Monthly Archives

August 2009

Twitter Weekly Updates for 2009-08-30

By | Weekly Twitter digest | No Comments
  • Published a new post: Twitter Weekly Updates for 2009-08-23 #
  • Published a new post: A great presentation on corporate culture #
  • Brad Feld comes out against angel groups charging entrepreneurs – – I agree #
  • I'm looking forward to this Apple Tablet – #
  • I forgot to credit @wreeve when I posted the Netflix Culture presentation yesterday – #
  • Published a new post: Apple should eliminate their app review process #
  • If newspapers claim they are serving the public why are they working so hard to limit who sees the content, from Techdirt – http://bit. … #
  • Working link this time #
  • Nice to see DFJ Esprit in the top five Euro venture firms – #
  • Great post from Scoble comparing Twitter, Yelp, Facebook and Google arguing the money is in social business listings – #
  • Published a new post: Remnant inventory sometimes not worth selling? #
  • Writing article for paidcontent on future of news, how the news itself is changing +what it means for society and business, pointers welcome #
  • Brad Feld talks sense on standard first round termsheets and legal docs – #
  • RT @rodneyschwartz: tonight justgiving celebrates over £500 million to charities Now that's impressive! #
  • Thanks for the pointers on news @MWarneford and @kolvin. Article now written in reply to MWarneford #
  • using socnets more increases your chance of getting burgled? and maybe your insurance premiums! – #
  • Published a new post: Good website design presentation – espescially on sign up processes #
  • Spotify overtakes iTunes in Sweden – #
  • RT @alexrahaman: Its official, Orange have bought us CONGRATULATIONS!! #
  • RT @hermioneway: Best tech news all year: Apple approves the Spotify App for iPhone! #
  • Published a new post: Opinion: the news industry needs to look beyond news to find a business model for 21st cent… #
  • Just finished re-reading Carlotta Perez's "Tecnological Revolutions" – the only book I've read twice in a long time. It's awesome. #

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Opinion: the news industry needs to look beyond news to find a business model for 21st century business

By | Business models, Content, free | 10 Comments

I originally wrote the post below as an opinion piece that was published on paidcontent yesterday – although I’ve changed the title here to one I think is a little better.  Ahhh, the joys of being one’s own editor.


News Corp (NYSE: NWS). and other traditional news businesses are hand-wringing over how they will make money on the internet. I think they are focusing on the wrong problem.

The web is more than just a new medium. Rather than thinking about how they can sell the same old news via a new channel, media bosses should be taking this opportunity to re-examine old assumptions, to rebuild their product for the 21st Century.

The interesting thing about the news industry is that, when we examine it from the ground up, we quickly realize that it lost touch with its customers a long time ago, and that the model for the future will most likely look very different to what we are used to.

The great tragedy of the newspaper industry in the late 20th Century was that, in the pursuit of profit, quality journalism became a dying art. Budgets were reduced, journalists were asked to write more stories per day and were given less time to check facts. At the same time, editors were instructed to avoid stories that might create controversy and the expense of lawsuits. The result was more and more bland articles recycled from paper to paper, more politically motivated editing and the collapse of public trust in the newspaper industry. This story is chronicled in Flat Earth News by Nick Davies.

We kept buying, though, because we didn’t have any choice. The newspaper industry operated as an effective oligopoly and the value of the news itself was impossible to pick out from the bundle of hard copy distribution, advertising and content that we all purchased.

Fast forward to 2009 and the situation looks very different – all of a sudden, there is choice and the bundle has been picked apart. And, to make matters worse, the industry is possibly more exposed than any other to the trend towards $0 pricing for online content.

As Chris Anderson argues in his seminal book on this topic Free, The Future Of A Radical Price, the answer to this conundrum is not to swim against the tide and find a way to start charging for news, but, rather, to understand what is becoming commoditized and abundant, and what new scarcities are created as a result. In the book, Chris points out that, when he was young, food was scarce and the main problem of poverty was hunger, but now food has become so cheap and abundant that the biggest problem of poverty is obesity. The new scarcity is health, spawning huge industries in diet food and health services.

In the news industry, it is the news itself that has become abundant.  Making a trip to the corner shop and buying a paper to find out what is happening in the world has shifted from being the only option to being the least good of a thousand options. I prefer to check Techmeme and Twitter, but there is the choice of thousands of other sites, aggregators and services that can deliver to your desktop or mobile. Moreover, there is no exclusivity in news per se – getting the headline from one place is pretty much equivalent to getting it from another.

The good news is that every abundance creates new scarcities and this is where the news industry must go to make money in the 21st century. The scarcities created (and enabled) by abundant news are interesting stories, thought provoking analysis, conversation and community, and trust/verification.

Interesting stories go beyond simple reporting of what has occurred, bringing in relevant context and staying with a topic as it unfolds. Thought provoking analysis will dare to shock, and to be wrong. Conversation and community will both make the experience richer for the active participant and improve the quality of the content on the site for the more casual reader. Trust and verification will make you go back to one site rather than another as you know the stories there will be more accurate (note breaking news should be published first and verified second, with appropriate caveats).

The successful news company of the future will have to take all this on board and deliver it with a radically lower cost base than this industry is used to. In the digital world, the news industry, like many others, will be radically smaller. This contraction is partly a consequence of much reduced distribution costs, but is also a reflection of the fact that the monopoly rents Fleet Street enjoyed in the last century are a thing of the past. Witness how Craigslist has reduced the multi-billion dollar classifieds industry to nearer $100 million.

Companies that follow the blueprint above are emerging already, notably TechCrunch for technology news, Talking Points Memo, FiveThirtyEight and The Huffington Post for politics, PerezHilton for celebrity, and Pitchfork for music. These niche sites all write compelling content, spend time building up their sources, check their facts, encourage writers to find the real facts behind stories and are trusted by their readers. And, they all generate solid advertising revenues and benefit from relatively low cost bases.

Note that none of them charge for news. They do, however, have the option of leveraging their standing in the community to generate other revenues.  TechCrunch runs the TC50 conference, Pitchfork organizes the Pitchfork Music Festival and Perez Hilton charges for personal appearances. This is, I think, the real business model for news companies in the future – build a community around news and stories and maybe make a little in advertising, but the real money will come from leveraging the position in the community to offer services no one else can.

I drew inspiration for this piece from a number of sources, and thanks to those who provided some pointers via Twitter.  I’d like to point to two authors/articles in particular that may recognise some of their thinking in my words – Paul Carr’s The future of journalism and Umair Haque’s – The Nichepaper Manifesto.

Good website design presentation – espescially on sign up processes

By | Startup general interest | 5 Comments

This presentation from design consultant Joshua Porter has a lot of great tips/reminders for maximising the efficacy of your site from the point of first contact with a new customer through to maintaining and increasing engagement over time.  I particularly like the pointers on registration processes.  Like me you may have noticed that for many sites registration is getting simpler and shorter and on slide 36 Joshua provides some AB testing data which tells us why – users have signup fatigue and often won’t be bothered unless they know it will be quick (and note the know).

As aside Joshua is practising a freemium model as a consultant. He gives away a lot of content for free and makes clear on his blog the extra stuff you get when you get him in person.  All consultants do this to a greater or lesser extent, but few make it as explicit as Joshua.

Remnant inventory sometimes not worth selling?

By | Advertising, Yahoo! | 6 Comments


There has been a big wave of interest in remnant inventory on the web in recent years, most notably with the acquisition of by AOL for $475m (a deal we backed when I was at Reuters Venture Capital) and RightMedia by Yahoo in an $850m deal.

The thesis behind these companies and their exits is that there is almost limitless inventory on the web and finding a way to monetise even just some of it and at low rates could generate a lot of cash.  And generate a lot of cash it has.  I’m not privy to much information about RightMedia, but I do know that AOL have been very pleased with the acquisition.

However, just because a lot of money has been spent through these networks doesn’t mean that they are necessarily delivering good value for publishers, and this is what Jim Spanfeller was saying in his post on paidcontent earlier this week.  The simplified version of his argument is that selling remnant inventory doesn’t generate much extra revenue and drives down prices across the board.

And, if anyone should know, it’s Jim.  He is the outgoing president and CEO of, he is the treasurer of the Online Publishers Association and chairman emeritus of the Interactive Advertising Bureau.

His argument exactly matches our experiences at WAYN where we have recently cut the inventory we are putting through RightMedia to focus on driving premium ad sales.  Our logic was that despite being a reasonable percentage of the inventory the revenue we were getting from remnant was a low percentage of total ad sales and that removing them would enhance both the experience on the site and the money we can make from premium deals.  The greater potential for premium deals comes from removing the option for advertisers to get access to WAYN on the cheap and because the remnant ads often detracted from the premium feel of the site (e.g. despite our best efforts they occasionally served ads for debt reconsolidation services).

I’m not going to publish numbers from WAYN, but Jim cites data from an IAB and Bain Consulting survey of seven member sites which found that the 30% of their inventory they were selling via ad networks was only generating 2% of their ad revenue.

I like to try and keep my posts to around this length, so I’m going to stop here, but if this topic is of interest to you then you should read Jim’s post as his full argument is much richer and nuanced than the short version I have produced here.  It’s full title is Publishers are killing web advertising’s potential with misguided pricing.

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Apple should eliminate their app review process

By | Apple, Business models, Google, Mobile | 5 Comments
I took this photo of my :en:iPhone and its SIM...

Image via Wikipedia

After reading a great post from Joe Hewitt I’m going to argue today that Apple should completely eliminate the app store review process.   This goes a step further than previous posts where I have argued that Apple should adopt a more open approach in its management of the iPhone app ecosystem, and be careful about blocking apps from the likes of Google and Spotify.

Joe makes three strong arguments:

  • We shouldn’t be afraid of a a world where anyone can publish an app to your phone.  After all it works pretty well on the web (and my Blackberry and many other devices for that matter), and fears of unscrupulous developers taking control of our iPhones are misplaced as the apps are sandboxed and have “scarcely any more privileges than a web app”.
  • The app review process is about enforcement of their terms of service and not about quality and therefore doesn’t add any value to the consumer or developer.
  • Feedback cycles would get shorter and apps would improve faster if the week long approval process for each new build was eliminated.

In a nutshell Joe’s argument is that eliminating the approval process would bring us iPhone owners better apps more quickly, and without any downside. 

On top of that fact that we would get access to the apps like Spotify and Google Voice that Apple is denying us at the moment.

The rub of course lies in the second bullet, Apple’s terms of service contain the requirement that an app doesn’t duplicate other functionality on the iPhone which gives them carte blanche to block apps which compete with other parts of their business.  To spell it out, Spotify competes with iTunes and Google Voice is a threat to Apple’s cosy carrier relationships.

My point in writing this post is not to revisit the now well rehearsed argument that Apple should let us use our mobile computers in whatever way we choose, but rather to highlight that there is no reason for the existence of the app store approval process beyond helping Apple to promote the interests of its other businesses and partners at the expense of its customers.

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A great presentation on corporate culture

By | Startup general interest | 2 Comments

UPDATE – when writing this yesterday I forgot to thank Will Reeve for the pointer.

This presentation from Netflix has some fantastic content. I particularly like the way the explanation of how values need to work in a company, the detail behind the values and the emphasis on managing using strategy and context rather than control.

Some of it goes a bit far though, notably their ideas around pay.

It’s a bit long, but it is worth the read.

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Twitter Weekly Updates for 2009-08-23

By | Weekly Twitter digest | No Comments

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Ownership of the social graph less important than eyeballs?

By | Facebook, MySpace, Social networks, Twitter | 4 Comments


The news this morning that Facebook will soon enable people to syndicate upadates from pages from Facebook to Twitter got me thinking that as social networks become more open ownership of the social graph is getting less important.

In the first phase of social networking everything was closed, meaning that if you wanted to network with your buddies you all had to be on the same URL for both publishing and consumption. It was this being closed that put the ‘network’ into social network and had investors theorising that as in traditional comms and more recently at Skype Metcalfe’s law would kick in making the big socnets much more powerful than the smaller ones leading to the creation of some huge winners.

The emergence of Myspace and Facebook validated this thesis to an extent but as these sites have become more open the network effects are getting weaker.

As a publisher I want to reach the largest audience I can and make my stuff available wherever people want to read it. When I write a blog post it goes out on RSS, and my status is updated on Twitter and Facebook with the title and a link back to the post. This takes advantage of my social graphs that are owned and resident in Twitter and Facebook without me actually going to these sites.

Moreover you can pick up those updates via third party clients without visiting Facebook or Twitter, consuming the content without delivering any value to the site where the social graph lives.

The same is true for my Twitter updates which I make without going to and can be read on Facebook, via the weekly digest on this blog and in third party clients.

The upshot of all this that value doesn’t accrue to the ‘owner’ of the social graph every time it is used and hence the value of these sites is less about the number of registered members and more about the amount of time people spend on them creating and consuming content.

Facebook’s acquisition of Friendfeed makes sense in this light, as does the recent rush of investor interest in companies like Tweetdeck.

The game doesn’t stop here though – to generate real value you need to make your app/site sticky and find a way to monetise. ILike and Slide‘s falls from grace have shown us that.

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The lessons of iLike’s low valuation

By | Exits, Social networks, Startup general interest | 9 Comments

As you may have seen it is heavily rumoured that Myspace is about to acquire social network based music site for around $20m (including $6m for employees).  On the face of it that seems like a low valuation for a business with 50m registered users, that is profitable and had offers from multiple buyers, according to Techcrunch.

Reading around all the blogs it seems to me there are two big takeaways here.

1. It is important to build value as well as traffic

Ultimately the true measure of value is net cash flow and it seems that despite being profitable there simply wasn’t much scale to iLike’s business in revenue terms.  I would speculate that is partly because not all their 50m users were very active (it is telling they always quote total registered users not active users) and partly because the inventory they do have doesn’t monetise that well.  Widgets on social networks suffer from the double whammy of limited real estate in an environment where ads perform poorly.

It is worth noting here, as David Pakman of partner at VC firm Venrock points out, that traffic is often a good lead indicator of value, just not always :).

2. Dependence is a weakness

The other big problem for iLike seems to have been that 70-80% of its traffic came from Facebook, making them vulnerable to changes in FB’s terms of service or if FB decided to launch their own music service.  So iLike was dependent for its future on the good will of Facebook, and If there is even a small chance that iLike could have its ioxygen cut off nobody is going to risk paying too much for the company.  This problem is all the more acute when the company you are dependent on hasn’t sorted out its own business model and is somewhat unpredictable.

Note that building a business on the back of another well performing business isn’t an inherently bad idea, but it carries its risks and if it will hurt you on exit unless you partner equivalently with other companies (in this case Myspace, Bebo etc.), have a partner who is very big and stable (there are any number of businesses dependent on Google that have exited successfully, including our former portfolio company which was acquired by AOL at a healthy price), or somehow make the other business depend on you just as you depend on them (as Photobucket did with Myspace).

The good news that comes from this analysis is that iLike’s fate needn’t be everyone’s fate.  If you are creating genuine value then I think the exit will still come – look at Friendfeed – but if the value isn’t there I guess the game is now well and truly up, but we probably knew that already.

Games publisher value add in an iPhone world

By | Casual Games, Venture Capital | 2 Comments


At the GDC conference in Cologne this morning I attended a panel session which was addressing the question of how games publishers add value to games developers in the iPhone ecosystem.  This is a topical question because in traditional games publishing the ability to deliver retail shelf space was beyond most developers and so they had little choice but to work with a publisher.  In the iPhone world this critical gating function has simply gone away – when Apple launched the App Store they announced that they would take submissions direct from developers and release everything that complies with their fairly simple guidelines.

As you’d expect the panel participants, which included representatives from leading iPhone publishers Chillingo and ngmoco as well as leading iPhone developers Subatomic and Fishlabs, had lots of ideas on the topic, which more or less fell into the following five areas (please shout if I’ve missed something):

  • Money
  • Marketing services
  • Advice on how to price the app (what level to start at, when to reduce it)
  • Advice on how to make the game better
  • Software the developer can use to make her game better and drive distribution (e.g. stats and social features)

I think that the last item on this list could well become the most important over time but it is largely a thing for the future.  The company furthest ahead in this regard is ngmoco and they released version one of their plus+ software only very recently, and Chillingo who are probably in second place have announced their first version of their Crystal SDK will be released shortly.

So the panellists talked mostly about the first four items on the list and the debate reminded me of discussions about VC value add to startups.  There is the money element and then there are the other things which are slightly intangible and which a startup or developer could do for themselves, but where a VC or publisher benefits from exposure to a much greater number of projects and might have more experience and/or contacts to bring to bear.

The fourth item on the list, that publishers help make games better, is perhaps the most contentious with Sergei of Subatomic (whose Fieldrunners game I love btw) saying openly that his company has all the creative skills they need and that publishers trying to help might not actually be helpful.  This of course has parallels in the VC world where some entrepreneurs will argue that they don’t need any help from a VC.

In the end this all comes down to the individuals and funds/companies involved.  Some startups will have enough experience and connections that however much a VC brings to the table it won’t make that big a difference to the eventual outcome and I’m sure the same is true of developers.  Sometimes though, and I would argue most of the time, the reverse is true.  When there is a good chemistry and alignment of thinking between the key individuals at the project and the investor you get a real 1+1=3 effect which goes way beyond the money.

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