Monthly Archives

May 2010

Why I blog – investment theses and dealflow

By | Blogging | 4 Comments

Refining my investment theses and generating dealflow aretwo of the most important reasons that I blog, and we had a good day on bothcounts yesterday. 

In the morning I read an FT article about mobile couponswhich prompted me to write a post on the topic.  As usual the process of writingthat post clarified my thinking with regard to potential startup opportunitiesin this area (if you are curious check out the post) which was helpful in andof itself.  Most of you have probably experienced something similar, forexample if you have written a business plan for a startup – putting thoughtsinto words is a process which forces clarity and often refinement of your ideasand hypotheses. 

Up to this point instead of blogging I could have written apaper for my colleagues at DFJ Esprit and got the benefits above, although thediscipline of writing a post every work day helps make sure I spend a goodamount of time reading, researching, and working on investment ideas. 

But the real benefit of writing the post came after I hitthe publish button.  I think most of my posts are read by a few hundred toa thousand people (a number I piece together from the c3,000 subscribers to myfeed, around 1,000 unique visitors to the site each day and small number ofhundreds that visit each of the individual post pages) and a small number ofthose typically write a comment which moves the debate on to the next level,helping refine my theses further.  Yesterday that refinement came in the formof a blog post from @567Tech who quoted my piece and added his own thinking to it.

And then occasionally people bring companies to my attentionthat match the theses I have been describing, providing dealflow.  As a VCdealflow is my lifeblood, and I got stronger yesterday when Mark Hindmarsh and mindsmack leftcomments identifying two startups that I should look at in the mobile couponspace.

 

Saying ‘thank you’ to everyone who reads and comments onthis blog is something I don’t do enough.  I hope this post goes some wayto redressing that gap.  I owe a debt of gratitude to you all.

Quick review of Scribefire for Chrome – a blog editor

By | Blogging | 2 Comments

I used to be a big user of the Scribefire Firefox plugin and so I was keen to try out their new extension for Chrome when I heard it was released a week or two back.  I just used it to write a post about mobile vouchers and I’m using it again to write this quick review.

The pluses:
  • Very quick to install
  • Runs within a tab in Chrome, so no extra application on my desktop
  • It’s fast
  • Log in to my blog was quick and easy
The minuses:
  • No option to upload images – you can only link to an image URL, so the image will disappear from the post if the person who is hosting it takes it down
  • The pop up boxes to add links come up too small and you have to scroll down to click the ‘submit’ or ‘cancel’ buttons
  • You can only specify one category per post
Overall I can see myself using it occasionally to make a quick post, but most of the time I will keep using Microsoft Livewriter which, whilst not being a great piece of software, does handle images very well.

Point of sale redemption is key to mobile vouchers/codes

By | Advertising | 27 Comments

There is an interesting article in the FT today talkingabout the rising influence of mobile in commerce generally – largely driven byrising smartphone penetration  – up to 30% of new phones sold in the US in Q1 from 21% in Q1 2009.  In summary people are using the mobile web to:

  •         Check competitor’s prices whilst they are instore
  •         Research products
  •         Read product reviews
  •         Buy products
  •         Access and redeem coupons

Retailers are rightly worried about the increased price transparency that comes with the mobile internet and whether they will have to reduce prices as a result, but from a startup perspective I think the mobile coupon opportunity is the most interesting one here.  I think I first saw a business plan based around mobile vouchers back in 2000, and I have probably seen one every year since then, but recent developments have me wondering if it might finally be an idea whose time has come, and that is because smart phones are enabling point of sale redemption.  According to the FT article US retailers Kroger and Target have begun issuing money off ‘digital coupons’ that can be downloaded to mobile phones and scanned against purchases at the store check out.  Similarly in Japan at McDonald’s users can download a coupon and then wave the phone over a reader at the till to receive a discounted price, and if they are on the right network they can even have the cost of the meal added to their mobile bill.

The point of sale redemption is usually based on 2D bar codes called QR codes (see picture) and it is this which makes the end to end coupon experience low friction enough that it could really take off.  The major barrier now is retailers updating their EPOS systems, which is expensive and won’t happen over night, but is clearly starting.  The obvious consumer oriented startup opportunity lies in driving people into real world stores by getting them to download coupons onto their mobile phones, and then taking a slice of the transaction – this is in many ways a real world parallel to the online affiliate network opportunity.  There might also be opportunities in technologies which enable this process.

Turning quickly to the other areas described in the FT article, I’m a big fan of the Amazon iPhone app, but forthe next little while I think m-commerce will be limited to big brands like Amazon thatusers already trust and who can afford to build high quality rich mobile apps.  As a result mobile price comparison and research sites will struggle to make direct links to transactions and the cost per action advertising model which supports these sites on the web won’t translate directly to mobile. Once mobile couponing gets underway, that will change. 

Apple’s product development model could work for everyone

By | Startup general interest | 3 Comments

You can argue with the way Apple operates its ecosystem and question the sustainability of its closed system mindset, as I have repeatedly on this blog, but one thing you can’t question is the quality of their execution.  We have all seen the iPod and then iPhone/iTouch spread to what seems like near ubiquity and been impressed with the early success of the iPad, but the best guide is their share price which is up from $38 this week five years ago to $255 today.

The two elements of execution they most excel at are probably making great product and marketing, and this description of part of their product development process from John Gruber on Macworld could, and arguably should, apply to just about any startup:

They take something small, simple, and painstakingly well considered. They ruthlessly cut features to derive the absolute minimum core product they can start with. They polish those features to a shiny intensity. At an anticipated media event, Apple reveals this core product as its Next Big Thing, and explains—no, wait, it simply shows—how painstakingly thoughtful and well designed this core product is. The company releases the product for sale.

This is another way of saying, keep it simple, do one thing really well, and the product should be good enough to speak for itself. Oh, and getting the launch right is important.  All these ideas are more true in startups than large companies where there usually isn’t the resource available to develop a rich and complex product before the first release and if the product isn’t good enough to generate word of mouth marketing life is likely to be difficult.

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Twitter Weekly Updates for 2010-05-16

By | Weekly Twitter digest | No Comments

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US ad market up to nearly $6bn in Q1

By | Advertising, Facebook | 2 Comments

Good news seems to be cropping up in market stats and company results everywhere at the moment, certainly the bulk of our portfolio is trucking along nicely.  I just hope that sovereign debt crises don’t upset the apple cart.

The latest came from Comscore data and Interactive Advertising Bureau data reported on Techcrunch out yesterday, showing that the US display advertising market is in good health.

On the overall market, revenues hit $5.9bn in Q1, 7.5% up on the same period in 2009, but less than the previous quarter.  As you can see from the chart the market is looking much healthier than in the last 12 months, but is still in the same territory as the 2007-08 period.

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On the display ad side, 1.1tn ad impressions were shown in Q1 2010, 15% up on the year ago figure.  The spend was estimated at $2.7bn, which is apparently also growing, although the comparison figure isn’t given.

The average CPM across the board for Q1 works out at $2.48, and the big question for publishers of course is which way that is going.  Again no data given, but I suspect it is still declining.

The other interesting fact in the Comscore report is that Facebook.com now accounts for 16% of display ads served, more than any other player by quite some margin.  I continue to hear good stories about the effectiveness of their targeting too, making it possible that they are bucking the trend in CPMs.

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Facebook privacy questions should be judged by consumers not politicians

By | Facebook, Privacy | 9 Comments

As you may well have seen there is quite a furore at the moment about Facebook’s new privacy settings – see the articles today in the NYT, FT and GigaOM, and it does seem to me like Facebook could be doing a better job here, at least by making privacy settings simpler and communicating what they are doing better.

But that does not mean they should be forced to change their service by the regulator, as has happened already in Canada, and now seems a possibility in Europe.

Nobody is compelled to use Facebook and everybody has the option of not sharing any data, by closing their account.  To me this makes Facebook’s privacy settings an issue to be decided in the market by consumers not by politicians.  Google Street View is also getting a lot of criticism, but this case is different because everybody on Facebook chooses to be there.

Long time privacy advocate Alan Patrick wrote a blog post yesterday which talks about a competing service to Facebook which has been getting a lot of early support – if people care about privacy they will migrate to alternative social networks like the one Alan describes.

Meanwhile, within reason Facebook should have the right to build the service it chooses and do what it needs to do to make money.  Right now it seems that politicians are stepping into areas that should be left to Facebook.  For example in Germany they are talking about compelling Facebook to allow users to create accounts under pseudonyms, which runs contrary to Facebook’s philosophy since the start (see FT article), and in Europe generally they are seeking to regulate default privacy settings in a detailed manner (see PaidContent article).

This matter is naturally of huge concern to Facebook who are holding an all hands meeting on this subject today because they rightly fear that regulators might undermine their business.  It would be to the detriment of just about all of us if that were to happen.

A caveat to finish: protecting minors is a different matter to everything I’ve talked about here, and should be of prime concern to all of us, including governments and regulators.

Apple’s ecosystem to dominate?

By | Apple, Mobile | 9 Comments

Regular readers of this blog will know I’m a fan of open systems and competitive markets, believing that they facilitate innovation, and as such I’ve been hoping that Android will become a viable competitor to Apple.  Despite some good news yesterday on Android’s Q1 market share it seems to me that generally the winds seem to be blowing Apple’s way:

  • The launch of the iPad has been a huge success – sales passed the 1m mark at the end of April, reaching that milestone twice as quickly as the original iPhone.
  • Momentum and hype are building around the launch of iAds, with rumours of brands being prepared to pay up to $20m to be one of the launch partners.  John Batelle does a great job of explaining the product and getting behind the buzz here.
  • The iPhone App Store continues to go from strength to strength, with 4bn apps downloaded now and 185k apps in the store.
  • The mobile Linux market appears to be fragmenting with negative implications for standardisation and effective competition with Apple – I fear that companies are seeing Apple’s success with an integrated hardware-software model and drawing incorrect conclusion that to compete effectively they should copy

All of this has huge implications for the type of mobile startup that will be successful over the coming years.  If you think that Apple will win you would agree with Ben Holmes of Index Ventures who was saying at a conference last week that he is looking for gaming companies 100% focused on the Apple ecosystem, if you think they will only be a small part of the market then a cross platform capability and distribution strategy becomes critical.

My slight fear is that if Apple wins the tax will take and control they will exert might undermine businesses that would otherwise have been successful, as the mobile operators did before them.  I also wonder how Apple will react to a business that grows within its ecosystem to become powerful enough to constitute any kind of threat.

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The DealMap – aggregates Groupon style daily deals

By | Advertising, Ecommerce | 4 Comments

Via Greg Sterling’s Screenwerk blog I discovered The DealMap which collects data on daily offers largely from daily offer sites like Groupon and Keynoir.  It then makes these deals available in a daily email, via a heatmp, and soon via mobile apps (global and London heatmap’s below – and I note with sadness that there are no offers near my home in N5 :-().

image

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I have been watching the success of Groupon and the emergence of multiple clones in Europe with interest.  I often get asked about how I think it will shake out, and whilst I think that the daily deal model is of value to both consumers and merchants my fear in Europe is that competition may put margins under undue pressure.  Given our current later stage investment strategy we haven’t made any investments in this sector, but that could well change if a leader emerges who is making the model work.

My concern around margins has had two aspects – firstly that competition will drive up the cost of acquiring subscribers to email lists and secondly that having a choice of daily deal sites will prompt suppliers to try and cut the margin they give to the site in return for providing customers (I think Groupon takes 40-50%).

If sites like DealMap gain traction then I imagine they will start looking for a piece of the action, putting further pressure on margins.

Update: I’ve heard from Keynoir that they block crawlers from accessing their deals and hence they won’t appear on DealMap.  I don’t know how this pans out across the sector, but if all the major daily deal sites block DealMap then clearly they won’t have much of an impact on margins, or anything else.

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Android making great headway

By | Apple, Google, Mobile | 2 Comments

According to this chart which I picked up from Peter Kafka’s MediaMemo Android is now outselling Apple.  As Peter points out the chart is based on survey data and so might be a little unreliable, but apparently this particular survey firm is usually pretty accurate.

Now that they have the device volume it seems to me the only major block to Google competing effectively with Apple in the app arena is development of a payment system as convenient as iTunes.

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