Monthly Archives

September 2008

Taking stock on cloud

By | Google, Innovation, Linux, Open Source | 8 Comments

There is a lot of hype around cloud at the moment – so much so that a couple of industry bigwigs have recently felt the need to take the heat out (and if ever there was a time for bursting bubbles, this is it….).

As reported in the Guardian Larry Ellison has criticised the recent rash of cloud announcements as “fashion-driven” and “complete gibberish” – and as if that wasn’t enough, he then just started to get funny (again from the Guardian):

“The interesting thing about cloud computing is that we’ve redefined cloud computing to include everything that we already do,” he said. “The computer industry is the only industry that is more fashion-driven than women’s fashion. Maybe I’m an idiot, but I have no idea what anyone is talking about. What is it? It’s complete gibberish. It’s insane. When is this idiocy going to stop?”

Open source guru Richard Stallman is more structured in his criticism of cloud.  He said (again as reported in the Guardian):

cloud computing was simply a trap aimed at forcing more people to buy into locked, proprietary systems that would cost them more and more over time.

Somebody is saying this is inevitable – and whenever you hear somebody saying that, it’s very likely to be a set of businesses campaigning to make it true.

What should make of all this?

For me, whilst there is undoubtedly a lot of hype around cloud right now, that is because it offers something genuinely new, and something better than we’ve had before.  I will come back to this another time, but in essence it is a much more flexible and cost effective way of managing infrastructure for certain classes of application.

Turning to the points of Ellison and Stallman, they are right in the sense that cloud isn’t yet right for everything and probably never will be.  But in the case of Ellison you have to note he has his own axe to grind – Oracle is at heart an enterprise software business – and Stallman is using a privacy argument in what is really an infrastructure debate.  It is perfectly possible to have cloud based apps which allow users to retain ownership and control of their own data – true Gmail doesn’t do this – but many other web apps do.

Time for something new in online advertising

By | Advertising, Consumer Internet, VRM, Widgets | 17 Comments

My buddy Paul Fisher of Advent published some research last week showing that venture capital investments into ad technology are over $580m so far this year.  Moreover Europe counted for 45% of the total in this sector, which is a lot when you consider that we only account for around 20% of venture investment across all sectors (by any sensible long term measure we should be nearer half, but that is another story).

There are some interesting looking businesses on Paul’s list, many with the general idea of pushing the web models to new areas – widgets, video and so on.  I’m sure lots of them will go on to be very successful (including DFJ’s contextWeb) but I can’t shake the thought $580m is a lot of money to invest in companies that are largely chasing extensions to a market that is already largely consolidated – albeit a very large and fast growing market.

Which is why my thoughts have been turning to ideas and models that are more revolutionary, and I have become interested in permission based marketing/VRM and more recently publisher based tools for ad optimisation.  What the online ad industry needs more than anything is a way to drive much higher eCPMs, and both VRM and publisher based tools offer the possibility of much, much, tighter targeting, based on the availability of a higher volume and quality of data than has been available to most current approaches.

The importance of lasting value

By | Business models, Entrepreneurs | 8 Comments

Umair wrote a post earlier this week entitled How to Build a Next-Gen Business Now.  His central point is a rework of one he has oft made before – have good corporate DNA and focus on adding real value to the world.  A bit more on that in a moment, but before then I want to bring out a couple of other points.

Firstly his analysis of the current meltdown on Wall Street as a problem of institutional decay, or bad DNA:

Investment banks failed not just as businesses, but as financial institutions that were supposedly built to last. It was ultimately how they were organized and managed as economic institutions – poor incentives, near-total opacity, zero responsibility, absolute myopia – that was the problem. The rot was in their DNA, in their institutional makeup, not in their strategies or business models.

Secondly, on the narrowness of market cap as a measure of success:

When your market cap … can be utterly vaporized in a matter of days, it’s a stark reminder that shareholder value is a videogame – and it is human outcomes that make work meaningful.

And finally, his list of what it will take for the system to right itself:

We need no less than better corporate governance, a working shareholder democracy, a recognition of what capital really is (and isn’t), radically more enduring incentives – aligned with outcomes that actually matter to people – the capacity to trust and be trusted, more accurate and timely reporting, strategy that creates authentic value instead of just shifts numbers around, and business models that can yield sustainable growth.

When it comes to startups and small companies generally I have been saying for a while now that businesses which have a real passion to change some aspect of the world for the better at their core (i.e. in Umair’s parlance have good DNA) have a better chance of success than those that don’t.  But then I always qualify that by saying this sort of passion helps, but it is neither a necessary nor sufficient quality for success.  However, as this crisis unfolds I am thinking that it is more and more important, so much so that I’m starting to wonder if I should make seeking out these sorts of companies a more explicit part of my strategy.  Certainly I will attach increased value to companies that don’t just think about themselves in terms of share price appreciation.

Massive investment into social games and virtual worlds

By | Casual Games, Virtual Worlds | 8 Comments

Jussi Laakkonen of social gaming stealth startup Everyplay has a great post tracking investment in the social games and virtual worlds space.  The simple message – there is a whole heap of activity, with roughly $2-5m being invested per week, and some large individual deals, including Balderton‘s investment of $87m into Big Fish Games.

Check out the post for the long list of individual deals.

Jussi makes the point that all this investment activity is a sign that the sector will generate massive profits in 4-7 years.  Anyone who reads this blog regularly will know I share that view.  What I am starting to worry about a little though, is that the amount of investment is getting out of kilter with the size of the opportunity, which might lead to what one of my partners has described as venture fratricide.

That said, most of the investment is US based and I think some of these plays will turn out to be geographically/culturally focused – which makes me more optimistic about the prospects for future investment in this space in Europe.

Some virtual worlds data

By | Virtual Worlds | 8 Comments

I’m reading a Gartner report on virtual worlds which has lots of interesting data (a lot of which is sourced from KZero).  Here are some highlights:

  • 300m registered accounts aggregate across all virtual worlds
  • Suggesting 30m active users (based on rule of thumb 1 active for every ten members) – compared with 16m active MMOG users
  • Userbase is largely kids and over 35s – the middle group use socnets and MMOGs
  • Enterprise activity in virtual worlds has shown a marked decline over the last 6-9 months as their earlier efforts inspired by a desire to be part of the new wave foundered due to lack of clear goals and value proposition
  • There is little in-world ecommerce

Open-ness in the mobile value chain

By | Google, Mobile | 9 Comments

Back in August I wrote about the Apple App Store and the coming T-Mobile open app platform saying that for all Apple’s history of closedness it is just possible they will end up unleashing a wave of competition in the mobile industry based on open-ness.

The early signs are that thesis is playing out, but that Apple may well be the loser.

First a little clarification.  The open-ness I am talking about here is the ability for end users to get any app they want on their phone, rather than anything to do with open-source code or proprietary software stacks (although the two things are linked).  Historically the operators have insisted on a gating role in deciding which apps get distribution via their portals, which has largely functioned to the detriment of innovation and the customer experience – IMHO.

The exciting thing about these new app stores is that they take away the risk that an operator won’t approve an application, or won’t market it well, making the platform much more attractive to developers, who to a much greater extent become masters of their own destiny.  This is, of course, what worked so well on the PC platform.

So why is Apple a potential loser?

Because, and despite getting off to a great start in part because they are open, they are now leveraging their position in the value chain to become a gate themselves …  and blocking applications that compete with stuff they want to do – e.g. the Podcaster app.  Worse still, Apple hasn’t done a good job of explaining the rules by which it will decide what is allowed and what isn’t.

Winning as an open platform is all about attracting developers and moves like this really won’t help – as evidenced by Alex Sokirynsky, developer of the Podcaster app, switching to the Android platform, (the platform launched last week and the first phone came out yesterday on T-Mobile).

Beyond the technical stuff developers are looking for access to large numbers of users and commercial predictability.  It looks to me like Android is a good bet as the eventual winner on both of these dimensions.

Three books, one conclusion

By | Business models, Entrepreneurs, Venture Capital | 6 Comments

I have just finished reading Herd by Mark Earls and I have been struck by the thought that three of the best books I have read lately all point to the same general conclusion.  The books are Emergence by Steven Johnson, Wisdom of Crowds by James Surowieki and of course Herd.  The conclusion is that the community of customers and interactions within it are important to the success of any business, that those interactions are largely governed by the community itself – and therefore outside the control of the enterprise.  The result of all this is that the best course of action for companies is to be well perceived as genuine and interesting by their customers, and that to do this they should let their actions speak louder than their words.

This last point – that it is the actions which count is also consistent with another of my favourite writers Umair Haque – although he would phrase it slightly differently, saying it is important that corporations have good DNA.

I suspect that this has always been true to a greater or lesser extent, but is becoming unavoidable as a conclusion as the internet age progresses and not only is everyone able to make their feelings known, but people increasingly are.  To put it in ‘long tail’ language now we are in an age of limitless communications bandwidth large corporations are no longer able to control what is said about them.

I couldn’t write a post about three of my favourite books without bringing in Taleb‘s Black Swan.  Whilst he is unconcerned with brand and community he is all about letting his actions speak louder than his words and I see his success as evidence of the ‘one conclusion’ in action.  I suspect that one of the main reasons he is so popular (I’ve heard Black Swan was the best selling non-fiction book in 2007) is that he is extremely genuine, the passion with which he holds his beliefs comes through on every page and they get people talking about him and make the book much more entertaining than a finance text has any right to be.

Balancing the power of the community with the need to take a service forward

By | Facebook, Social networks | 3 Comments

Zuckerberg wrote a nice post yesterday explaining how Facebook had listened to the community in the Facebook re-design, but at the same time they had to make some decisions.  This shows the need for community sites to strike a balance between giving the community what they want and stretching the service to new places that will initially be disliked but will (hopefully) come to be loved over time.

The following excerpt catches it nicely:

We realize that change can be difficult though. Many people disliked News Feed at first because it changed their home page and how they shared information. Now it’s one of the most important parts of Facebook. We think the new design can have the same effect.

With this release, we’ve worked harder to get more feedback about what we can improve. Starting in March, we created a Page where we gave updates on the changes we were considering and more than 150,000 people joined and participated. We also wanted to give people a chance to try out the new design before launching it for everyone. More than 40 million people tried it out and 30 million continued using it.

It’s tempting to say that we should just support both designs, but this isn’t as simple as it sounds. Supporting two versions is a huge amount of work for our small team, and it would mean that going forward we would have to build everything twice. If we did that then neither version would get our full attention.

The challenges of acquiring social media businesses

By | Consumer Internet, Exits | No Comments

Acquiring social media companies is a tricky business as shown by yesterday’s rumour that Ebay is putting StumbleUpon up for sale – over the last twelve months traffic has declinced by 70% as measured by unique visitors and 19% as measured by page views, and it is likely they will get less than the $75m they paid for it in May last year.

The problem is that acquirors haven’t quite figured out how to manage these companies post acquisition.  As far as I can tell one of the biggest challenges is balancing off the fear that if a service is integrated into the acquirers offering it will lose it’s magic (particularly if the founder is still around) with the feeling that if it is left unintegrated there will be few synergies and it might slowly whither on the vine as the best people drift off to work for new startups.

I think this is largely a product of youth.  In sectors like software and semis that have been around much longer experienced acquirers like Broadcom, Cisco, and IBM have acquisition processes that are both well honed and highly effective.

There is some evidence that digital media acquirers are starting to get better at this – the recent relaunch of Jaiku is encouraging from the Google perspective and elements of the Bebo acquisition by AOL bode well.