Monthly Archives

March 2008

Authenticity, respect and the changing nature of business

By | Business models, Enterprise2.0 | 8 Comments

Last week I attended a Honda Earthdreams event at the kind invitation of 19 Entertainment.  As well as the event being fun (Jensen Button talking, F1 car there to look at, lots of interesting people present…) I was struck by the strength and genuineness of the commitment to Corporate Social Responsibility (CSR).  The F1 executives were really committed to the concept, some at the level of wanting to do good and change the world, and some from a pure business perspective – they believe that consumers will increasingly favour brands that are socially responsible.  Additionally there was widespread agreement that brands needed to be authentically socially responsible – which means favouring causes that are relevant to the product.  E.g. formula one should address environmental issues.  Brands who are perceived as embracing CSR just for the sake of marketing will be no better off than if they hadn’t bothered at all.

This need for authenticity has parallels in the web world, where the companies that operate communities need to authentically embody the values of the members of those communities.

I have been mulling these thoughts over in my head and wondering if I should blog them, and then this morning Sam Sethi pointed me a post on Bubblegen in which Umair makes a persuasive case that corporate DNA needs to change dramatically before the economy will really right itself.  Umair’s argument in a sentence is that the lack of authenticity and respect in modern corporate culture is slowly sucking the life out of the economy.

This is the other side of the CSR coin.

Then on top of that we have the trend to free disrupting the way we do business at an entirely different level.

Taking these trends together with the problems with the current system and it seems to me pretty evident that we are in for some massive changes in the nature of business.

These changes will be in the size of companies, the nature of employment, the ways in which companies are managed and finally, perhaps most importantly in the way companies and consumers interact.

A lot of change has happened already – more and more people are working for themselves, the boundaries of the enterprise have been blurring for some time, command and control corporate cultures are giving way to decentralised models, we get more stuff for free than ever before, and ,finally, marketers are starting to get the idea that consumers need to be treated with respect (some of them anyway).

The fact that a lot of change has happened already gives me faith in the ability of the system to adapt.  It will have to go a lot further though.  That said, I don’t expect change to happen quickly – we are mostly talking about shifting cultures and patterns of behaviour here and that always, always happens slowly.

Internet M&A – the party is over

By | Entrepreneurs, Venture Capital | 4 Comments

FirstCapital hosted a breakfast seminar this morning where the topic of discussion was the state of the internet M&A market.

FirstCapital founder and CEO Jason Purcell gave the opening presentation and he had some interesting (if slightly grim) stats:

  • Internet acquisitions peaked in both volume and value in the middle of last year, and Q4 was sharply down on Q3.
  • Valuations have also peaked and are on their way down – they have risen over the last 4-5 years from an average of 3x revenues to peak at 13x and are now heading south quite rapidly, probably with some way to go.  (Remember though that many internet companies are acquired with little or no revenues, so whilst I’m sure it is directionally correct this stat come with a bit of a health warning.
  • But at the sub $100m enterprise value level this situation is more stable, with transaction volumes approximately flat.

Comments from Sara Clemens (corp dev at Microsoft) and Rob Feldman (corp dev at News International) confirmed this trend – they say the bar for acquisitions has risen and valuations are coming down as many acquirers have stepped out of the market.  Rob even went so far as to say that there was a clear message from his Chairman not to even consider doing deals at the levels of twelve months ago.

It looks like we are all going to have to work a bit harder for our money!

Ultimately though, this doesn’t change the fundamentals of our business.  Cycles will always come and go and the important thing is to be building sound companies that can survive both the good times and the bad, then you can time your exit to maximise your position, instead of having the timing dictated to you by market conditions.

Musings on open-ness, extensibility and the writeable web

By | Blogging, Consumer Internet, MySpace, Open Source, Social networks | 3 Comments

For me, it is increasingly the case that a lot of the best software is open and extensible, at least to an extent. The inspiration for this post came when I was playing with the photo sharing software and service from Jalbum last week, but it is true for a wide range of companies, from blogging platforms through social networks to enterprise plays like Salesforce.

Blogging/CMS software from WordPress.org (not WordPress.com) is for me perhaps the best example out there at the moment – the code is open source, which is about as open as it can get, but more significantly the architecture enables themes, plugins, and widgets which radically alter the look, feel and functionality of sites built with WordPress.

Plugins and themes are built by anyone with CSS skills who wants to add something to the WordPress community or customise their own site.  Then people like me find them either via the wordpress site (a very important search and discovery mechanism) or via the open web.

We upload them to our blogs and can alter the code ourselves to further customise/extend the functionality.

For example I have been building a site this week dedicated to promoting the cause of European venture capital (of which more later) and I chose from themes – determining the colour, the number of columns, the use of images and many other elements in the site.  I looked closely at probably 15 different options of the hundreds available before I made my choice.

Next I will customise the site via plugins which control the way comments are handled and the site can be updated, among other things.  Then finally I will get my hands a (little bit) dirty by adding some code to customise the appearance a little bit further – e.g. by adding some logos.

Many of you, and certainly any hackers out there, will be wondering what is new about this, and maybe noting that the open-source community has been operating in this fashion for a long time now.  Well, the new thing is how easy this is becoming.  I would say it is approaching mass market easy.  In the refresh I did of this blog last week I was able to accomplish twice as much in half the time as when I last did an update around nine months ago.

Indeed the way people customise their Myspace profiles is arguably a mass market version of what I have been doing on my blog.

Which brings me to the writeable web.  As software all software comes to be delivered online open-ness and extensibility leads us naturally in this direction.  So much so that I am starting to think of the writeable web as the sort of meta-trend I would like to get some money behind.

Free ad-supported music coming closer to reality

By | Advertising, Facebook, Music, MySpace, Social networks | 6 Comments

Stimulated by news of a new service from Myspace, a couple of weeks back we were talking on this blog about how free ad-supported music was on it’s way but that unrealistic pricing assumptions from the labels were holding the market back.

Maybe not for much longer.

Reported on Mashable this morning:

Reports were filed last month by the media concerning MySpace’s purported negotiations with the world’s four largest record labels to gather rights for its own music distribution platform. Today, Joshua Chaffin of the FT talks of learning that those talks may proceed to legitimate agreements among MySpace and at least three of the four labels – Sony BMG, Warner, and EMI – by the end of March.

(I would have linked to the FT were it not for their paywall.)

Universal are the only label that aren’t close to a deal and apparently their issue is an outstanding lawsuit rather than anything commercial.

Assuming our previous conclusion about that labels are asking for more per track than ads can realistically provide is correct then one of three things is happening.  Either the labels are lowering their expectations, Myspace is planning to subsidise their music service, or Myspace believes they can monetise the ads better than We7, QTrax, Imeem and the other providers in this market.

I really hope it is the first of these.  Myspace subsidising the market might be good in the short term for consumers, but would be bad for the medium term health of both the music and social networking industries.  Similarly – if they are being more aggressive in their monetisation assumptions I would worry that they may end up losing money.

On the other hand, if the labels are now asking for less that is great news – we should see some of the great services that are out there blossom and some entrepreneurs and their investors make some good money.

As Mashable points out the winners will be those who execute the best – and that won’t necessarily be Myspace or Facebook (also rumoured to be in discussion with the labels).  Music is a big category and one that is important enough that a lot of people will hunt around to find the best service rather instead of simply accepting the first half decent one they come across.  The success of iTunes has shown us that.

The best I have seen so far, by a mile, is Sweden’s Spotify – a company I haven’t talked about much here because they are somewhat in stealth mode.  The cat seems to be increasingly out of the bag now though.  This post from Varsavsky waxes lyrical about how great their service is.

iPhone takes a big step forward

By | Mobile, Venture Capital | 5 Comments

Jobs announced yesterday that from June the iPhone will be able to receive push email, and that they will open the platform so third party developers can write apps to it.

These are two big steps forward, for Apple and the mobile internet generally.

They got one thing wrong though. Third party applications will only be available through a special Apple store and Apple will take a 30% revenue share. I assume this precludes apps being made available for free, which would really stimulate the market.

Ultimately we need mobile phones to be exactly like little PCs – fully open platforms with a choice of networks. We have made big strides in that direction, but Apple could have gone that little bit further yesterday.

In related news leading Valley VC firm Kleiner Perkins announced a new $100m fund for companies that develop iPhone applications. For me that is a brave move, unless Apple is going to relax its rev share requirement over time.

UPDATE – Mike Butcher of Techcrunch UK pointed out in the comments that I got it slightly wrong. He said:

You’ll be able to get free iPhone apps from the iTunes store and Apple will not charge developer for making those available, so yes, they have allowed innovation to flourish. The drawback is that the store will be a bottleneck and there is no Long Tail crowd intelligence in the iTunes store to bubble up the best apps.

New header image

By | Blogging | 8 Comments

I liked the black and white london skyline image a lot, but it was too tall and serveral of you complained it was taking up too much of the page. When I tried to crop or squash it it look poor.

So we are back to the London Eye, and a big thank you to Robin Blandford who provided this image, which also looks cool.  As an aside it is amazing how the London Eye has become so iconic for London in such a short time.

Hopefully that is it for major changes now.

The internet remains a strong secular growth story

By | Advertising, Consumer Internet, Venture Capital | One Comment

I had lunch yesterday with Simon Nicholls and Khurram Farooq of Ingenious and we were remarking on how despite the current macroeconomic malaise most of the online advertising businesses we are familiar with are still experiencing strong growth.

If the overall market is flat to down and your area is growing, that means someone else is really feeling the pain – unsurprisingly that is traditional media. ITV reported it’s results yesterday and this is from the FT write up (damm their paywall):

It is a sign of an industry in trouble when the best a company can say is that it is declining less than the rest. Yesterday’s presentation of full-year figures from ITV, Britain’s largest free-to-air television broadcaster, gave off a whiff of desperation. Yes, the flagship channel, ITV1, lost 2 per cent of its viewers or “audience share” last year, but look at BBC1 and BBC2 (both lost 3 per cent) and Channel 4 and Five (both lost 10 per cent).

Most if not all of that audience is moving to the internet, and even though we have some way to go before we perfect the monetisation of that traffic there is enough there for the online advertising industry to keep moving forward.

I have written before that if we have done a good job of choosing the sectors in which we invest our time and/or money then we will be working in high-growth pockets which should still keep growing through an economic slowdown, albeit not as quickly. That is what we are seeing here.

More on ‘free’ as a business model

By | Business models, chris anderson, Entrepreneurs, free, kevin kelly, Venture Capital, wired | 6 Comments

Last week Chris Anderson of Wired and Long Tail fame posted a preview of his new book on free as a business model and I wrote a post summing up his argument (which I largely agree with) and calling for innovation in business models – we will all still need to find ways to make money after all.

Reading through the comments on the preview and on my post, there is a lot of scepticism about whether things can really go this way.  I think they are already and will go further – maybe not 100% all the way – but enough that understanding this topic is important, and that there will be money made by the entrepreneurs who get there first.

Today Jay Deragon has an interesting post on this topic, largely quoting Kevin Kelly, also of Wired.

He offers some different ways of looking into this difficult topic.

Whilst Anderson explains free by the declining cost of processing, bandwidth and storage Kelly says the same thing a different way – by pointing out that distributing copies of anything is now free, whereas in the previous era copying became cheap, but money was made by selling the copies (books, CDs, etc.).

Therefore, Kelly argues, we need to look for things that can’t be copied if we are going to find innovative business models.  Kelly has one big idea – trust/reputation, and eight others:

  1. Immediacy – getting it before everyone else
  2. Personalisation – requires an ongoing conversation between customer and supplier
  3. Interpretation – make it work for me – Red Hat does this for Linux
  4. Authenticity – guaranteed
  5. Accessibility – whenever, wherever I want it etc. – this is where BT are heading
  6. Embodiment – we still need real things every now and again
  7. Patronage – the idea people want to reward their favourite artists – e.g. Radiohead let their fans decide the price of it’s last album
  8. Findability – helping people find stuff they want/need – Facebook does this for it’s application developers

These are all great ideas.  Scaling bsuinesses based on them will not be as straightforward as scaling a traditional web business, but if it were easy, everyone would be doing it. 🙂

I look forward to hearing how it will be done.