Monthly Archives

April 2007

Google’s double click acquisition – good vs MSFT

By | Advertising, Google, Microsoft | No Comments

Double Click       Google whacking

I have been thinking about what Google’s acquisition of DoubleClick means for the online ad industry and I am coming to the conclusion that the only real answer is that it makes life tougher still for Microsoft.

Over on Technofile Europe Max blogged about this acquisition under the title The banner is back!.  I’m not so sure that this move by Google is the sign of a big change in the balance of power between search and display in the online advertising world.  As I have blogged before the big above the line advertisers haven’t moved much of their budgets onto the web yet, but I don’t see them suddenly piling into banner advertising now – they haven’t so far and I’m not sure video banners will make enough of a difference, once the novelty has worn off.  My fear with banners is that people train their eyes to look at the parts of the site that give them the content they want and simply don’t see the other parts.

Rather than banner ads, the brand owners seem to be more focused on experimenting with advertising on social networks via profile pages and building presence in places like Second Life, and maybe Habbo Hotel.

You can see the logic for Google though.  Display is a very large part of the online ad market and Doubleclick will significantly increase their presence there.  There should be clear customer synergies too.  After all that good stuff, I  suspect that locking Microsoft out of the market might have been the clincher, particularly when it comes to price (which at an estimated 10x revenues was huge).

The lock out logic might also have been in play when Google acquired YouTube.

That said, Google is turning into a behemoth which has a great search product and lots of other pieces.  It seems to me that they have some work to do to avoid their own peanut butter memo in 3-4 years time.

Raising money from VCs – some insights

By | Blogging, Entrepreneurs, Venture Capital | 4 Comments

Venture Capital 

Today I came across the Onstartups blog (via the web2.0 entrepreneurs group on Facebook).  Great blog, and when I come across a jewel like this it always makes me wonder how many more are out there.

There are loads of great posts (I have spent well over an hour reading the blog) and I’m going to borrow extensively from 9 Pithy Insights On Venture Capital in this post.  One of my goals in writing this blog is to increase understanding of how venture capital works, but one way or another that is something I haven’t done as much of as I would have liked or expected.  Hopefully these points will help re-dress the balance:

Pithy Insights On Venture Capital1.  Remember that VCs have a diversified portfolio of investments and can spread their risk.  You can’t.  Don’t try to compensate by pursuing a bunch of different ideas simultaneously with the hopes of diversifying your risk.  It doesn’t work that way.

2.  VCs negotiate term sheets and financing deals for a living.  You don’t.  Accept this imbalance early and find great advisors and counsel.  VC negotiation, even in early-stage deals is highly nuanced and reasonably complex.  

3.  Partners at VC firms have one big constraint, and it’s usually not capital, it’s time.  The time it takes to find new deals, explore them and continue to oversee their existing portfolio companies.  Understand where the partner is in terms of their deal flow.  If they have already closed a couple of deals this year, it will impact your chances of getting funding from that partner.  This is not a reflection on you or your idea, but is often purely a function of timing.

4.  Remember that you are being measured on a relative scale.  It’s not good enough that you have a great idea and team, it has to be *better* than the other opportunities a VC is considering.  If you’re talking to a top-tier, successful firm, they’re seeing a lot of great ideas and teams.  Most partners in venture firms will do only a few new investments a year, regardless of how many “great idea and great team” opportunities they see.

5.  You raise money from a VC firm, but you work with a specific partner.  Know your partner.  This is the individual that will either bring immense value to your startup or make your life miserable (or both).  Next to your choice of co-founders, this will likely be one of the most significant people decisions you will make.  Don’t take it lightly. 

6..  Transparency is crucial.  Don’t try to hide facts about the startup you know are important.  They will come out eventually, and later is rarely better for you.  From a VC’s perspective, the act of hiding unpleasant facts is in many cases a worse signal than the fact itself.  It goes to the integrity and behavior of the founders.  

7.  Time is usually working against you.  You’re better off getting a deal done quickly (as long as it’s reasonable) than dragging things out for the best possible deal.  If you’re looking to raise money, focus on the critical factors and get a deal done.  You are generally better off getting a fair deal done quickly and efficiently vs. seeking the “optimal” deal.  

8. Between the time initial terms are agreed to and when money shows up in your bank, a lot of things can go wrong.  Plan accordingly.  No deal is “done” until the money is in the bank.

9. Never underestimate the intelligence of a general partner at a successful VC firm.  It is a highly competitive industry and though impacted by a “who you know” phenomenon, they don’t suffer fools for very long.  Chances are very high that a partner at a VC firm is highly intelligent.  They have to be.  It’s a tough business.  If you think the VC you are talking to is stupid, you’re talking to the wrong person or the wrong firm (or both).

Bonus Insight (and my favorite one):  Remember that VCs are looking to optimize their “risk/reward” ratio.  As such, it is often to their advantage to get a “costless option” on an investment opportunity.  Said differently, let’s assume they sort of like you and your company.  The deal terms they need to give you today (i.e. the “price”) may not be that different than the deal-terms they’d have to give you 4-6 months from now.  During that time, the risk in your opportunity gets disproportionately lower compared to the “higher price” they’d have to pay later.  The only reason for them to do the deal now is if there is competition for your deal and they may miss out on the opportunity (i.e., a “costless option” is not available).  If, on the other hand, there is no competition, they’re often better off waiting.  If they’ve maintained a good relationship with you in the early days, chances are you’re going to go back to them in a few months anyway (once the business is further along).  Effectively, what they have is an “option to invest later” which didn’t really cost them anything.  At that point, they will have much better insight into you and your idea (and how you deal with the inevitable fact that the business you thought you were building is likely not what you end up building anyways).  All of this is a long-winded way of saying:  “The word maybe is one of the most powerful tools in the VC tool-chest”.

These are all great points.

Another resource worth checking out is Smarter Ventures by Katherine Campbell.  It is getting a little old now but gives a great peek inside the mind of the VC.

Other VC blogs are also worth checking out – Fred has written some interesting posts on this topic recently.

I am serious about improving transparency into the VC process.  If there are things you would like me to write about, let me know.

I wouldn’t want to be an Apple exec right now….

By | Music | 6 Comments

iPhone and Jobs 

There was an interesting Sunday Times article yesterday about the new iPhone yesterday that got me thinking that maybe for Apple the only way is down.

I say that despite the fact that last week they passed the 100m mark in iPod sales and that they have gone from $5bn revenues in 2001 to a forecast £23bn this year (half of that will be from iPods).

To me the music player business is not an attractive one, the hardware is a commodity and my bet would be that Apple will struggle to sustain their dominance over the next couple of years.  We have seen this play out on the PC and if anything it should happen faster with MP3 players.  At the high end Apple faces competition from Samsung, Zen and other Asia Pac manufacturers and at the low end people will increasingly use their mobile phones as music players (conveniently subsidised by mobile operators).  Last week’s announcement that the Leopard release of MacOS will be delayed by four months because the company is focusing on the iPhone is a recognition of the threat from this quarter.

I think that iTunes is a bit of a sideshow to the main game of device sales, but in that area too Apple faces its challenges. These come from Nokia post the LoudEye acquisition, from Microsoft and in the courts from various European governments who take offence to the tight coupling between iTunes and iPods.

So if I was an Apple exec I would be thinking life will be tough going forward and the point of comparison is an out of this world performance over the last five years.  Apple has a fantastic (and I mean fantastic) brand and top spot is theirs to lose, but great history and tough future is not a great combination for people working at Apple.

(Disclosure:  I am not an Apple man.  My dirty little secret is that I have PC religion – I hate getting locked in to closed platforms.)

Now you can get The Equity Kicker via audio

By | Blogging | 2 Comments

Connect Me Anywhere audio blog 

A big thanks to Ryan Gallagher of ConnectMeAnywhere who has set up audio access to this blog.  All you have to do is dial 020 7099 1082 and a text to speech engine will play my feed for you.

You can navigate using the keypad on your phone in two ways,

  • through the blog, choosing which posts you want to listen to,
  • and once in a post using # to fast forward, * to rewind, 8 to stop, 0 to pause (and again to restart)


Let me know if you use, it like it, or even think the idea sucks.  I can always benefit from understanding how people use and read my blog.

I think the text to speech engine could be better (and I know they are working on that) but this could be a neat idea.

Musings on mobile advertising and targeting of ads

By | Advertising, Entrepreneurs, Mobile, Venture Capital | 3 Comments

This post was stimulated by Alan Patrick’s Mobile Advertising…….Immobile industry?  In turn, he was responding to a piece by Damian Green on the Telco 2.0 blog.

The first half of his post lists a number of reasons why “mobile advertising will prove to be a sideshow to the main event”.  When I read the list of reasons (and I will summarise in a sec.) I see them as reasons why the sector will be slow to develop rather than reasons why mobile advertising will remain small forever.  From an entrepreneur/VC perspective this makes the question one of market timing rather than market size, and the rapid growth of Admob and Screentonic tell me the market is happening now.  That said these are valid points and will impact the development of the market.

Damians reasons for thinking that mobile advertising will remain a sideshow are (and this is my possibly over concise summary):

  • Mobile is complicated – multiple devices, networks techonologies, network policies – this will make it expensive to produce mobile ads thus shrinking the market – this is true for now, but will become progressively less so over time
  • Advertisers don’t understand mobile and the channel may not prove effective – again fair comment today, but there is enough experimentation going on at the moment to convince me that someone will work it out

The second half of the post goes on to say that mobile operators could leverage their knowledge of consumers where consumers surf and their position of trust to serve highly targeted ads.  This turns the internet model on it’s head, as the service provider chooses the ads, instead of the site owner.

This is a powerful idea, but not necessarily a new one.  I remember having conversations on this theme with respect to the wired web seven or eight years ago, yet it hasn’t happened (yet).  The difficulties on mobile will be the same as they are on the web:

  • Practical difficulties with the service – a user will need to be able to edit his profile – so he can avoid a situation whereby, for example, the operator serves an ad for a holiday in the Carribean when his wife is looking at the phone, thereby ruining his surprise holiday.  Or a gambling advert revealing he hasn’t really stopped betting on the footie, or whatever it might be.  To make matters more complicated the profile should consist of clickstream data plus other factors like age, income bracket, hobbies etc. which the user needs to be encouraged to enter and maintain.
  • Value chain complications – for this to work site owners will need to switch their ad serving partner from e.g. an Admob to the mobile operator – and unless all the operators start doing this at the same time a site owner will suddenly be trying to use e.g. Screentonic for three quarters of its traffic and e.g. Vodafone for the other quarter.  Further, given that mobile operators are also portal operators the notion of trusting the advertising on a mobile site to a company that operates a rival site might prove difficult for many.
  • Chicken and egg – the difficulty with starting any advertising business is that it is hard to get inventory until you have advertisers and vice versa.  This problem will be particularly acute in this model as the inventory will be restricted to a fraction of the traffic on any given site (although I suppose traffic on the operator’s own portal will all be available).

And that is without mentioning the difficulty of working with operators!!!

Now Channel 4 joins the mobile advertising party

By | Advertising, Mobile | No Comments

Mobile advertising 2

NMA reported today that Channel 4 is in talks to sell banner ads on two operator portals here in the UK – believed to be O2 and T-Mobile.  They are apparently hiring a dedicated team to handle mobile advertising focusing on both on-deck and off-deck inventory.

They are joining a party that is already pretty crowded.  When Nokia launched it’s mobile ad network at the beginning of March I blogged in a bit of detail about how crowded the space was getting – and it just got worse.

With (nearly) all things mobile the problem for entrepreneurs and VCs alike is that the opportunities are too obvious, and as a result too many companies go after them too soon.  Unless there is a deep tech angle or some other source of competitive advantage it is generally hard to see how this will generate good returns for shareholders.

Screentonic and Admob secured an early mover advantage in mobile banner advertising and hopefully their scale will allow them to continue to dominate this market.

“Data on viewing habits during TV ad breaks to be released” – how kind!

By | Advertising, TV | 4 Comments

Fresh back from holiday this morning and full of the joys of spring following a great Chelsea victory last night my day started well when I read in the FT this morning that (as usual no link due to DRM restrictions):

“The US television industry is preparing for a big shift in its relationship with advertisers as it allows them to see for the first time whether viewers are actually watching the commercials on which $70bn is spent annually”

Phenomenal.  Fancy not providing your customers with the data they need to assess the quality of your product. 

This shows just how far the TV ad world has got to go to catch up with the service that internet companies provide to their advertisers.  It seems the TV companies have had it too good for too long.

Trackability and transparency are central to all forms of internet advertising, and over half of online ad budgets (in the UK at least) are only paid out if there is some action from a consumer that shows she has read the ad and is interested in it.  That action is typically a click through on the ad, but is increasingly often a purchase on the advertiser’s website.  These qualities help explain why the internet advertising sector is growing so fast and will continue to grow into the future.

It is great news for all of us who are active in this sector that the traditional TV world isn’t responding well to the threat that the internet poses to its advertising budgets.

I suspect that the reason for the slow response is a fear that the data on whether viewers are actually watching ads (instead of, for example, fast forwarding through them) will bring more bad news than good TV companies.  Advertisers are now demanding this data and if I am right when they get it they may increase the rate at which they are moving their budgets onto the internet.

EMI go DRM free

By | Business models, Content, Copyright, Music | 2 Comments

mspoke, who is a regular commenter on this blog, yesterday posted this as a comment to my “going on holiday” post:


How can you go away when EMI announce they will be offering DRM-free music from May. Maybe people will respond to this comment.

What I don’t get about the EMI announcement is that people will have to pay a premium (99p for DRM-free as opposed to 79p for DRM tracks) for DRM-free tracks. Talk about trying to confuse the consumer. It such a half-a**** effort in my opinion. What do others think?

Good call, and thanks for the comment.  Up here in the Alps I had missed the news, but this is a significant development in the online music industry as it grapples with copyright issues. 

I am posting it here so it gets the attention it deserves – about three quarters of you access this blog via a feed reader and I suspect don’t regularly read the comments.

I see it a little differently to mspoke though.  I think it is a positive step in the right direction for EMI to offer DRM free music, and giving the consumer an option to pay less for a track that they in effect don’t fully own doesn’t alter that.  In fact, we will now see for the first time what sort of value the market places on the extra benefit of having tracks DRM free.

That said, the devil is always in the detail with things like this and the way EMI present the options will be critical.


By | Blogging | 2 Comments

I am taking my family of small children to the Swiss Alps tomorrow (St Morritz if any of you will be there).  Not sure how much boarding I will get in but it should be a relaxing ten days or so.  A lot of the extended family are joining us.

Anyway – you probably won’t hear much from me until April 11th.

Online advertising in the Sunday Times

By | Advertising, IPTV, TV, Video | 2 Comments

There is a feature in today’s Sunday Times about online advertising and it echoed many of the themes I have been talking about on this blog over the last few months.  I hope it wasn’t an April Fools Day article….

  • First off they cite Nigel Morris CEO of Isobar a network of digital marketing agencies that is part of Aegis.  (Aegis is a fantastic business, and Isobar is the name of the network rather than a true brand in itself – but for a digital agency there site is really hard to find, and once you are there, your only option is to watch a video, minimum length three mins – to me that is two things they have done badly.)  But Nigel makes a good point I have made before – that scheduled TV channels just don’t work for the next generation of consumers.
  • They cite PWC data which says that the internet has a 27% share of media time – in my post last week I said “at least 30%” – I am pretty sure I saw that number from a reputable source a year or two ago, but I can’t find it again now.  The message remains the same though – media consumption online is way ahead of media spend online (which the Sunday Times has at 11%).
  • At £870m Google “makes more from UK advertisers than either Channel Four, Sky or Five”
  • There is “huge more upside” – “lots of brands have yet to go through the learning process [of moving ad budgets online]”
  • Banner ads have a questionable impact – Claire Enders of media reseach firm Enders Analysis writes “there’s very little emotional response to online display”
  • She also said that Yahoo, MSN, AOL and others have been struggling to make pre-rolls work – user don’t like them

One thing that surprised me was Glen Drury of Yahoo UK saying that behavioural targeting produces a 56% uplift in response rates.  Great if that is what they are seeing across the board.  The rumours I have heard would put the number much lower.