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A brief and not-so-kind history of web advertising

You could chart the history of web advertising like this (quotes from Adrian Saunders/

  1. Display ads from Yahoo and AOL: “Incredible returns! Trackable analytics on reader behavior! Just like the print ads you know and love, only cheaper and with better metrics!”
  2. Google Adwords, Demand Media: “Publish what you want, when you want, and make a living through Google Adwords! Build a business outside of the stranglehold of portals! Show readers ads that they’ll actually want to click! Keep optimizing the hell out of your stuff and you’ll turn this into a business any day now!
  3. Facebook and Twitter: “Forget everything but social, where people read and consume content based on other people’s recommendations! Build up social capital, focus on “sharing” and watch your amazing work go viral! You’ll receive more traffic than you’ll ever need to make the business work!”
  4. Mobile: “Everything before was a falsehood, the reality is that everyone is on their phones now. Mobile is where advertising is really going to take off…”

And now the new hotness is content marketing and it’s close cousin native advertising, ref A16Z’s investment in Buzzfeed).

The analysis above is a bit unkind in that entrepreneurs have built businesses on the back of display ads, Google Adwords, social and mobile, and critically it ignores search advertising. However, there’s more than a grain of truth in it. Nobody is enamoured with display ads anymore, everyone understands that unless you have massive traffic you only make pennies from Google Adwords, and mobile has already taken a big chunk out of desktop social (albeit that much of it is mobile social).

Ultimately the important question is: is web advertising moving forward?

For me the answer to that is a clear ‘yes’. Search marketing is the most efficient way of connecting people with things they want the world has ever seen, social is developing into a great way to connect people with things they might want to buy but don’t know exist, and now content marketing allows brands to build authentic and high value relationships with potential customers. Moreover, from a startup perspective you can make these channels work at the small scale you need in the early days of your business.

That said, there is a constant feel of “emperor’s new clothes” about the web advertising world and it’s important to look beyond the hype.

Tablet share flat on driving license site

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I post this chart showing breakdown of access by device for the UK government’s ‘book your driving test’ site for two reasons:

  1. We have data showing that tablet share is flat since the beginning of the year and that all the growth is going to mobile. The ‘tablets are yesterday’s story’ meme has been growing recently, and it’s great to see some hard data. There are of course variations by sector, but driving tests are pretty mainstream (although I imagine they skew young) so this should be representative.
  2. This is a great example of innovation from the folk at The fact that they are sharing data like this is great and the implementation is high quality. The chart on the site is interactive with options to set the date range, but I couldn’t see how to embed it, so this is just a screen grab.

App store discovery a little less broken?

It’s a common refrain that the process by which apps are found or discovered is broken. Discovery and hence download volumes are driven more than anything by ‘app store placement’ and by being ‘featured’, both of which seem to be more down to the whim of Apple and Google than the merit of the app. What we need is an equivalent of Google’s Page Rank, but for apps. That way good apps would float to the top and discovery would be more meritocratic. That would be better for startups who often have great products but lack the resources or the networks to curry favour with Google and Apple.

The current discovery process isn’t completely broken, in that Apple and Google do take the quality of the app and it’s popularity into consideration, but it isn’t right. Consider these stories. Two similar stage startups that we are close to have recently been playing the App Store game with Apple. They both networked hard to get close to the right people at Apple, developed features that Apple suggested they should and then held back release of those features in the hope of getting promoted. One got promoted in a big way (Stylect) and the other got only a low placement in an App Store category with little traffic. Neither knew until the day of the promotion. That can’t be the best way to do things.

However, Apple and Google are both heavily invested in the status quo. Their app stores earn them a lot of money and are a protective moat for their mobile phone businesses. So I’m not expecting things to change quickly. Thus I was surprised to read this morning that app store competition is increasing. Tomasz Tunguz has found that app store volatility has increased substantially over the last twelve months which indicates that new entrants are doing better and that discovery is getting less broken.

That’s a little bit of good news for startups in an area where they don’t usually get much. I like to think that one day we will have an open system on mobile, but until we do life will be harder for young companies than it needs to be and we will get less investment and innovation in mobile than we could.

Talking with customers: focus on quality not quantity

At Forward Partners we invest in early stage companies in the ecommerce ecosystem, often from company inception. Much of the time, then, there are no customers who have bought the product, and often there isn’t even a prototype we can look at. We have to evaluate the idea and conversations with potential customers are one way of doing that.

Everyone understands, by now, the importance of talking with customers to validate business ideas. However, few entrepreneurs do it well, and recently I’ve noticed that companies are asserting the quality of their customer discussions based on the number they’ve had rather than the quality. A typical conversation might go like this:

  • Me: That sounds like an interesting idea. Have you spoken with any potential customers?
  • Entrepreneur: Yes! We spoke with 150 customers.
  • Me: Mmm, that sounds like a lot. What did you learn?
  • Entrepreneur: That they totally want our product.
  • Me: Ok, but why, and what have they done in the past that suggests they will make the effort?
  • Entrepreneur: We didn’t ask that question.

I recently blogged about the customer discovery process at our portfolio company Lexoo. Daniel van Binsbergen, the founder, spoke to 20 customers and including the time to set up the conversations and write them up afterwards it took pretty much all of his time for two weeks. Those 20 conversations taught Daniel an incredible amount about his business and his answer to my ‘what did you learn?’ question would have been more detailed and much stronger (read this post for details).

Talking to customers should be a discovery exercise, not a tick box exercise, and hence a small number of high quality conversations is much better than speaking with lots of people. With quick and poorly constructed conversations It’s easy to get lots of falsely positive validation (people who are nice and poor at predicting what they will do saying they will buy your product). I’ve said it at least twice on here now, but The Mom Test is an excellent guide on how to do it well. We’ve also found that it’s helpful to have someone from outside of your company join the discussion as they are able to listen impartially and avoid confirmation bias.


The dream is free…

…but the hustle is sold separately. I love this picture that was doing the rounds on Twitter this morning.

Dream Is Free

In English-English we would say something like ideas are cheap, and execution is everything. This is soooo much better. Dreams are more exciting than ideas and ‘hustle’ captures the work of startups much better than ‘execution’, particularly at the early stages.

One of the things that has worked well for many of the day-zero/solo-founder investments we make is to launch a concierge MVP where products are sold and manually delivered. That’s pure hustle. Hustle to find customers, to sell them, and then to deliver. Sometimes this place is buzzing with hustle as people work the phones. The learning that comes from that is immense and I love it.

Imagining the next iteration of paid TV

I read two facts this morning that got me thinking about how TV will look in the future:

That got me wondering what these young YouTubers will watch as they grow older.

Assuming they are going to want to watch premium content like Breaking Bad, and most won’t want to use BitTorrent for the rest of their lives they will have to start paying. The question is what they are going to buy, and I can’t see them going from paying nothing to paying £5.99 a month for a Netflix account, or worse, £29.99 for Sky.

Jim Barksdale, founder of Netscape famously said that “there are only two ways to make money in business: bundling and unbundling”. We’ve seen this a lot in media – iTunes unbundled the album into singles and now Spotify have bundled singles up into an all you can eat subscription.

With TV programmes the major story has been Netflix taking market share from cable and satellite TV companies but that has been substituting one bundle for another rather than unbundling, albeit in an on-demand rather than channel format. I suspect in future we will see a proper unbundling with more market share moving pay per view services. Like iTunes, except with discovery built in. And a UX that doesn’t make me want to scream.

I think there’s a opportunity to build a startup that aggregates the content, makes recommendations, and handles payments, taking a cut on the way. A bit like our portfolio company, but for TV. The challenge with this will be timing the startup to coincide with when the content becomes available to aggregate.


Google acquires the most, Apple hasn’t bought big (until now)

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Tomasz Tunguz of Redpoint ventures posted this table as part of a long analysis of M&A by leading tech companies over the last 15 years. Here are the takeaways:

  • Google comes out as the most prolific acquirer by far, with almost twice the number of acquisitions per year as Facebook who sit behind them.
  • Most surprising for me was that with the exception of the $3bn acquisition of Beats (which is missing from the analysis above) Apple hasn’t paid more than $390m for a company in the last 15 years. Beats may be a one off, or their acquisition strategy may be changing under Tim Cook. One to watch.
  • Of particular interest to us as an ecommerce investor is that Amazon is the most infrequent acquirer. Other data in the post shows that the bulk of their acquisitions fall in the $100-300m range.


Lost My Name on Dragons’ Den


Ever wondered how much of a difference it makes going on Dragons’ Den?

Our portfolio company Lost My Name found when they pitched their magical children’s book to the Dragons whilst I was away on holiday last week. You can see the relevant section of the show in the YouTube clip below with realtime analytics super-imposed in the corner of the screen. At the start of their pitch they had 36 users on the site and by the end they were up to nearly 13,000, and they sold thousands of extra books. Additionally the longer term benefits of the brand exposure are still to come.

However, none of this comes without risk. It worked out well for Lost My Name who walked away with a £100,000 investment from Piers Linney at the highest valuation ever seen on the show, but that might not have happened. The Dragons might not have liked the company and even if founders Asi and David pitched flawlessly there was a chance that final edit portrayed them badly. We thought long and hard about these risks before deciding to go on the programme. Fortunately it worked out.

If you’re now wondering what it felt like to be there check out David’s story from the inside.


Don’t let post event rationalisations ruin your future decisions

Putting a favourable gloss on events even when it isn’t merited is in many ways a healthy part of human nature. It helps us preserve our self confidence and lets us move on. However, it can lead to a history being mis-remembered and then future decisions get made using bad data. That’s dangerous.

I often see this when good people leave a company. Before long their little faults are remembered as much as their contribution and everyone starts to think it was a good thing that they left. Then replacements are hired without addressing the reasons that the previous person left.

A common example at VC funds is to analyse investment decisions based on how companies fare rather than on whether the analysis behind the decision stands the test of time. This can make good investment decisions look bad when companies have either unlucky or lucky runs and undermine future investment decisions.

Another example is when good candidates don’t accept job offers. Pretty quickly people decide they wouldn’t have been good after all and that the company has ‘dodged a bullet’. Often without questioning whether that means they made a mistake offering the job in the first place, or whether there is something wrong with the role or package. That’s what’s on my mind today.

The challenge is the dissonance between what helps us function well as human beings and what helps a company to perform well. Eliminating falsely positive post event rationalisations and maintaining a positive and happy company culture is what we should all strive for, but requires over-riding human nature and isn’t easy. Going all in to eliminate any favourable gloss can hurt morale and be as damaging as sitting back and allowing it to happen. As with many aspects of corporate culture the key is to know where you are trying to get to, where you are today, and then be realistic about how quickly you can move. In this case holding regular post event ‘retrospectives’ and documenting the good and the bad is a good practice, maybe starting in the area that’s core to your business and then spreading to the rest of operations once the process is honed.

Her – a movie about artificial intelligence


Last night Fiona and I watched Her, a kind and sensitive film about love between a human and an artificial intelligence. I’ve embedded the trailer above in case you want to take a look.

It’s a great film on two levels. Firstly as a modern era human love story and secondly for the way it shows what artificial intelligence will bring to society. Her shows how powerful artificial intelligences will be, the range of emotions they will have and how they will evolve and explores issues of mutual dependency. All of this is played out without the usual ‘machines vs humans’ narrative which allows for a more nuanced investigation of the issues. It’s powerful stuff. I’d love to say more, but won’t for fear of ruining the film.

We will most likely have a $1,000 computer with the power of a human brain before the end of the next decade so the stuff of science fiction could be with us very soon. It’s impossible at this stage to say how it will play out, but I’m excited to see it. Will the machines have personalities? Will they have soul’s? Will they treat us well?

For better or worse we will have answers to all these questions inside the next twenty years or so.