Monthly Archives

February 2011

Google may be getting its mojo back

By | Google, Microsoft | 3 Comments

In private conversations recently I’ve found myself being quite critical of Google’s track record in innovation.  I’ve been saying that their search product is deteriorating and that outside of search the only business line they’ve really got working well is Android, and amazing though the success is even that has seen significant compromise as they allowed carriers to (ab)use the software to push their own services rather than sticking with their original ambition of truly revolutionising the mobile value chain.

Three developments over the last couple of weeks have got me thinking that before long I might have to change my tune:

  • Google belatedly changed their search algorithm to take action against the content farms that have been gumming up our search results – just a few days in the changes look like they are having a meaningful impact, although surprisingly Demand Media seems like it is emerging unscathed.  These changes are only partly based on data from the Personal Blocklist Chrome extension, which is pretty cool in its own right.
  • Chrome is getting a bunch of cool new features that is making it more and more like an OS, including the ability to have apps running in the background (i.e. without a tab open),
  • Google Docs got a boost with viewer support for a bunch of new file types (including Microsoft Excel) and the release of Google Cloud Connect which syncs Windows desktop MS Office files to Google Docs

If these changes live up to their potential in a few months Google could be looking a whole lot smarter.  People might have stopped complaining about the search results and Chrome/Google docs might be looking like a real threat to the Microsoft Windows/Office monopoly.

At that point the complaints will shift back to Google being a monopolist 🙂

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Twitter Weekly Updates for 2011-02-27

By | Weekly Twitter digest | No Comments

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Myspace loses nearly half it’s audience – a reminder that execution is everything

By | Uncategorized | 2 Comments

image As you can see from the inset chart Myspace’s traffic is declining at a hell of a pace.  This a reminder that ideas are cheap and execution is everything. 

I was talking with some folk earlier this week about which large companies had responded effectively to the internet and our surprising conclusion was that none of them had capitalised on the web opportunity as well as startups (Google, Facebook, Yahoo etc.), but we did say that three or four years ago News Corporation looked like maybe they would.  They had acquired Myspace, done a search deal with Google that more than covered the purchase price and had a couple of smaller things on the side. 

Fast forward to now and News Corporation is mostly notable for trying (and most likely failing) to push paywalls for their news properties.

The main thing that went wrong for them is, of course, Myspace.  Myspace has largely failed to innovate, and their attempts to build out Myspace Music were more aligned with the interests of the record industry than consumers, and were hence always likely to struggle.  By contrast, Facebook has rolled out a number of major changes to their offering and reaped huge rewards as a result.  Their execution hasn’t been flawless (we all remember Beacon…) but the newsfeed, opening up the application platform, and Facebook Connect and the Like Button have all been impressively implemented.

All this goes to show that even if you have scale and a solid business execution is everything.  If you are a smaller business that is doubly true.

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Are we in a bubble?

By | Startup general interest | 3 Comments

I was on a panel last night at an even organised by Jon Watts of MTM London.  The event was billed as a discussion about building internet businesses in the UK, but much of the debate turned to whether we are in a bubble at the moment, a topic that keeps coming up at the moment.

When there is talk of bubbles the comparison point is always with the 1999-2000 internet bubble, a period in which a) valuations sky-rocketed and b) many highly valued businesses lacked the substance to become real businesses.

The parallels between now and the late 1990s are:

  • that some businesses are commanding huge valuations – Twitter $8-10bn, Facebook $60-70bn, Groupon $12bn etc.
  • some much earlier stage companies are also receiving investments at valuations getting towards $100m for companies with a small number of months of good user growth but little else
  • there is a widespread feeling that new levels of web penetration are going to change the way we live and do business – last time round with the wired web, this time round with mobile

The differences are that the fundamentals are much stronger this timer round – revenues are higher, costs are lower and more real value is being delivered to users – and that the high valuations are largely limited to private companies in the Valley. 

For me the defining characteristic of a bubble is when a painful crash is likely, and I don’t think we are in that situation now.  Not yet anyway.  As Fred Wilson and others have argued, prices for some assets are definitely on the high side right now, but if there is a correction (which I think would be healthy) then the pain would largely be limited to VCs and other professional investors and I think it unlikely that the ramifications would be widespread.  Given that most of these businesses have real substance I doubt many of them would go under.

The next few months will be interesting to watch.  The combination of cuts in government spending and the impact of the middle east crisis on oil could undermine confidence in the general health of the economy both here and in the US which might lead to the correction mentioned above.  Alternatively the world economy might ride out these shocks, in which case the valuations of private companies might continue to rise and we may well find ourselves in bubble territory.

For a more pro-bubble read check out Alan Patricks How the Bubble moves to main Street.

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Avoiding co-founder conflict

By | Uncategorized | 5 Comments

Back in January I wrote a post inspired by Ev Williams comments on focus that I read in the TechStars inspired Do More Faster collection of pieces of advice for startups pulled together by David Cohen and Brad Feld. At the time I commented that I was enjoying the book a lot, and I wish I hadn’t left it on my shelf for so long before picking it up, somehow forgetting that I got distracted by another book (Surface Detail by Iain M Banks, rare for me to read non-fiction these days, but I love his Culture novels) –I’ve picked it up again now though and this time I’m going to paraphrase Dharmesh Shah’s thoughts on avoiding co-flounder conflict.

Dharmesh Shah is the founder of Hubspot – a provider of inbound marketing software that some of the smartest sales and marketing execs I know rave about.  He also writes the popular OnStartuUps blog.

Dharmash’s advice in a nutshell is to avoid founder conflict down the line by ensuring early on that you have a common understanding on a number of key, and often difficult, topics.  He provides the topics as a list of questions:

  • How should the equity be split?
  • How will decisions get made? (including if consensus is hard to find)
  • What happens to the equity split if a founder leaves the company?
  • Can a founder be fired? (operational matters should be separated from shareholder matters)
  • What are the personal goals of the founders? (lifestyle, make enough money to be comfortable, build a $billion company)
  • What role will each founder play in the company?
  • What is the commitment of each founder? (are there any side interests, how long will they give it to work, how long can they forego salary)
  • What salary will the founders take?
  • Will any of the founders invest cash, and if so, on what terms?
  • What are the financing plans for the company? (bootstrap, angel, VC)

As I’m sure many of you have experienced firsthand, founder conflict is often value destroying and personally painful.  It is also common – startup life is full of rough and tumble, change, great highs and great lows, all of which effect different people in different ways and challenge relationships.  Every year so far at TechStars one of the ten founder teams has split up by the end of the three month programme.

Asking these questions up front avoids conflict down the line and is also a good test of the strength of the co-founder relationship – if any of these topics are too difficult to address it may be a sign that getting to know each other better should be a priority. Asking these questions up front also makes it easier if there is conflict down the line. A three time serial entrepreneur friend of mine (who I won’t name for reasons that will become obvious in a second) had a difficult split with his co-founder the second time round and one of his main pieces of advice to aspiring entrepreneurs is to agree what happens if the founders decide to separate and document it legally. He had a simple 50-50 split and ended up in a protracted legal wrangle when they decided to go their separate ways. It got sorted in the end and the company went on to a multi hundred million dollar exit but the experience left such a scar that he often says ‘you simply must have a legally documented mechanism for decided what happens if you split with your co-founder, even if it is just tossing a coin’ [sic].

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London underground to get a mobile network – finally

By | London | 7 Comments

image It has emerged this morning that Huawei are bidding to provide mobile network on the London underground in time for the 2102 Olympics.  In my opinion this development is long overdue.  Just about every other major city I visit has mobile access on their metro system and if London is to remain a major financial, media and technology centre we should have the same.  Internet access is a key piece of infrastructure for modern economies and given the number of people that use the underground every day and the amount of time they spend there the benefits of web access underground can only outweigh the costs.

Over the years I have heard that problems of bureaucracy were the responsible for stymieing development, and I understand that the ageing infrastructure in the underground makes development expensive (many of the copper cables are apparently so old that if you move them they crack and stop working) but I suspect part of the problem is that the way mobile bills are structured operators wouldn’t benefit much the extra usage they would get.  Too many people are on unlimited data plans and don’t use up their monthly bundle of minutes and texts, and if these people use their phones on the underground there will be a marginal extra cost for operators, but no extra revenues.

I carry two mobile phones, a Blackberry which I use for voice and email, and an iPhone for browsing and apps.  Until recently the iPhone cost me virtually nothing, as provided I had call credit data access was unlimited, and because I use the Blackberry as my primary phone I rarely used up my call credit.  A month or so back that changed and now I have to regularly top up just because of data usage.  Obviously that costs me money, and is a pain on that level, but overall I welcome it as a step towards a more sustainable charging model.  Spectrum is a scarce resource and operators should be charging more to those of us who use it more, for data as well as voice.  If they did that then the business cases for further development of their networks would be easier to make, which would be a good thing for all of us.

There is a case that the government, or local government, should be subsidising the rollout of mobile to the underground as a public good.  I think there is merit in that argument, but right now and for the next couple of years there simply isn’t enough money to go round.  It is good to see that the London Mayor Boris Johnson and his team are doing everything they else they can to make this development a reality.

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Apple’s new subscription rules would make iOS a no go area for Rhapsody

By | Apple, Google | 3 Comments

As you probably saw last week Apple announced new subscription billing rules that are punitive to their developer and publisher partners.  I wrote about them last Thursday arguing that given the rise of Android Apple should be trying to make itself more attractive to partners, not less.

On Friday Jon Irwin, president of the popular music service Rhapsody went on the record saying that after Apple’s new 30% cut they wouldn’t be able to make any money on their service:

Our philosophy is simple too – an Apple-imposed arrangement that requires us to pay 30 percent of our revenue to Apple, in addition to content fees that we pay to the music labels, publishers and artists, is economically untenable. The bottom line is we would not be able to offer our service through the iTunes store if subjected to Apple’s 30 percent monthly fee vs. a typical 2.5 percent credit card fee.

If this means that Rhapsody stops being available on the iPhone/iPad some people will presumably switch to Android or other platforms where it is available, which that would be bad for Apple.  A similar logic applies to services like Spotify and maybe even Lovefilm.  Rhapsody has 750k subscribers, of which apparently a ‘substantial proportion’ use their iTunes app.

In the Techcrunch piece that reported Jon Irwin’s statement they question whether Apple will back down from their proposed subscription pricing, as they did last year over their proposal to limit the activity of third party ad networks on their devices.  I hope they back down this time as well.  Much as I would like to see Android compete more equally with iOS I wouldn’t want to see it happen this way, i.e. at the expense of publishers and developers who have to close off the part of their revenues.  Much better would be for Android to improve as a platform to the point where it rivals iOS.

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Twitter Weekly Updates for 2011-02-20

By | Weekly Twitter digest | One Comment

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The end of the smartphone – Google’s idea

By | Uncategorized | 9 Comments

This morning I went to a breakfast briefing given by corporate finance and research house GP Bullhound to share their ten predictions for 2011.

Their predictions are:

  1. Google’s Android outdistancing Apple’s iOS
  2. Mobile payments to surge in 2011
  3. Social shopping, dating and gambling thrive on mobile
  4. Augmented reality apps take off
  5. Mobile and smart grid applications open the digital home
  6. Privacy becomes a top priority for social network users
  7. Thin film makes a come back
  8. Short messaging format will gain wider support and momentum
  9. Gaming moves to the cloud
  10. A new generation of consumer business intelligence and data analytics apps will emerge

Overall I think this is a pretty good list (and it was very amusingly presented by Per Roman and his colleagues) – as you’d expect, I agree with some of them more than others.  I remain unconvinced that people really care enough about privacy for it to become a ‘top priority’, but I am with GP Bullhound on the business intelligence/analytics opportunity and particularly on the strength of Android – something I have now written about on three days out of five this week.

Per was in Barcelona this week for Mobile World Congress and he met with the Google Android folks.  Google’s belief is that within a couple of years all mobile phones will be smartphones – with touchscreens, good browsers, multi-media capability etc.  Free Android software and cheaper hardware will mean that nobody needs to make do with a low end feature phone anymore, at which point we should simply call them ‘phones’ because everyone has one and the prefix ‘smart’ is redundant.  Hence the end of the smartphone.

The general belief seems to be that in this scenario Apple will hold onto the top end of the market and will be just fine.  I’m not so sure about that.  Developers will start to produce their Android apps first and their iOS apps second given the greater number of potential customers on Android causing early adopters to switch.  Additionally the high end Android phones will come to match the iPhone over time, buoyed by structural advantage of a free operating system.

The news today that Apple is considering making a cheaper phone suggests they see this risk.

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Apple needs to make friends right now, not enemies

By | Apple, Google | 12 Comments

On Tuesday I wrote about how Android is continuing to gain momentum, but that it still lags Apple in terms of the health of its ecosystem.  Also on Tuesday Apple announced a tightening of the rules around purchases via the apps that run on their platform which are designed to increase Apple’s share of the pie.  In a nutshell any app or service that is available on an iPhone/iPad/iTouch needs to be available via Apple’s app store at the same price or less than it is available elsewhere, and of course Apple will take their 30% cut.

Newspaper publishers who sell subscriptions via their website and keep all the margin this will lop a significant chunk off the revenues they hope to get from selling content online, their great hope.

Amazon will have to put a link in their Kindle apps that launches Apple’s single click in app purchasing, on which Apple takes a 30% cut.  That will replace the link to Amazon’s website where they get to keep all the margin.  I don’t know if it will be profitable for Amazon to sell books if they have to hand over 30% of the purchase price to Apple.  If not they may have to pull their Kindle apps.

It will of course be easier and simpler for consumers to buy direct from their iPhones and iPads apps than launch a separate browser session, type in the link, etc. meaning that newspaper publishers, Amazon and Apple’s other partners will end up handing a significant portion of their sales to Apple.  Either that or move off the platform.

No wonder the Wall Street Journal is reporting that Apple’s latest move raises anti-trust issues.

Given the growth in the Android platform (and I was with a company yesterday that is launching a mobile app only on Android) I am surprised that Apple isn’t adopting the opposite strategy of working to be a better partner.  Perhaps I shouldn’t be surprised though – looking back over recent history it is clear that Apple has long thought that their contribution is far more important than that of their partners and as a result have undervalued the ecosystem.

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