all the exposure they can handle and sell out their gigs in minutes, so there is little marginal benefit to them in a few extra fans having a copy of their music.  They will be better off with one extra CD sale.

Wrapping this up, I guess what we are starting to see is the long tail of music artists and authors eschewing DRM in the hope that sales will increase as and the belief that wider exposure will bring other benefits – probably including a faster rise to star status.

Turning to video, I don’t know if the same logic can apply.  I’m not sure if there are any meaningful revenue streams for long tail film producers beyond cash at point of consumption (via pay per view or advertising).

Indie labels to sell music on MySpace

By | Business models, Consumer Internet, MySpace, PCTV, Social networks, TV, Venice Project | 19 Comments

Myspace records 

This deal has been reported on in detail on GigaOM and by Jason Ball, but in summary MySpace has cut a deal with a group of independent music labels and legal peer to peer download service Snocap to sell DRM free MP3s.  A neat feature of the deal is that individual users can put a line of code on their page to sell music from their favourite band.  It looks like MySpace, Snocap and of course the labels share the revenue, nothing for the user.

The music will be unprotected MP3s.

That is either very far-sighted or very stupid.  The major labels will think the latter and avoid this like the plague in the fear that rampant copying and piracy will hit sales.  They might be right, but they just might be wrong.  The other way this could play out is that untethering legal downloads from annoying DRM restrictions might send sales through the roof.  I would like to believe this will be the case, but I really don’t know.  One thing is for sure – it is great that the indy labels have the guts to experiment like this.  We will all be the richer for it.

In the past music hasn’t been protected by DRM, and people have always been free to make copies and give them to their friends.  Things never got out of control because burning CDs and making tapes is a bit of a hassle.  Digital music is much easier though – music files can be emailed around, or shared using networks like Allpeers.

For this to work, over the medium to long term artists and labels need to make a living – if there is too much copying then they will stop selling unprotected files and we will be back where we are today.

This experiment will be closely watched by Hollywood and other video content owners.  If unprotected distribution works for music then it should also work for film.

Also interesting is the peer to peer delivery infrastructure.  With Joost and others adopting the same model for delivery of broadband TV peer to peer is starting to emerge as the dominant architecture.

Finally – this news nicely follows my post last Friday: The Long Tail theory is playing out well for music lovers.  I was responding to suggestions that niche music producers were getting squashed by the death of the record shop with the point that these labels and artists aren’t dying, they are simply using new distribution channels on the web.  Then two days later Myspace make this announcement.  If only some of my football predictions (and bets) were as prescient….

Widgets – some straight talking

By | Blogging, Consumer Internet, MySpace, Social networks, Widgets | 14 Comments

I’ve been thinking a lot about widgets recently and the recent Valleywag and Fred Wilson posts made me want to get my thoughts down in writing.  I started with the hype but I think there is something important going on here, so don’t give up in disgust if the Valleywag stuff offends you.

In his Valleywag post Nick Denton lets off a bit of steam because he thinks widgets are over-hyped.  True enough.  As he points out the definition of widget is:

A small device, esp. one whose name is not known or cannot be recalled.

Yet there are businesses out there trying to hit the big time with plans to do nothing more than provide widgets for MySpace, and Newsweek has asked if 2007 will be The Year of the Widget?

All of this despite the fact that business models for widget companies are unclear at best.  I have got to agree that right now, widgets are over-hyped.

On the other hand, as Fred points out:

You can’t build a business on widgets alone. But if you have a business; YouTube, Flickr, Delicious, MyBlogLog, Digg, etc, etc, you can get distribution on other’s pages with widgets. It’s a content and brand distribution strategy.

I think this cuts to the heart of the matter – widgets are a very important part of the online mix because they are a great, possibly the best, form of distribution, and as I’ve written before distribution is everything

Where does this leave me?

I am a big fan of widgets – I love being able to see who has been on my site via MyBlogLog – but you can have too much of a good thing.  Slow page load times suck and sites that are too cluttered don’t appeal.

I also don’t think that you can have pure play widget business.  The lack of business model is the killer here.  I have posted on this before in Widgets and business models – where the conclusion (which came via the comments) was that rotating adverts in and out was the only business model we could see.  On reflection I think that will be hard too – it will slow sites down even more, and will alienate site owners who might not be prepared to put your widget on their page if you are making ad dollars from it (and the revenue share will be too small to go down that route).

There might be space for widget platform companies though.  Ivan Pope’s Snipperoo is doing this in the UK – their play takes the hassle out of using widgets by displaying them through a Snipperoo meta-widget, and there are others.

Taking this further, as Ivan pointed out in Widget Predictions – we may even see widgets becoming building blocks for sites – as snap together content units – either for personal home page units (like Netvibes, but more flexible) or for blogs and social networks.  This is a logical next step in the progressive atomisation of content.

This leaves me very interested in widgets – but not in pure play widget companies.  The interesting companies will those that facilitate the use of widgets (like Snipperoo) or use the growth in widgets to do something new.