Monthly Archives

November 2007

Happy Monday – English entrepreneurs aren’t afraid of failure

By | Entrepreneurs | No Comments

The FT today reported a Harris survey on popular perceptions of the entrepreneurial climate in the UK, the US, France, Germany, Italy and Spain.

I was delighted to discover that answers to the question “Does fear of failure discourage many people from starting their own business?” were similar in the US and the UK.

Hopefully we will now start to hear less and less about the supposedly peculiarly British disease of ‘fear of failure’.  I’ve ranted about this before so I won’t say much now other than it is rational to fear failure when you start a company – not to consider it would be just plain stupid – but I really don’t think we suffer from it here in the UK more than anybody else.
If you want to see the full survey results, including the chart on fear of failure, you will have to buy the FT from a newsagent.  This link takes you to the article, but the online version omits the graph which forms the basis of this post.

Brand power is on the wane so you’d better engage

By | Advertising, New Media | 12 Comments

I have posted on this theme before a number of times (including here and here) and am returning to it today because of a great little story posted on Modern Marketing:

The greatest problem that marketeers have these days is that no one really cares what they say.  The only opinions people are interested in are those from other people.  Let me give you a personal example.  I have been in the market for a new kitchen for sometime and as a result, quite randomly, found myself in a Moben salesroom and booked up for a consultation.  The Moben rep duly arrived and was very good, explaining everything we needed.  In short we were sold and even cancelled other consultations.  However, I then mentioned our intended purchase to friends and family and got some concerned looks.  Unusually for me I hadn’t checked the company online but then did so.  I found a series of horror stories – including this particularly graphic one.  Order cancelled.  Moben’s tight marketing programme including a shop in a nice part of town, lovely website, super salesman and beautiful literature had been made entirely redundant by my 10 second search. Call it death by Google Index.

Clicking on some of the links is fun too.  They take you to the results of a simple Google search on ‘Moben’ which returns half a dozen complaints in the first page of results, and a website called KitchenHell which is dedicated to publicising Moben problems.
As an aside, it is unbelievable in this day and age that Moben don’t exercise more control over the search results on their name.

And to make matters worse, now I’m writing about it.

Here is a succinct explanation of why things have changed, also from Modern Marketing:

Advertising used to work because the industry had the biggest loudhailer and it could be used to make everyone listen, even if they didn’t really want to.  Which meant brands could be ‘built’ for people to ‘aspire’ to.  Which was all fine when no one really had anything and luxurious things were genuinely rare.  So people watched the ads because they had little choice and the odd one was funny and a few were inspiring.

However, in 1990 one man sowed some seeds which would eventually annihilate that top down, scarcity-driven world of communication.  When Tim Berners-Lee gave us the world wide web he offered everyone a little soap box to say their piece.

And now we listen to the people telling stories from their soap boxes as much as we listen to the messages the brands want us to hear.

Which takes us right back to Cluetrain – brands have got to join the conversation so that they know what people are saying and then amend their behaviour so people start saying good things.  This is the route to success in the 21st Century.

The masses have collaborated – to buy a football club

By | Business models, Innovation | 12 Comments

Back in June I briefly mentioned MyFootballClub, a site which was collecting pledges of £35 from UK football fans which it would use to buy a football club once it had secured sufficient commitment.

On Monday they got there and announced the acquisition of Ebbsfleet United – a club that plays in the Blue Square League – one level below the English Football League. They have acquired a controlling interest, with the option to go to 100% ownership later.

This is an example of mass collaboration in action. Not only were the funds provided for by a mass of small contributors, but the plan is to govern the club by democratic vote amongst the members, which each £35 investor given an equal say.

We will see how this works out to be in practice. Democracy is great in principle, but can make it difficult to take decisions. Already Jason Botley, the site organiser, has had to ignore parts of the vote on which club they should acquire, and I’m sure we will see more of  sort of thing
This is interesting because it is an example of the internet enabling mass collaboration in a way that simply hasn’t happened previously. I think we will see more and more examples of people using the internet to come together to achieve things that either weren’t possible at all before, or were the exclusive preserve of big institutions. In itself this isn’t new – ebay is old news now – but the MyFootballClub example shows just how far this might go.

Bebo making push into PCTV?

By | Consumer Internet, PCTV, Social networks, TV | No Comments

There is a lot of talk this morning about the deal that announced yesterday with the BBC, Sky, ITN, Channel 4 and others which will enable Bebo members to embed clips from the TV shows of these two companies into their profile pages.  Other broadcasters, and possibly music companies will follow soon.
In what could turn out to be a far-sighted move Bebo is allowing the broadcasters to control the advertising that appears in the clips and to retain 100% of the revenue (and rights).  I think this is a smart move – Bebo could have tried to insist on taking a cut in the revenues, but had it done so the move would have been less attractive to broadcasters, which would have meant less content being available, and therefore a worse offering for Bebo’s members.  Instead they have put the long term health of the community ahead of short term revenues – which will pay off in the long term.

But so far it is only clips.  The big play is for full length programmes and it will be interesting to see if Bebo takes this service in that direction.

For those that don’t know, Bebo is the UK’s largest social network and is third globally behind Myspace and Facebook.

Advertising will change more in the next five years than it did in the last fifty

By | Advertising, Business models, IBM | 11 Comments

In the words of IBM:

The next five years will hold more change for the advertising industry than the previous 50 did. Increasingly empowered consumers, more self-reliant advertisers and ever-evolving technologies are re-defining how advertising is sold, created, consumed and tracked.”

From The end of advertising as we know it, IBM 2007.

Spot on. There are huge budgets at stake in a rapidly evolving market place and that means good opportunities for startups.

For IBM there are four drivers:

  • Attention is increasingly controlled by consumers as media consumption moves away from the TV and due to ad skipping/blocking technologies
  • The rise of UGC is enabling engagement marketing
  • New channels and technologies are enabling measurement of advertising effectiveness for the first time
  • The rise of exchanges is changing the way advertising is bought and sold

….. which will demand two key changes (and this is IBM plus a bit of me)

  • Demand from advertisers for transparency on how their budgets are spent and what the results are. Over time this could go as far as cross channel comparability and allocation of budget to different channels and formats based on performance. This might even get automated.
  • Greater creativity in advertising – traditional and online. This will take many forms, a lot of which I suspect haven’t even been thought of yet – but are necessary to overcome online ad-blindness and ad-skipping technologies in video. Part of the answer could well be innovative models that make explicit the exchange of advertising attention for content, and potentially even for cash. (Check this out for a fun example.)

If you read the IBM presentation (which I warn you is a bit of a slog…) then you will see they have a lot of survey data to back these ideas up.
Credit goes to Tomoaki Sowada for the pointer to the IBM presentation.

‘Good wins out over evil’ – a cheery thought for the weekend

By | Business models, Facebook, Venture Capital | 12 Comments

One of the reasons I like being a VC is that I think the work we do makes a difference to the world in a positive sense – or at least it does when the work is done well.  There are at least two levels to this – as an industry we are a catalyst for innovation, and as individuals we help build companies (which can be a profoundly enriching experience for all involved).

So you can imagine the philanthropic side of me was happy to read Umair saying that in the new corporate world good wins out over evil:

What makes revolutionaries – well, revolutionary – is the desire to change the world. For the better.

Almost all of today’s new market leaders, interestingly, share this trait: it is a deep genetic difference that underpins advantage.

Why is it that people who want to change the world for the better are suddenly winning out in business, when historically that hasn’t always been the case?

Today’s real radical innovators know that games of coercion and domination really don’t work very well in the edgeconomy – because you can’t coerce all of the people all of the time.

To explain:

Pre the internet consumers didn’t have access to good information and production technology made it difficult for companies to innovate quickly.  So the value maximising strategy was to control and manipulate the media to sell as much of your existing product as possible.

These days the game has changed in two ways which demand a relationship of trust between company and customer.  Firstly the internet makes it impossible for anybody to control the message any more, and secondly smart companies are now co-opting consumers into their product design processes.

Hence good wins out over evil.  Consumers will engage with radical innovators who are changing the world and help them to achieve their goals.  They will run from companies who are perceived to be manipulating or exploiting them.

The current hooplah about Facebook’s ad platform is an example of this playing out in practice.  People are worried that Facebook will shift from its current position of trust and exploit the personal information in their profiles to drive excess profits.  This shift from good to evil might kill the company, is the implication of a lot of what is being written – and I agree it might.  This is very clear in Umair’s post.

More on Google’s OpenSocial

By | Facebook, Google, Social networks | No Comments
Kevin Marks of Google gave some more information on OpenSocial at the Defrag Conference on Tuesday.  It is all a little earlier in development and vaguer than I was hoping for, but there are a couple of important points here that were good to see.  Reported on Read/Write Web.
  1. The APIs will be read and write – so one network will be able to pull user data from another – including bios and friend data.
  2. They are developing functionality that will allow networks to add users from another network.  So I could add my Twitter friends to Facebook, for example (assuming Facebook supports OpenSocial…. isn’t it funny how in days Facebook has gone from being synonymous with ‘open’ to almost the opposite?)
These are important features if social networks are to become truly open.  Without the ability to port friends lists in particular then we won’t have got very far.
The next question will be how fully the different social networks support OpenSocial.  The history of the internet is that open always wins, but that is not the case across all areas of technology, and may not be the case forever on the web.  The middle ground of partial compliance and standard manipulation could (unfortunately) become the smart way for companies to play in this market, as it is in many areas of telecoms today.

Facebook’s new advertising platform

By | Advertising, Facebook, Social networks | 6 Comments

I have been wondering for some time if Facebook has some tricks up its sleeve that might boost revenues, particularly revenue per user – something which will do for them what Adwords did for Google.

Now we know that they do, which is pretty unsurprising given all the big valuation talk.  Yesterday Facebook announced its new advertising platform.  Details are a little unclear but it appears to have three main components:

  • Social ads – which combine an advertisers message with actions from your friends – e.g. a product review or purchase
  • Project Beacon – which allows brands to find and work with advocates within the Facebook community, and then pump ads to all their friends
  • Insight – a data mining tool that allows brands to access social graph information on an anonymous basis

The first two are the interesting ones, and for me these ideas and are smart in theory – mostly because they leverage the trust relationships made explicit in Facebook.  That said, they will require very careful execution, and I wonder how scalable they are.

All things being equal an ad that has some information about what my friends are doing with a given product or brand is better than the same ad without that information.  That content is valuable and will cause people to take more notice of the ads – I have no doubt about that.  This idea is common to both Social Ads and Project Beacon.

The execution challenges will lie in stopping the ads feeling like a new form of spam, and in recruiting consumers into the system in large enough numbers to make it interesting.  Each of these would be a challenge on its own, and to make matters worse their is a clear tension between them.

If the ads were confined to the existing ad slots then they wouldn’t feel like spam at all, but there is a clear suggestion that they will appear in news feeds, which feels kind of dangerous.

Similarly, if brands go on a headlong rush to recruit consumers then things could get pretty messy.  By recruit consumers I mean either getting them to contribute to social ads by reviewing products or telling the system when purchases are made and getting them to sign up as beacons.

There are a few cool brands that people will flock to, and for which I can see this working very well – brands like Lego, and maybe even Nike, as well as a host of local brands, but for most, e.g. soap powder brands I suspect it will be difficult.  These predominantly FMCG brands could end up having to bribe people to get involved with promotions which would undermine the independence of the participation and hence the trust that the whole system is based on.

Returning to the logic above – the extra information in an ad that says one of my friends used or reviewed the product isn’t worth much to me if I think they might have done so in return for a free sample.

There are some similar, if more cynical, thoughts from Alan here.

Blinkx announces plans for online television service

By | From mobile | No Comments

Posted by mobile phone:
Suranga Chandratillake, CEO of video search company Blinkx yesterday told the FT of his plans to launch an online television service by March next year.

They are entering a crowded market, and their planned service is superficially similar to Joost and Babelgum, in that it will be free to the consumer, depend on highly targeted advertising to make the business model work, and use P2P protocols to get the video stream to the desktop.

The Blinkx service has two key differentiators from the competition which I think give them a good chance of success. One is technological and the other is strategic.

The technological advantage lies in their video search and profiling capabilities. Blinkx claims to be the wrlds biggest video search engine, delivering 4.2m searches per day, and Suranga believes they will be able to leverage this position to deliver on the oft promised aspiration of highly targeted advertising.

The different strategy choice Blinkx has made is to focus on the mid-tier of programmes. That saves them from having to compete for expensive content deals, and will hopefully give them enough niche content that isn’t readily available on mainstream TV to get people off their couches and watching on their PCs. I think that this is what it will take to unlock the market anytime soon.

Sub-prime fallout yet to impact venture capital

By | From mobile | No Comments

Posted by mobile phone:
Every other day I get asked whether the fall out from the sub-prime crisis is affecting our business as venture capitalists. I always answer ‘No, not in any significant fashion. Crises like this always take a long time to filter through to our end of the market but I’m hopeful we will ride this one out’.

There are two ways in which crises at the macro level impact VCs and entrepreneurs – one is demand for the products and services our companies provide and the other is demand to invest in venture capital funds themselves. Unlike the stock and money markets changes in both these areas tend to play out quite slowly. Remember that we invest in fast growth businesses that usually can’t support much debt – so unlike our private equity brethren there is no direct impact from the tightening of the credit markets.

Demand for the products and services of our portfolio companies and by extension our ability to exit them at good valuations is linked to overall economic performance rather than any individual sub-market, so unless the credit problems spill into the wider economy and cause a general recession we should be ok. Despite the crisis claiming it’s second major investment bank CEO over the weekend as I write this post my best guess is that the fallout will be relatively contained. We are also somewhat further protected because we invest in high growth areas of the market, so a general slowdown to say 2% growth has proportionately less effect on us than on larger and more mainstream businesses. Obviously a full on recession is bad news for pretty much everybody.

The impact that I have seen so far has been limited to one of our portfolio companies that peripherally deals in consumer credit and a couple of exits that fell through when private equity buyers saw the debt side if their deals fall away.

The story is somewhat similar when it comes to demand from institutions to invest in our funds. The first point is that they mostly operate annual allocation cycles so the impact of the current crisis won’t be seen until next year. The second point us that the size of those allocations is geared more than anything to the stock markets – and so far they are holding up very well.

Most institutions set allocations to venture capital as a percentage of assets under management, and that percentage is rising over time as the asset class becomes more mature. So unless we see a sharp fall in the stock markets I wouldn’t expect the current problems to have much impact on the ability of VCs to raise funds. This seems to be reflected in the market where a lot of people are successfully raising new funds.

For these reasons I remain bullish on the European VC/startup ecosystem.