Monthly Archives

August 2007

Characteristics of ‘lucky’ winners

By | Entrepreneurs, Venture Capital | No Comments

This is more from Taleb’s Fooled by Randomness – which I am still enjoying very much.

Taleb is mostly talking about traders in publicly listed highly liquid securities, but much of what he says has relevance to venture capital (which after all is trading of a sort – albeit with long time horizons and the ability to work with the investment to improve your outcome).

With these characteristics Taleb seeks to expose traders who doesn’t understand that a currently successful strategy won’t necessarily hold going forward.  I.e. their world view doesn’t allow for the fact that things change.  I think they are useful for us as investors and entrepreneurs to check that we are not ‘being fooled by randomness’ – i.e. that we haven’t developed any such blind spots.  Success is a seductive partner and can blind us to many things.
The characteristics:

  • An overestimation of the accuracy of their beliefs in some measure – in VC this crops up when applying successful models to new markets – e.g. software as a service, open source, term licensing, I could go on
  • A tendency to get married to positions – beware of the person who does this – and don’t become him!
  • A tendency to change their story (their reason for believing the investment is a good one) – a classic bad sign this, and one that crops up frequently
  • No precise plan ahead of time as to what to do in the event of losses – if you don’t have such a plan then you are probably not adequately considering all the potential outcomes
  • Denial – a failure to understand that things have changed, or will never develop as expected.  In VC this probably most often happens in the relation to the opening up of new markets

TV is moving to the web at pace

By | PCTV, TV, Video | 2 Comments

Check out the numbers in this excerpt from a Commentisfree report on the Edinburgh television festival last weekend.

On the eve of the festival, with consummate timing, Ofcom released its Communications Market Report – a study that reads like a pre-recorded obituary of the television industry. In 338 pages of close-set type, Ofcom lays out how much, and how quickly, the media is changing. Every day, it reports, 542 hours of video are uploaded to YouTube, equivalent to 22 television channels broadcasting continuously. In addition, 3.74 million photographs are uploaded to Flickr, and 1,845 new articles are added to Wikipedia – equal to about 22 UK broadsheets’ worth.

In the words of Bob Dylan Times, they are a’changing

‘Groups’ an important concept in enterprise2.0

By | Enterprise2.0 | 20 Comments

When I think about enterprise2.0 I think lightweight collaboration.  For a while now I have been thinking that easy to use shared work spaces like Huddle and Basecamp is the main component.  Recently I have started to think that micro-blogging is also important (status updates to Huddle anyone?).

Today I am thinking ‘Groups’ is an equally important concept.

The thought comes from Clay Shirky, FOUR WHOLE YEARS AGO in this piece (thanks to JP for the tipoff in Social Software is Political Science in Executable Form – with a title like that I was always going to read it).

Collaboration happens in groups.  Without groups there is no collaboration – they are as fundamental as that.  As well as being important they are far from simple.  As Clay points out they have goals, membership processes and rules that govern behaviour.

As an example from venture capital, we form groups to execute deals.  They are small, limited time, single purpose groups formed to manage deal execution through to completion.  Membership is by invitation only and mandatory for those invited.  Membership processes and rules are rarely defined explicitly, but come from the roles of the different participants – investor, lawyer, advisor, investee, supplier, client etc.  Unfortunately there is no easy online tool that we use (there are tools I have tried to use, but that is a different story…).

There are of course many different types of group.  Others are much larger, have more permanence and more fluid rules and purposes.

Finally, they exist in many different places – Facebook, mailing lists, project management software, collaboration tools, etc. etc.

A lot of complexity!

And a pressing need for tools to manage it :).  In a simple, lightweight, non-proscriptive fashion of course.  Which won’t be easy – but there is a lot of value there for the company that gets it right.

More musings on the effectiveness and necessity of ads

By | Advertising, Business models, Consumer Internet, Content | 14 Comments

Two commenters on my post yesterday Blocking ads is taking a free ride show the passion this issue evokes. It seems people really don’t like ads – or at least the digerati doesn’t.

There were a couple of points – the first from Tom Raftery making the point that a lot of sites are available via RSS feeds, so unless the ads are in the feed then people won’t see them. And worse, it is pretty easy to switch off a feed so the content had better be pretty compelling to make it worthwhile putting up with the ads.

All very true Tom – in particular I agree that in-feed advertising will become more important..

A couple of thoughts in response:

  1. I’m guessing that a lot of the sites you read are blogs, and they are written by people who are not looking to monetise their content directly. I’m a prime example – I write this blog because it helps me be a better VC, not to make money directly. This is a different case to companies whose business model is to build a web service that people want to use. If they are not making money from their site they are probably in a world of trouble. Typically these sites don’t make their content available via a feed precisely because it is then difficult to monetise. Newspaper sites are a good example.
  2. Content needs to be compelling enough that people are happy to put up with the ads. If it isn’t then it almost certainly isn’t good enough to build a business on. Particularly given we are pretty adept at not seeing the ads – see below.

Then Alan made a couple of points around the idea that ads don’t work. He cited Jakob Nielsen’s eye tracker studies which have shown people barely see the ads. These heatmaps show where people’s eyes linger on the page (they make compelling viewing):

Heatmaps from eyetracking studies: The areas where users looked the most are colored red; the yellow areas indicate fewer views, followed by the least-viewed blue areas. Gray areas didn’t attract any fixations. Green boxes were drawn on top of the images after the study to highlight the advertisements.

This is undoubtedly an issue for advertisers and they need to find formats that work. I would regard this as a problem for the advertiser and the publisher though, not the consumer. If we barely see the ads then why do they irritate us so much?

IMHO we need to let publishers and advertisers experiment to find formats that work and that consumers are prepared to put up with in return for free content and services. Otherwise we will either have to pay for the services directly or they will disappear.

To my mind it is as simple as that. Notions of fairness and irritation are secondary considerations. At some point, maybe not in the too distant future, companies will lose the land grab mentality and close down services that they don’t believe can generate cash for them. This is business after all.

Blocking ads is like being a free rider

By | Advertising, Business models, Content | 5 Comments

Over on Broadstuff in (Ad) ventures in Wonderland Alan writes about a website owner who has barred Firefox users from his site in response to the rising popularity of a Firefox extension that blocks ads (originally from Infoworld):

A Web site owner has blocked Firefox users from accessing his site in protest of a popular browser extension that blocks text and display ads.
Firefox users who go to http://jacklewis.net/weblog/ are redirected to Why Firefox is Blocked, which says the Adblock Plus extension undercuts Web sites dependant on advertising revenue.

“Accessing the content while blocking the ads therefore would be no less than stealing,” wrote Danny Carlton, a Web site designer and author, who runs both sites. JackLewis.net is his personal blog site. “Millions of hard working people are being robbed of their time and effort by this type of software,” he added in a posting on the Why Firefox is Blocked Web site.

I have some sympathy with this guy.  Sure his response is over the top (blocking all Firefox users because some of them have are offending), and some of the language he uses is inflammatory, but deep down he has a point.  If everyone blocked all the ads on all sites then the quality of content available to us all would plummet.  All of our favourite websites would go out of business (apart from the VC backed ones….).

So if a small proportion of the web community are blocking ads then they are free-riding on the rest of us that put up with them.

Some disclosure feels appropriate at this point – we are invested in a number of businesses that depend on web advertising for their livelihood.

Now I’m with Alan when he points out that Firefox users who get blocked from the site aren’t goint to fire up IE and have another go.  Danny Carlton is going to lose lots of viewers to his site.  Being a pioneer in areas like this is rarely rewarding.  If ad-blockers continue to gain popularity at some point, somewhere, someone will have to make a stand though.

The right answer, or should I say the fair one, is that people should have a choice – they can view the site for free if they take the ads or they can pay for a site without them.  That is the way it is with traditional media and the way it should be online.  (Actually – with traditional media the choice is typically between free with loads of ads and pay for with only a few ads, but you get the point.)

Seedcamp – judges day

By | Entrepreneurs, Equity gap, Seedcamp, Venice Project | 8 Comments

If you follow the Seedcamp Blog you will know that applications to participate in startup-school-cum-incubator-cum-fund’ Seedcamp closed twelve days ago and yesterday was Judges Day where the 268 applications was whittled down to the 20 that will be invited to Seedcamp week.

The number of great companies was awesome to see.  By definition they were all early stage, but there were a lot of really high potential businesses amongst the 268 (which came from 40 countries by the way).
One of the reasons I have gotten involved with Seedcamp is to do my bit to help the London/European startup ecosystem to develop.  What I saw yesterday tells me we are already in pretty good shape.  Of course there is more to do, and I would encourage everyone to chit in, but it was great to see such a high quality set of companies.

I am really looking forward to Seedcamp week.  With this level of company everyone should get a lot out of it, mentors and companies alike.

Misuse of personal data

By | Identity, Privacy | 6 Comments

A couple of days ago I wrote a post Why are we concerned about privacy? in which I argued that sharing personal some personal data in return for better services was a good trade off. Alan Patrick and I had a privacy versus sharing debate in the comments which left me thinking that to move this topic forward we needed to talk more clearly about the data that would or wouldn’t be shared as well as the risks and benefits that sharing would bring.

One of the difficulties with this subject is that everyone has a passionately held opinion, and it is starting to look to me like that has gotten in the way of good communication. My hope is that in taking the debate to the next level of detail we might find some common ground. (Where is the fun in that I hear you cry!!!)

Yesterday’s FT had an article Fraudsters target social networkers sets out the privacy position pretty well and offers a good basis for moving the discussion forward. They opened with the following two paragraphs:

Millions of people signing up to Facebook, MySpace and other social networking sites could be leaving themselves, and their companies, open to online crime, IT security experts are warning.

The practice of posting up personal information such as birth dates, addresses and phone numbers is proving to be a goldmine for identity fraudsters.

This is worrying, and I have made a mental note to check my Facebook profile for offending items. Everyone should be careful about things like this. Possession of the sorts of data that you use to identify yourself – date of birth, name of first school, home telephone number, favourite football team, mother’s maiden name etc. will be a big help to anyone who is trying to pose as you – i.e. steal your identity.

But, and this is the critical point, that is not the sort of data that I am talking about sharing. That data is much less useful to someone who wants to target ads than information about your hobbies, which sites you visit, what sort of holidays you take, when you take them, etc. That is the sort of information I am thinking about sharing, and unless I am missing something there isn’t much there that someone could use to steal my identity.

It is important to protect against spam though and that might come through some kind of profile/filter system which masks my IP address from the advertiser. That way I can choose to block any offending advertisers from having access to my information just like I block emails from the domains that spam me. As a further level of security the company that hosts and manages my profile for me could keep a blacklist of offending companies as well and refuse them access carte blanche – much as hotmail blocks email from known spammers.

Hopefully being careful about the data that is shared combined with a blacklist functionality should be enough to assuage most people’s fears. We won’t know, though, until someone puts it to the test. It would be very interesting to see a service which offered extra functionality to those who shared their data and permitted targeting. Then we would see how much people really care. Whilst the debate remains in the abstract there is little incentive for people to examine whether their fears are valid in the context of the gains on offer.

YouTube finally launches in video ads

By | Advertising, Consumer Internet, Google, MySpace, Video | No Comments

I was pleased to read today on Marketing Pilgrim about YouTube premiering InVideo ads. It is at once a little surprising that they haven’t done something before now and a testimony to the problems of pre-rolls that they haven’t.  (For a long time YouTube have had display ads around their videos – I am specifically talking about in-video here.)
The way Google is approaching this is smart.  The key point is that they have made it unobtrusive and remain committed to not swamping the user with too many ads.  The most important aspects of that are that the ads will only appear after the stream has been going for 10-15s, when they arrive they will be an overlay over only the bottom 20% of the video and they will only insert ads into a small percentage of videos.

Check out Marketing Pilgrim for more screenshots and a more detailed description of how the system works.

I was pleased to read this because it is important that Google make a success of monetising YouTube and this looks like a really promising step towards that goal.  Trial results in terms of click throughs are very promising as well (although this always seems to be the case with new formats and we should hold off on making conclusions until people have gotten over their initial curiousity).

Google has a lot of inventory here, people are watching literally billions of minutes of video per month on YouTube so this could be a big deal for them.  I am generally a bit sceptical about Google’s ability to keep its momentum going and wasn’t surprised by their last earnings miss, but just maybe this could underpin their next phase of growth.

One interesting aspect of the way they have set this up is that not every video will have an ad.  That is a big departure from traditional ad funded TV which thinks of programmes and the ads withing them as a single unit.  This is more like a magazine model where some pages have ads, some don’t and the number of ads is down to editorial judgement.  The significance of this initiative will depend in large part on where that judgement line is drawn and how many ads they feel comfortable showing without fear of driving users from the site.

I hope that they are able to turn this into a big enough revenue stream that people start saying Google got YouTube at a bargain.  That will help us all as we build the next wave of companies.  At the moment Myspace is widely accepted to have been a great acquisition for News Corp, it is starting to look like maybe Ebay didn’t do so well with Skype and the jury is still out on YouTube – so things are pretty evenly balanced.  It would be great to see the great acquisitions outnumbering the less good ones by two to one.

Musings on micro-blogging

By | Blogging, Enterprise2.0, Facebook | 11 Comments

For those of you that haven’t come across the term before micro-blogging is the business of sending out small communications to your friends on a frequent basis.  The main tools for this are Twitter, Jaiku and status updates on services like Facebook.

This is a newish development and is one of those things that polarises people at the moment.  A lot of people have passionately embraced the new media (mostly younger people) and an equal number just don’t get it.  They see no value in inane ‘twitterings’.

I’ve been using Twitter for a couple of months and update my Facebook status reasonably frequently.  I’ve found it useful for getting an idea of what people are doing, what interests them and how they think (particularly now my friends Facebook status updates have started miraculously appearing in my Google toolbar).  Hopefully the messages I put out there give people similar insights into my life.

I’ve seen a couple of posts in the last few days which put some theory behind this observation.  Firstly an article in Wired puts it like this:

when my four closest friends and worldmates send me dozens of updates a week for five months, I begin to develop an almost telepathic awareness of the people most important to me.

It’s like proprioception, your body’s ability to know where your limbs are. That subliminal sense of orientation is crucial for coordination: It keeps you from accidentally bumping into objects, and it makes possible amazing feats of balance and dexterity.

Twitter and other constant-contact media create social proprioception. They give a group of people a sense of itself, making possible weird, fascinating feats of coordination.

and:

It’s almost like ESP, which can be incredibly useful when applied to your work life. You know who’s overloaded — better not bug Amanda today — and who’s on a roll. A buddy list isn’t just a vehicle to chat with friends but a way to sense their presence. Are they available to talk? Have they been away? This awareness is crucial when colleagues are spread around the office, the country, or the world. Twitter substitutes for the glances and conversations we had before we became a nation of satellite employees.

The other post was from JP and was really about Facebook and knowledge management.  In it  he described how in to help his direct reports get to know and understand him better he opened up his email account to them.  To his surprise they spent more time reading his sent mail than his inbox, which lead to the following insight:

People learn best by watching what you do. Not what you say.

Microblogging is a tool that helps people watch what you are doing in a non-demanding and non-intrusive fashion – i.e. a kind of knowledge management tool.  They can watch more closely if they are less busy or if they are particularly interested in what you are doing this week.  They can watch less closely if their focus is elsewhere, but still keep an idea of what you are doing and where your head it at.

As the enterprise becomes more extended, we get busier and we have less face time with each other we end up facing all sorts of management challenges.  These tools can help with those problems.

Why are we concerned about privacy?

By | Facebook, Identity | 6 Comments

This post has been forming in the back of my mind since I read Privacy and Personalisation: From Clickstream to Targeted Advertising on Read/Write web last week.  I was waiting until I met with Luke Razzell this morning to discuss the final two posts in our identity and startups series to make sure there wasn’t any overlap – there isn’t, so here we go.

For a long time I have thought that concerns about privacy are overdone – or more specifically that the benefits to be had from sharing some personal information far outweigh the risks.  If you have been reading this blog for a while you will have seen that thought as a recurring theme.  It is a issue that is at once critically important to predicting the future and difficult to do much more than guess at.

I will borrow the question from Helen on Technokitten:

Will the prospect of privacy become irrelevant as the myspace generation start to do the jobs we’re doing now?

Answer – YES – (and apologies for choosing the question to get the answer I wanted).

This is where the Read/Write web post comes in.  I’m going to take three brilliantly simple and clear quotes which convey all bar one of the reasons why it is my guess that privacy will diminish as an issue.

Firstly, these are emotional concerns, not rational ones:

Many times over the past few years I had conversations where people asked: But what about privacy? My answer is always: What exactly are you concerned about? The majority of people just worry about privacy as a word; they can’t express what it is that worries them. It is a conservative, mostly uninformed behavior: “I just don’t want them to know about me.”

Secondly, when you look at it there isn’t much to be worried about:

The good news about the people stalking our online behavior? They don’t want to hurt us, they just want our money. The reason retailers want to know our private information is because they want sell us things.

And finally, people are already showing they will give up on privacy pretty easily:

It is particularly odd to hear privacy concerns and then login into Facebook and see people putting everything about themselves in their profiles.

The final reason, and one that isn’t brought out explicitly in the Read/Write Web post is that sharing a little personal information is good for you.  It will allow advertisers to market to you more effectively, which increases the CPMs they can pay to your favourite sites who will then have more money to invest in improving their service to you.