Monthly Archives

June 2009

Yahoo! closes a business it acquired for $160m last year

By | Exits, Yahoo! | 2 Comments
Yahoo! Messenger

Image via Wikipedia

Yahoo! is apparently closing down Maven Networks, a company it acquired in May last year for $160m.  If you read the Techcrunch report Yahoo! is claiming that the technology lives on in some of their other products, but tellingly they are not migrating customers on the Maven platform to another service.

New Yahoo! CEO Carol Bartz says they are still interested in making acquisitions, but as I wrote yesterday unless they improve their track record I can’t imagine this enthusiasm will last for long.

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China bans virtual world gold farming

By | Virtual Worlds | 4 Comments

Up until now wealthy players of virtual worlds and MMOGs like World of Warcraft have been able to expedite their progress through the game by spending real money to acquire levelled up players and other in-game virtual goods in a grey market largely supplied by Chinese labour.  According to Information Week China has now banned the trade of virtual goods and services for real money, so this practice will largely come to an end – or maybe move to Africa….

This little talked about aspect of the MMOG ecosystem is actually quite important because it makes the games much more attractive to time poor but cash rich players, which are exactly the type of punter that everyone wants in their worlds.

I have been writing much less about this sector recently because it has become clear that virtual worlds are very difficult businesses to make a success of, much more difficult than I had thought.  On top of the difficulty and expense of building a good virtual world it has transpired that cost effective customer acquisition has been beyond most startups in this category – largely because of poor conversion from visitor to active player and monetisation.  This development will make monetisation more difficult still.

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Making M&A work in new media – some insights from Google

By | Exits, Google, Microsoft, Yahoo! | 3 Comments

 

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In the software, semiconductor and networking spaces there are a number of large companies that have made acquiring startups a core part of their business strategy.  These companies have developed well honed M&A processes – from evaluation through acquisition to post merger integration.  As a result they understand what they are getting and what they can do with it and therefore what they should pay – three important features of any well functioning market.  Cisco, IBM, Oracle and HP are perhaps the most active exponents of this strategy.

In the new media space things are not yet that mature.  Google, Yahoo!, Microsoft and AOL have all made a decent number of acquisitions and in the evaluation and acquisition phases they do things in largely the same way as the pre-web tech giants, but in the post merger integration phase their track record is much more spotty.  I’m not going to name names here other than to point to a previous post about the number of failed acquisitions that Google has made and to say that the others are no better, and often a lot worse.

And, at the risk of stating the obvious, it would be great for everyone in this space if the acquirers of our businesses were more successful with the businesses they acquired.  That way they will make more acquisitions in the future, and at higher prices.  My fear at the moment is that the poor success rate will lead to a decline in transaction volumes.

These thoughts have been at the back of my mind for some time, and I have long thought that one of the big challenges is the difficulty of ringing out back end synergies when you acquire a new web service.

This post was stimulated by an article on The Register this morning which described a spat between two senior techies from Microsoft and Google.  The Microsoft guy was describing the multiple projects they have going to improve the performance of their various web properties and how they were doing different things in different places for different apps – in other words he was describing the patchwork approach they are forced to adopt because they are not running everything on a single platform.

The Google guy (Vijay Gill) responded by pouring scorn on Microsoft, saying they have taken entirely the wrong approach.  At Google they force everyone to develop to the same platform (which includes Google’s distributed file system GFS, BigTable its distributed database, and MapReduce its distributed number-crunching platform).  Then when they get an improvement in any of the underlying infrastructure all the apps benefit.  In other words they get back end synergies across all their apps.

The challenge with this approach is on the people side.  Vijay put it like this:

"People are lazy. They say ‘I don’t want to design my applications into this confined space.’ And it is a confined space. So you need a large force of will to get people to do that."

The Google approach makes much more sense to me.  The people challenges might be difficult but once you are over them you are sorted.  If you take the other approach, and Yahoo! are also in this camp, then you might have an easier time up front with your developers, but you sign yourself up to a lifetime of difficulty as your apps scale.

Moreover, the Google approach reminds me very much of the approach which served Cisco so well during their ascendancy.  Like Google Cisco had it’s own proprietary software stack, they called it IOS, short for Internet Operating System, and everything had to be written to it. 

Bringing this back to M&A – going back a little way, every acquisition Cisco made was ported to IOS and the cost and expense of doing this was understood prior to a deal getting done, and hence they knew with reasonable certainty that the extent of the synergies they would get (this process was in fact so visible that startups targeting an exit to Cisco would start thinking about how to reduce this cost long before they came to sell themselves).  As I have written before it looks like Google is adopting a similar approach.   For me this is great, and the more vocal Google is about it the better.  That would help them overcome the people challenges at the point of acquisition.

The big picture here is that if Google can get half as good at acquiring businesses as Cisco, and other leading businesses in this space can then copy their best practice, it will be fantastic news for all of us.

 

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Twitter makes customer service more effective

By | Twitter | One Comment

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In another example of Twitter being used to increase efficiency there is a story on USA Today about Comcast using Twitter to communicate with customers after lightning caused a blackout during a hockey playoff game.  This is efficient for both Comcast and the customer.

First the consumer perspective:

"I did a search on Twitter as soon as the game went off the air," says Dave Decker, 31, a Web developer in Pittsburgh who regularly tweets while watching sporting events. "The mystery was resolved in minutes. Before Twitter, it would have been a nightmare trying to find out what happened on the phone."

and from the service provider perspective:

The popular communications technology has helped companies quickly and inexpensively respond to customer complaints, answer questions and tailor products and services. It has supplemented current customer services, easing the load on call centers and expensive mailers that most consumers abhor. Twitter, Facebook, YouTube and online software services such as LiveOps, Salesforce.com and RightNow Technologies are all are being used to improve customer service, retain users and gain a competitive advantage.

Finally, three other social media success stories:

Direct sales. Dell says it has sold more than $2 million worth of PCs through its @DellOutlet account (over 710,000 followers) on Twitter since 2007.

Up-to-the-minute service details. Twitter can function like a real-time search for airlines and others. For example, JetBlue (@jetBlue; over 730,000 followers) assiduously answers traveler queries about flight times, delays and weather updates. "It’s like an early-warning system," saysspokesman Morgan Johnston.

•Customer feedback that leads to enhanced services. Starbucks is using a blend of social media via Twitter (@Starbucks; over 230,000 followers), Facebook (3.2 million fans) and its own social-networking site (MyStarbucksIdea.com) for product ideas and feedback. Splash sticks, the company’s new plastic plugs for sip holes, were created in part through feedback.

 

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Twitter as a productivity tool – a financial services example

By | Twitter | 5 Comments
New York Times zu Twitter

Image by Frank Hamm via Flickr

A month or so ago I wrote about Twitter as a productivity tool for participants in the Hacking Education conference in New York – that was quite a loose example of how Twitter extended people’s reach into new conversations and extended the range of existing conversations, thereby making the communication process more efficient for all.

There is a report in the Telegraph today about hedge fund traders using technology from US company StreamBase to mine the Twitter stream for information that they can plug into their automated trading platforms. 

For me this is a pretty clear example of Twitter being used as a tool to increase the productivity (or more accurately effectiveness) of trading systems.

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More good news for Bing

By | Microsoft, Search | One Comment

Fresh news out today from search marketing technology company Efficient Frontier shows the Microsoft search engine is making good progress with it’s share of paid clicks.  If this trend continues the advertising budgets will follow.

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This comes on top of good news about their share of searches, so I’m guessing folks at Redmond are pleased.  It is still very early days though, as the folks at Efficient Frontier point out, two weeks data doesn’t constitute a trend.

 

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Wednesday fun – Chris Anderson abuses ‘free’

By | chris anderson, Content, Copyright | 2 Comments

In an ironic twist Chris Anderson is guilty of taking content for his latest book from Wikipedia for free and without citation:

Chris Anderson and his US publisher Hyperion have said they intend to "correct" future editions of his title Free after the Virginia Quarterly Review said it had "discovered almost a dozen passages that are reproduced nearly verbatim from uncredited sources", with most "but not all" coming from Wikipedia.

And his excuse, poor:

Responding in an email after VQR posted its findings online, Anderson said he "had the original sources footnoted," but "lost the footnotes at the 11th hour", and admitted that in his "rush" to publication he had forgotten to do a "write-through [which] covered all the text that was not directly sourced".

Please!

Full story on Bookseller.com.

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Facebook versus Google

By | Facebook, Google, Search | 11 Comments

There is a great article in Wired today describing how Facebook is increasingly a threat to Google.  First I am going to pull out what is the best explanation I’ve seen of why the two companies have diametrically opposed views of the web:

For the last decade or so, the Web has been defined by Google’s algorithms—rigorous and efficient equations that parse practically every byte of online activity to build a dispassionate atlas of the online world. Facebook CEO Mark Zuckerberg envisions a more personalized, humanized Web, where our network of friends, colleagues, peers, and family is our primary source of information, just as it is offline. In Zuckerberg’s vision, users will query this "social graph" to find a doctor, the best camera, or someone to hire—rather than tapping the cold mathematics of a Google search. It is a complete rethinking of how we navigate the online world, one that places Facebook right at the center. In other words, right where Google is now.

I’ve long had the feeling that social search is going to be important, but despite a lot of meeting startups in this space and spending a lot of time thinking about the topic I have struggled to see how it will work in practice.  Maybe querying the social graph (on Facebook), or more probably the extended social graph, will provide the answer.

The Wired article is quite long, but well worth a read if this topic is of interest to you.

I’m going to bring out three other highlights here:

  1. Wired describes Facebook’s four step plan:
    • Build critical mass – largely done
    • Redefine search – this will perhaps be the hardest part, but as described above the basic idea is already visible
    • Colonize the Web – Facebook Connect and Open Stream allow FB to extend it’s reach into and gather information from a myriad of other web apps
    • Sell targeted ads everywhere
  2. The biggest advertising budgets are still not online – offline spend on brand advertising last year totalled $500bn, which compares with online brand advertising of $50bn.  Google has not been terribly successful in this market.  Facebook hopes it can be.
  3. There is now a TON of information on Facebook that is hidden from Google search – FB’s 200m members add 4bn pieces of info, 850m photos and 8 million videos every month.

As pointed out in the comments to the wired article there is of course space on the web for both Google and Facebook to continue to be successful.  I guess the interesting thing here is that Facebook is starting to look like it could become a threat to Google’s utter dominance, although they obviously have a long way to go, not least in finding a way to make money.

Habitat jump on Twitter in the wrong way and then change their behaviour quickly

By | Advertising, Social networks, Twitter | 7 Comments

socialmediatoday have a post up chronicling the adventures of Habitat in Twitterland over the last few days.  Within a very short space of time they opened up their Twitter account, started abusing #hashtags so their Tweets appeared in trending topics, got a lot of flak for being spammers and then deleted the offending Tweets and stopped abusing #hashtags.

For those that don’t know Habitat is a UK furniture retailer with a trendy brand that sits a little upmarket from IKEA.

I like this story for a couple of reasons:

  1. It shows how difficult it is for brands to engage effectively in social media unless they are genuine
  2. It illustrates how quickly feedback loops operate in the realtime web era – I say credit to Habitat for reacting so quickly

socialmediatoday is upset that Habitat hasn’t apologised.  Whilst I agree that would be better than simply stopping their bad behaviour, I’m not so sure they should be held to task for not publicly admitting their mistake.  Habitat is a long established brand and social media will still be a small part of their marketing budget.  It is in all our interests that companies like them continue to experiment with new media and if the price of failure is putting out apologies that can be read at will be superiors then my fear is that we will simply get less experiments and hence less money flowing into the sector.  Particularly as I suspect the storm has been limited to the Twittersphere and any apology would be seen much more widely.

I won’t repeat the detail of the socialmediatoday post, but I’ve put some of the offending Tweets below as the crassness of their #hashtag abuse is amusing.

imageand an example of the some of the negative response:

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App store wars

By | Mobile | 8 Comments

Every smartphone worthy of the name comes with an app store these days, but so far Apple’s is the only one that has been successful.  I would argue that there are a number of hygiene factors that Apple got right, and which some of the others have missed, but the critical success factors are a pre-integrated payment system (iTunes acounts) and trust.  Put another way Apple’s brand and history selling songs via iTunes were key to it’s success.

I am writing this today on the back of news that the app store for the Palm Pre (which they call the App Catalog) has achieved only 660,000 app downloads in its first twelve days and is on course for 1 million in the first month – a total which would put it at 1/60th of what Apple’s app store achieved in the same period.

As Techcrunch points out they got one of the hygiene factors wrong – most notably there are only 30 apps available and they have restricted availability of the developer SDK meaning the number is unlikely to grow quickly going forward.  I call this a hygiene factor as it is relatively easy to fix.  Having a pre-integrated payment system however, is really hard to fix.  The only remotely option available to companies like Palm is to cut deals mobile operator by mobile operator so that app charges appear on the bill, but cutting these deals this is a painful process.  That said it does at least have some chance of success, unlike the other option of asking consumers to enter their credit card details on their phones or put money into a mobile wallet, which has no chance of success, at least in my opinion.

Over the long run I think the solution will be a mobile payments system that operates with Paypal like simplicity and is independent of the device manufacturers and network operators.  Newly funded Boku might provide the answer in time, but it isn’t here yet.

The list of app stores I’m aware of is:

 

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