Raja Jasti’s Blog - Renaissance Thinking

July 7, 2009

Mobile Apps Migrate to the Cloud

Filed under: Mobile, Technology, Trends — Raja @ 6:17 pm

From InternetNews:

developed, accessed and used. And the cloud could save cell phones without operating systems from a premature death, according to an ABI Research study out today.

With the explosion of mobile apps in the past two years, developers as well as wireless carriers are eager to cash in on the trend, but most of today’s applications need handsets with robust computing power, limiting their potential market.

However, a new architecture based on software running in the cloud will drastically change the way mobile applications are developed, according to a new study, “Mobile Cloud Computing,” written by ABI Research Senior Analyst Mark Beccue.

He said this emerging trend could eclipse the current mobile application model by 2014, delivering revenue of nearly $20 billion annually by the end of that year.

Currently, mobile application developers face the challenge of how to address multiple mobile operating systems. Either they must write for just one OS, or create many versions of the same application. Adding to the task is the fact that most apps require significant processing power, data storage and memory in the handset.

By taking a Web development approach, Beccue said applications can run on servers instead of locally, so handset requirements can be greatly reduced and developers can create just one version of an application.

This trend is in its infancy, but ABI Research believes that eventually it will become the prevailing model for mobile applications,” Beccue told InternetNews.com.

He said several factors come into play in regard to the issue. First, there is a vast amount of Web developers who would create mobile apps if it were easier to do. Second, wireless networks operators want to capitalize on consumer awareness of mobile apps, which is at an all-time high. And, finally, the advent of cloud computing along with two industry initiatives regarding standards are creating the optimal environment for a seismic shift in mobile app development.

“There’s infinitely more Web developers than any other kind, but on the macro level, this talent isn’t being tapped from a mobile perspective. Meanwhile, there’s huge consumer demand for apps, and the carriers are saying, ‘There’s interest out there for them, but how do we push it down to everybody, the masses?’ Smartphones dominate apps because they have the processing power, but feature phones don’t, so that’s a problem for everyone who doesn’t have a smartphone,” said Beccue.

That’s where cloud computing comes in. “The best way to solve this is by looking at Web development. If a mobile phone has an Internet client that’s thin enough, you can move all the processing and storage out to the cloud. The Internet basically solves the limitations you have from the form factor,” said Beccue.

He goes on to say that there are two major initiatives sparking the trend. One is Bondi, which is backed by the Open Mobile Terminal Platform (OMTP) group, whose members include AT&T, T-Mobile and other wireless carriers.

The goal of Bondi 1.0, released last month, is to ensure that Web applications can access native functionality on mobile handsets consistently across platforms and with the appropriate security to protect the user from malware.

“Bondi is from the OMTP, and they’re putting together standards that would come on the device, say for Java Script, so a developer can write to that standardized API and off we go. It’s cool because it means Web developers get access to mobile specific stuff in an easy manner,” said Beccue.

The second one is called OneAPI from the GSM Association, a global standards association network. “It’s a network API, so it’s a standardized API for things unique to mobile phones, things like location-based services, address book. The idea is if it’s standardized and the carrier buys into this, the developer can write to this and all the carriers will support it. And there’s revenue share for the developers, like ring-tones, the carrier bills it and gives money back to the developer.

Beccue said it will take some time before these initiatives take off, but he is optimistic that they will. “The feature phone would be saved because the cloud computing and these initiatives solve OS fragmentation, it smashes it. The Web can open mobile apps to the masses. Which then means, how do the OS players figure out a way to add value?”

Another factor entering the mix are so-called “over the top apps,” meaning there is no immediate tie to the carrier, which are also called “platform-as-a-service.”

“The over-the-top apps, or PAAS, is another big deal that will goose this trend. The three looming giants are Amazon AWS, Google’s App engine and Force.com. The benefit to carriers is that they get more data traffic, even though there’s no direct tie to the carrier,” Beccue said. “This is cloud computing at its best, everything is hosted, the developers write on these platforms, which offer all the services, including mobile. If the developer community starts working avidly with these three groups and it’s logical it will migrate to mobile, there’ll be an even bigger push.”

Still, Beccue said this new approach to mobile apps is not without challenges, chief among is intermittent network availability. A cloud-based application stops working if the connection is lost. However new programming languages such as HTML 5 will enable data caching on the handset, allowing work to continue until cellular signal is restored.

In the end, though, he thinks cloud computing will benefit the wireless sector, and especially consumers.

“Cloud computing will bring unprecedented sophistication to mobile applications,” Beccue said. “To mention just a few examples, business users will benefit from collaboration and data sharing apps. Personal users will gain from remote access apps allowing them to monitor home security systems, PCs or DVRs, and from social networking mashups that let them share photos and video or incorporate their phone address books and calendars. Consumers just want the apps, they don’t really care if it’s Web based or not, and this will open up that access.”

Amazon to Mobile Apps: No Soup (APIs) for you!

Filed under: Mobile — Raja @ 6:07 pm

Amazon is apparently restricting mobile apps from using its product advertising API.

Well, this sucks. I had not yet gotten around to downloading the new Delicious Library iPhone app, which I heard was great. And now I can’t because the developer had to remove it from the App Store. Why? Because of Amazon.

A recent change to Amazon’s Product Advertising API means that apps like Delicious Library are being restricted from using it, according to Alan Quatermain. And what’s really perplexing is that this change apparently only matters on mobile devices, meaning bye bye to an iPhone app that took its developers 8 months to build.

Here’s the official wording that killed the app:

You will not, without our express prior written approval requested via this link , use any Product Advertising Content on or in connection with any site or application designed or intended for use with a mobile phone or other handheld device.

Developer Wil Shipley tried to reach out to Amazon to see about getting permission, but Amazon apparently said no exceptions were being made. Not only that, “they [Amazon] told me to remove it today, or they’d shut me down,” Shipley tweeted out.

And this data is crucial to Delicious Library, because it’s how it pulls its product information. So it won’t be back unless Amazon changes that rule, which it doesn’t appear to be ready to do anytime soon.

It would seem that Amazon only wants you to be able to access its product data through its own mobile site and apps. But that’s a problem because, as Quatermain points out, the Amazon iPhone app isn’t even available in places like the UK.

Yeah. This is fairly ridiculous.

July 5, 2009

Web Video looks beyond 2 min clips

Filed under: Entertainment, Internet, Media — Tags: — Raja @ 11:25 pm

NYT looks at the evolution of web video from 1 or 2 min clips to larger formats.

“Momversation” on Blip.tv is relatively long-form, with 20-minute shows.

When motion pictures were invented at the end of the 19th century, most films were shorter than a minute, because of the limitations of technology. A little more than a hundred years later when Web videos were introduced, they were also cut short, but for social as well as technical reasons.

Video creators, by and large, thought their audiences were impatient. A three-minute-long comedy skit? Shrink it to 90 seconds. Slow Internet connections made for tedious viewing, and there were few ads to cover high delivery costs. And so it became the first commandment of online video: Keep it short.

New Web habits, aided by the screen-filling video that faster Internet access allows, are now debunking the rule. As the Internet becomes a jukebox for every imaginable type of video — from baby videos to “Masterpiece Theater” — producers and advertisers are discovering that users will watch for more than two minutes at a time.

The viral videos of YouTube 1.0 — dog-on-skateboard and cat-on-keyboard — are being supplemented by a new, more vibrant generation of online video. Production companies are now creating 10- and 20-minute shows for the Internet and writing story arcs for their characters — essentially acting more like television producers, while operating far outside the boundaries of a network schedule.

Some are specifically introducing new shows this month with the knowledge that TV networks generally show repeats and reality shows over the summer.

Yet TV networks get much of the credit for the longer-length viewing behavior. In the past two TV seasons, nearly every broadcast show has been streamed free on the Internet, making users accustomed to watching TV online for 20-plus minutes at a time. By some estimates, one in four Internet customers now uses Hulu, an online home for NBC and Fox shows, every month. “Dancing With the Stars,” the popular ABC reality show, draws almost two million viewers on ABC.com, according to Nielsen.

“People are getting more comfortable, for better or for worse, bringing a computer to bed with them,” said Dina Kaplan, the co-founder of Blip.tv.

Ms. Kaplan’s firm distributes dozens of Web series. A year ago all but one of the top 25 shows on her Web servers clocked in at under five minutes. Now, the average video hosted by Blip is 14 minutes long — “surprising even to us,” she said. The longest video uploaded in May was 133 minutes long, equivalent to a feature-length film.

Dave Beeler, a producer of “Safety Geeks: SVI,” about a threesome who make the world more dangerous as they try to protect it, said the “fallacy that anyone post-MTV has no attention span” is being refuted by the success of original video Web sites.

While online video is not going to replace television anytime soon, it is now decidedly mainstream. About 150 million Internet users in the United States watch about 14.5 billion videos a month, according to the measurement firm comScore, or an average of 97 videos per viewer. Although the Web lacks a standard for video measurement, comScore says average video durations have risen slowly but surely in the past year, to an average of 3.4 minutes in March.

To be sure, many of the most-watched videos are still as short as a song. But YouTube, the dominant video destination, recently recognized the trend and added a “Shows” tab to its pages, directing users to long-form TV episodes and movies. Jon Gibs, a vice president for media analytics for Nielsen, said online video — projected by eMarketer to be a $1 billion business in 2011 — is at a pivotal point.

“Historically it has been very much a clip-based experience online,” he said. “We believe we are moving into a transition period where more of that viewership is going toward long-form video.”

Much of the video innovation is coming from people who — empowered by inexpensive editing equipment and virtually no distribution costs — are creating content specifically for an online audience.

“On the Web, producers have this delicious freedom to produce content as long as it should be. They’re starting to take advantage of that,” Ms. Kaplan said.

What took so long? Tom Konkle, Mr. Beeler’s production partner on “Safety Geeks,” suggested that the shorter-is-better rule reflected limitations in Internet speed and server space. As computer power has improved, the video experience has too.

“A few years ago, three minutes ‘watching’ your computer felt like a novelty; now, it’s as familiar as your television set,” he said.

Two years ago when the comedian David Wain was stitching together the first episode of his series “Wainy Days,” he called Rob Barnett, the founder of the video distribution site My Damn Channel, and asked whether a nine-minute video would seem drawn out. Mr. Barnett deferred to the creator, and an hour later Mr. Wain called back with his mind made up: he would slice the first episode into three parts.

“I bet you, if this phone call happened today, we’d go with a nine-minute piece,” Mr. Barnett said. “I think it comes down to quality winning out over minutes and seconds.”

In short, the storytelling is superseding the stopwatch. “If there’s good storytelling and good production values, people are willing to engage with the content,” said Eric Berger, a senior vice president of Crackle, the Sony video site.

More than anything else, the longer viewing spans may speak to the maturation of the medium itself. Mr. Konkle said that the first kinetoscopes, in the 1890s, were about 30 seconds long, because the format required outrageously long strips of film.

“It was also accepted as fact that 30 seconds made for a good kinetoscope. This is what filmmakers thought the audience could handle,” Mr. Konkle said, drawing a parallel to the early days of online video. “It probably felt like a giant dangerous leap to short films of three minutes.”

Blockbuster movies now, of course, are measured by the hour, not the second; the most popular one last year, “The Dark Knight,” clocked in at two and a half hours.

Marc Andereesen launches $300M VC fund

Filed under: Entrepreneurship, Internet, Mobile, Technology — Tags: — Raja @ 11:18 pm

Marc Andereesen, noted entrepreneur who created the Netscape browser, has announced a $300M VC fund focused on silicon valley technology companies.

andreessen-horowitz-21Marc Andreessen, the entrepreneur who co-founded the first significant Web browser Netscape at 22, is moving on to his next profession: Venture Capitalism.

Andreessen (pictured left) with his long-time business partner, Ben Horowitz (right), have raised $300 million in fresh capital to form a firm they’ve called “Andreessen Horowitz.” They’ll invest the money in a way they say is more suitable to today’s needs. They’re particularly enthusiastic about investing in Silicon Valley, saying it is unparalleled in its software prowess.

First, they’re going to spray small amounts of their first fund — checks of around $50,000 to $100,000 — into between 60 and 80 early stage companies, on the belief that a new wave of startups building with inexpensive web tools can get by with less than $500,000 in total funding over the lifetime. They’ll team with other investors, including prolific Silicon Valley angel Ron Conway to support these companies, which will be comprise mainly a few engineers with little need for guidance. (Conway is in fact an investor in Andreessen Horowitz).

Next, they’ll invest between checks of several million dollars into 12 to 15 more advanced companies, which typical for venture capital firms. This is where the two will spend most of their money, and time, taking board seats (7 or 8 each) at these companies. Such companies need more help in management and in growing a company, Andreessen said. Only the best of the very early-stage companies they back would reach this phase.

Finally, they’ll invest checks of up to $50 million into two or three “late-stage” deals, Andreessen said.

The two met at Netscape, when Andreessen hired Horowitz (left) to join as a product manager at that early browser company from Lotus. Horowitz earlier had worked at Silicon Graphics, which at the time was considered one of the hottest companies in Silicon Valley. After Netscape was sold to AOL in a $10 billion deal in 2009, the two put in some time at AOL, and then another company, called Loudcloud, which eventually morphed into a company called Opsware, and sold in 2007 to HP for $1.7 billion. Until recently, Horowitz ran HP’s software division, where he managed 4,000 people. Andreessen, meanwhile, co-founded a company called Ning, which has raised more than $100 million. He is chairman there.

Notably, Andreessen sees most of the interesting action still happening in Silicon Valley, as opposed to other areas of the world, and says they’ll focus their investments there, though “not necessarily exclusively.” The firm will be based on Sand Hill Road, home of most big-name venture firms in Silicon Valley.

Andreessen told me an interview that the two have proven themselves as founders and company builders, and see themselves as “throwbacks to how venture capital firms got started in the 1960s and 1970s,” when entrepreneurs like Don Valentine and Tom Perkins with real experience running companies launched venerable venture firms like Sequoia Capital and Kleiner Perkins.

Andressen said they’ll invest in all of the “new” business model areas, including consumer internet, cloud computing and consumer electronics. He said they would also invest in “back-end” companies or those with less exposure to consumers, such as virtualization and cloud storage.

If you are a silicon valley based tech entrepreneur, this fund should be one of the first ones to consider. Marc and Ben add a huge amount of value and cred to your startup.

Allen & Co @ Sun Valley

Filed under: Business, Entertainment, Internet, Media — Raja @ 7:19 pm

Evan Williams of Twitter is widely expected to be the center of attention at this year’s Allen & Co conference held at Sun Valley in Idaho where media and internet execs congregate and many deals are talked and made. If you are invited to the conference which in by invitation only, you know you have truly arrived.

The media moguls attending an annual powwow staged by investment bank Allen & Co. used to be able to rest comfortably in the Idaho mountains as they mulled their next moves.

Even if they didn’t hatch any big deals or bright ideas, the media executives could try to squeeze more profit from their firm grip on the flow of news, entertainment and seemingly everything else people read, watched or heard.

Things have changed radically since Allen & Co.’s first summer summit in 1983. The conference, which returns to Sun Valley on Tuesday, now revolves around the technology trailblazers who have turned computers and mobile phones into multimedia hubs that are tormenting newspapers, magazines, broadcasters, music labels and movie studios.

The disruption has the geeks playing the dual role of the media’s sages and scourges.

This week, Twitter Inc. CEO Evan Williams will likely be in high demand as everyone tries to figure out whether the online messaging service is a fad or a revolutionary breakthrough in communications.

“Ev is going to be the belle of the ball,” predicted Silicon Valley entrepreneur Mark Pincus, CEO of Zynga Inc., a developer of games widely played at online hangouts such as Facebook. Pincus is going to the Allen conference for the first time.

With roots going to the 1920s, Allen & Co. is run by Herb Allen, the grandson of one of the firm’s founders. Although relatively small, Allen & Co. has become a prominent media investment bank by emphasizing a personal touch — such as the Sun Valley summit. The firm invites current and prospective clients to spend five days frolicking with their families at a posh lodge made famous by Ernest Hemingway.

When they aren’t playing tennis, golfing, biking, swimming, fishing and rafting, the guests are cloistered in presentations about emerging opportunities and business challenges.

The Allen & Co. guest list isn’t officially disclosed, but familiar media faces at the conference typically include News Corp.’s Rupert Murdoch; Donald Graham, head of the Washington Post Co., and Robert Iger, CEO of Walt Disney Co.

Allen & Co. began sharpening its focus on technology in 2001, around the time the dot-com bust caused other investment bankers to abandon California’s Silicon Valley and New York’s Silicon Alley. The firm has tried to enmesh more media leaders in the Web by regularly inviting Internet innovators such as browser pioneer Marc Andreessen, Amazon.com Inc. Chief Executive Jeff Bezos and Google Inc. founders Larry Page and Sergey Brin. All are expected back this year.

A few years ago, YouTube CEO Chad Hurley stole the show as he met with TV, movie and music executives eager to learn — and sometimes gripe — about the Internet’s most popular video channel.

Like YouTube before it, Twitter still hasn’t come up with a way to make money. That is likely to stir speculation that Williams may be fishing for business partners or even an acquirer as he holds court in Sun Valley.

For what it’s worth, Hurley agreed to sell YouTube to Google just three months after dominating the discussions at Allen’s summit in 2006. The deal, worth $1.76 billion when it closed, was hammered out at a Denny’s in Silicon Valley. YouTube remains unprofitable, though its audience is larger than ever.

Williams and Twitter co-founder Biz Stone have consistently said they aren’t interested in selling their company, preferring to subsist on $55 million in venture capital until they unveil their plans for bringing in revenue.

Meanwhile, long-established media companies are desperately trying to plumb new revenue sources as their advertising sales shrivel.

The 18-month-old U.S. recession has stung newspapers and broadcasters as advertisers have clamped down on their marketing budgets. But even before the economy collapsed, the Internet was luring consumers and advertisers from traditional media.

The trend has caused the media business to lag the overall economy, with revenue growing slower in good times and falling further during the recent downturn. The newspaper industry in particular has gone into a free fall, with U.S. ad revenue plunging $7.5 billion, or nearly 17 percent, last year.

Internet veterans like Pincus believe newspaper publishers and other media executives have to offer more engaging services that give their audiences more opportunities to commune and conduct commerce.

“Maybe there is something the off-line media can learn from the online media about monetizing their users differently,” Pincus said.

Although they aren’t necessarily losing money, many of the Internet’s best known companies have problems of their own to hash out in Sun Valley.

Yahoo Inc. is breaking in its third CEO since June 2007 as it tries to weed out bureaucracy and snap out of a three-year earnings slump. Despite investing billions, Microsoft Corp. still can’t undercut Google’s dominance of the lucrative Internet search market. AOL has been struggling for so long that Time Warner Inc. is spinning it off to get rid of the headache. (AOL’s new CEO, former Google advertising executive Tim Armstrong, is supposed to be at the Idaho summit).

Google has its own worries, even though its revenue has been rising despite the recession.

Its biggest potential problems appear to be Twitter and Facebook, whose 25-year-old CEO, Mark Zuckerberg, is uncertain whether he will attend Allen’s conference.

Twitter looms as a threat because the constant chirping on its service enables it to offer a search engine that illuminates what’s on people’s minds within seconds after they express it — a “real-time” look at the Web that Google hasn’t yet perfected.

Facebook could turn into an even bigger challenge for Google. Facebook has attracted more than 200 million users and made it enticing for them to share personal details about their backgrounds and lives. That kind of data — potentially intriguing to advertisers — has eluded Google’s tentacles and could threaten its status as the Internet’s most effective marketing vehicle.

Andreessen, a Facebook board member, thinks technologists like the leaders of Google are more likely to rise to the challenge than media companies still fighting to protect franchises born before he helped simplify Web surfing by co-founding Netscape Communications in 1994.

“In the technology industry, change is a constant so it feels like there is always a gun to your head,” Andreessen said. “You quickly learn you have to either adapt or die.”

Marc Cuban on Free Model

Filed under: Entrepreneurship, Internet — Raja @ 7:06 pm

Marc Cuban writes that if you succeed by free, then you will die by free. His argument is that building a long sustaining business on free model is not possible.

The problem with companies who have built their business around free is that it is far from free to remain successful.

The more success you have in delivering free, the more expensive it is to stay at the top. The more success you have, the more important it is to management to remain successful.  The more important remaining successful is to management, the more money they will spend, the more chances they will take, the more infrastructure they will build, the more people they will hire.  All of the things that will prevent them from staying lean , mean and flexible. All of the things that distract them from innovating within their core competency.

Lets look at the rule that eventually KILLS all freemium based content plays:

There will always be a company that replaces you. At some point your BlackSwan competitor will appear and they will kick  your ass. Their product will be better or more interesting or just better marketed than yours, and it also will be free.  They will be Facebook to your Myspace, or Myspace to your Friendster or Google to your Yahoo.  You get the point.  Someone out there with a better idea will raise a bunch of money, give it away for free, build scale and charge less to reach the audience. Or will be differentiated enough, and important enough to the audience to maybe even charge more. Who knows. But they will kick your ass and you will be in trouble.

For Google, who lives and dies by free, we dont know who their BlackSwan company will be. But we all know it will happen don’t we ? The only question is when. Of course Google knows it as well. Which is exactly why they invest in everything and anything they possibly can that they believe can create another business they can depend on in the future.  They are spending incredible amounts of money in search of the “next big Google thing”.  When their BlackSwan competitor appears, they won’t be in a position to compete with the newly presented model, particularly if its free based because their ecosystem has bloated to the point where they can no longer create anything for free.

Google is not unique. The same happens to all companies based on free.

The same will happen to Facebook, Twitter, pick any company who lives off of free.

Its not that they can’t make money offering free. They can , have and will. The problem is that they know that its literally  impossible  to be the king of the mountain forever. But that won’t stop them from trying. And that is exactly what will kill them.

Their better choice would be to run the company as profitably as possible, focusing only on those things that generate revenue and put cash in the bank.  More importantly, when you see your BlackSwan company appear and you know they will kick your ass, rather than ramping up to try to compete, get out. Sell. Or maximize cash and pay your shareholders every penny you have.

Like every company in the free space, your lifecycle has come to its conclusion. Don’t fight it. Admit it.  Profit from it.

Which is exactly what MySpace should do.  Rather than trying to reinvent itself to compete better with Facebook, they should do the exact opposite. They should try to optimize whatever monetization opportunities it has. Cut costs to the bone. Maximize revenue per user. Think purely in terms of business.  Squeeze every nickel out of it that they possibly can, knowing its going to die a long, slow death.  Meanwhile, they have the opportunity to take that money and invest it where they think some young company is preparing to become Google/Facebook/Whoever’s black swan.  They can invest alone, or along side others. It doesnt matter.  What does matter is recognizing that they have a better chance of beating Facebook by investing in a company they think can pre empt Facebook than by trying to reconfigure MySpace to be that company.

When you succeed with Free, you are going to die by Free. Your best bet is to recognize where you are in your company’s lifecycle and maximize your profits rather than try to extend your stay at the top.

July 4, 2009

PR Silicon Valley Style

Filed under: Media, Technology — Raja @ 7:51 pm

NYT writes about changing face of PR in the valley tech startups.

 

Menlo Park, Calif. — Brooke Hammerling (publicist) and Erin McKean (entrepreneur) are in a Sand Hill Road conference room, hashing out plans to unveil Ms. McKean’s new Web site, Wordnik.

Ms. Hammerling, while popping green apple Jolly Ranchers into her mouth, suggests a press tour that includes briefing bloggers at influential geek sites like TechCrunch, All Things Digital and GigaOM.

But Roger McNamee, a prominent tech investor who is backing Wordnik, is also in the room, and a look of exasperation passes across his face at the mere mention of the sites.

“Why shouldn’t we avoid them? They’re cynical,” he says, also noting his concern that Wordnik would probably appeal more to wordsmiths than followers of tech blogs. “That’s where I would be most uncomfortable. They don’t know the difference between ‘they’re’ and ‘there.’ ”

Without missing a beat, Ms. Hammerling changes course, instantly agreeing with Mr. McNamee’s take. “I love you for that,” she intones. “I’ll leave the tech blogs out. Let them come to me.”

Instead, she decides that she will “whisper in the ears” of Silicon Valley’s Who’s Who — the entrepreneurs behind tech’s hottest start-ups, including Jay Adelson, the chief executive of Digg; Biz Stone, co-founder of Twitter; and Jason Calacanis, the founder of Mahalo.

Notably, none are journalists.

This is the new world of promoting start-ups in Silicon Valley, where the lines between journalists and everyone else are blurring and the number of followers a pundit has on Twitter is sometimes viewed as more important than old metrics like the circulation of a newspaper.

Gone are the days when snaring attention for start-ups in the Valley meant mentions in print and on television, or even spotlights on technology Web sites and blogs. Now P.R. gurus court influential voices on the social Web to endorse new companies, Web sites or gadgets — a transformation that analysts and practitioners say is likely to permanently change the role of P.R. in the business world, and particularly in Silicon Valley.

While public relations is just one arrow in the marketing quiver for most companies, it plays an especially crucial role in a region where dozens of start-ups are born each month. Without money for advertising, these unknown companies have to promote themselves to potential users, investors, employees and partners.  

Mike Arrigton says the reality of PR is smile, dial, name drop and pray.

Fred Wilson on Free Model

Filed under: Internet, Media — Raja @ 7:34 pm

Fred Wilson, one of my favorite VC bloggers, wrote about free business model.

This week we saw the release of Chris Anderson’s book Free and reviews from the New Yorker (Malcolm Gladwell) and the Financial Times. I’d like to talk a bit about the firestorm that freeconomics (fed by Chris’ book) has unleashed but first we need to clarify something.

The FT piece says:

The most plausible contender for an “entirely new economic model” made possible by the internet is what Fred Wilson, the New York venture capitalist, has dubbed “freemium”.

There was no dubbing by me. In March 2006, I wrote a post called My Favorite Business Model in which I outlined the freemium concept and I asked the readers to help me give it an easy handle. The word Freemium was not coined by me. It came from Jarid Lukin, who at the time was working for Alacra, a company I am on the board of. Fortunately, we’ve got Wikipedia which has got the story straight.

Now let’s talk about freeconomics. I don’t believe everything will be free on the Internet. There will be plenty of paid business models. For example, if you want to watch Major League Baseball games live over the Internet, you’ll pay for that. If you want to use services like the FT and the WSJ frequently (more than 10x per month), you’ll pay for that. If you want to watch HBO over the Internet, you’ll pay for that. If you want a Twitter desktop or mobile client, you might pay for that too.

But we also must recognize that the cost of delivering many services over the Internet has decreased significantly from what it cost to deliver them in the analog world. The marginal cost of delivering a piece of content is approaching zero. But the total cost of delivering content on the Internet is far from zero. My partner Albert wrote a great post about this last week. He said:

The price of watching a stream on Youtube is zero.   With marginal cost zero and marginal benefit zero, from a perspective of maximizing total social (net) benefit, free is the right price because it does not preclude any video that could possibly have benefit from being viewed.  That does not mean that free is sustainable because it obviously doesn’t help cover the total cost.

And, as Albert recognizes at the end of his post, this debate is not entirely about economics. It is about the value of various participants in the content ecosystem.

Gladwell got pretty negative on Anderson and his book in the New Yorker piece. He said:

It would be nice to know, as well, just how a business goes about reorganizing itself around getting people to work for “non-monetary rewards.” Does he mean that the New York Times should be staffed by volunteers, like Meals on Wheels? Anderson’s reference to people who “prefer to buy their music online” carries the faint suggestion that refraining from theft should be considered a mere preference. And then there is his insistence that the relentless downward pressure on prices represents an iron law of the digital economy. Why is it a law? Free is just another price, and prices are set by individual actors, in accordance with the aggregated particulars of marketplace power.

These are the anti-freeconomics arguments we hear from the likes of Andrew Keen and his ilk. Lambasting file sharers and entrepreneurs who rightly recognize that free is the right way to build market share on the Internet might be fun and make certain people feel good. But it’s ignorance of a fundamental fact. And that fact is that free, ad supported media works best on the Internet. We have seen it again and again. I’m not going to even give examples.

Once you have built that audience, you can deliver upsells via freemium models, you can monetize it via advertising and you can branch out into other services which are easier to monetize. This post by Silicon Alley Insider on Facebook’s revenues this year is instructive:

Earlier this week, we spoke to several sources who each have some insight into Facebook’s financials (none of them know precisely). Taking the sources’ input together, we’d estimate the company’s expected 2009 revenue this way:

  • $125 million from brand ads
  • $150 million from Facebook’s ad deal with Microsoft
  • $75 million from virtual goods
  • $200 million from self-service ads.

 

These numbers are similar enough to others that I have heard that I feel comfortable republishing them here. Facebook has 200mm+ monthly active users worldwide. Let’s say they are doing $50mm per month in revenue. That’s a revenue per monthly active user of $0.25. Low for sure, but enough to operate at breakeven. And I expect the self service ads and the virtual goods revenues to grow strongly in the next year, more than making up for the likely loss of some of the $150mm from the ad deal with Microsoft.

And the next move for Facebook is to generate transaction revenues with its payment service and off site ad and transcation revenues from its Facebook Connect service. I’m pretty confident that Facebook can take its revenue per monthly active user to at least $0.50 and maybe higher in the coming years.

Facebook is a perfect example of freeconomics at work. A woman who works for a major media company was in my office recently. She quoted her CEO as saying “why doesn’t Facebook just charge a monthly subscription fee, they’d be making money hand over fist?”. Well I believe that if Facebook did that, they’d be vulnerable to other networks offering a free service. And certainly not every one of those 200mm+ users are going to cough up a monthly subscription. But by offering a friction free service, they have built a powerful and growing network that they are now starting to monetize in various ways and that they will monetize even further in additional ways. And they are super hard to compete with because they are free.

I like to keep my posts short, so I’ll end here with the observation that the Internet allows an entrrepreneur to enter a market with a free offering because the costs of doing so are not astronomical. And most entrpreneurs who take this approach will maintain an attractive free offering of their basic service forever. But that doesn’t mean that everything they offer will be free. That’s the whole point of freemium. Free gets you to a place where you can ask to get paid. But if you don’t start with free on the Internet, most companies will never get paid.

The last point is interesting and a bit of contrarian. The prevalent view is that if you start with free then you can’t switch to pay model as users would revolt. Fred says on the internet it is the other way around.

July 3, 2009

Mike Arrington ventures into hardware

Filed under: Internet, Technology — Raja @ 11:09 pm

Mike Arrington, the founder of the popular tech blog TechCrunch, is apparently working on a new venture called Crunchpad Inc. It is developing a web tablet touch screen computing device.

Michael Arrington, founder of the influential tech blog TechCrunch, has been talking for a year about building a touch-screen tablet for Web surfing. Now, it appears that the CrunchPad is about to become a reality.

The San Francisco Business Times reported Friday that Mr. Arrington has incorporated a separate company called CrunchPad. Later on Friday, he told us he would hold an event at the end of July or the beginning of August to make a big announcement about the CrunchPad, and the tablet would be for sale “as soon as possible.”

Mr. Arrington is a former corporate lawyer who became a blogger — not exactly the résumé of a hardware developer. “I just wanted this, and no one will build it,” he said.

The purpose of the CrunchPad will be very simple: surfing the Web. Turn it on and up comes a browser. It is nothing more than “an Internet consumption device,” for reading, checking e-mail or watching video, Mr. Arrington said. It will not have a hard drive or keyboard, though users can plug it in to a keyboard if they wish. It will cost less than $300, he said.

The CrunchPad will be 16 millimeters thick with a screen of at least 12 inches that is flush with the aluminum case, and it will come in different colors. It will run on an Intel Atom chip and support Flash, which the Apple iPhone cannot.

There are pictures of the latest prototype at TechCrunch. (They even show you what it would look like to read NYTimes.com on the CrunchPad!)

Mr. Arrington said the CrunchPad would be different from netbooks, the mini-laptops made by companies like Acer, Asustek and Dell that my colleagues have written about. Many of those have small keyboards and offer more capabilities than just a browser, like running Microsoft Word.

The additional applications bog down the performance of netbooks, Mr. Arrington said. “Most people will find it works as good as a netbook or better,” he said of the CrunchPad.

He said it will also be different from the tablet computer that Apple is rumored to be building. He has speculated that an Apple tablet could run iPhone applications and be $500 to $1,000. “I’ll buy three of those, that sounds awesome,” he said. “I don’t intend to be the Pre for the iPhone,” he said. “This is very different from what they’re doing.”

The project started a year ago, when Mr. Arrington wrote a post asking for help from readers to develop a “dead simple Web tablet.” Since then, it has been referred to internally as “Mike’s science project,” and he said he has been spending two-thirds of his time over the last six months working on it.

Most of the development work has been done by his team of 15 in Singapore. They are part of Fusion Garage, a start-up with the motto: “What if the browser could boot without an OS? How different would the world be?” The team showed up at the 2008 TechCrunch50 conference, and TechCrunch is now closing its acquisition of the start-up.

Building hardware has not been as hard as he thought it would be, he said, though he was surprised by the ferocity of the competition, which he said has been much more cutthroat than it is among software and Web companies.

The development of the CrunchPad has been funded internally, Mr. Arrington said. He would not comment on whether he has raised outside capital but said that TechCrunch is a very small shareholder.

He said he will remain actively involved for now, but wants to replace himself at CrunchPad and return his full-time focus to the blog.

Good luck to Mike. It is always godo to see people trying new things venturong out of their comfort zone.

On the viability of Free model

Filed under: Business, Internet, Media — Raja @ 10:54 pm

FT article says that Free as a business model fails to live up to its billing in its revew of Chris Annderson’s book, ‘Fee: The future of a radical price’.

biz life

Chris Anderson has built a career out of making bold pronouncements that the economics of Silicon Valley – the way in which software and digital technology are built and distributed – are likely to spread to, and ultimately conquer, the rest of the economy.

His first claim, in The Long Tail: Why the Future of Business is Selling More of Less, was that consumption patterns were being fundamentally altered by the plentiful and cheap shelf space provided by digital technology. Instead of most dollars being spent on hits, consumption would instead skew towards thousands of niche products.

Now Mr Anderson, editor-in-chief of the US edition of Wired magazine, has followed that up with Free: The Future of a Radical Price, a manifesto for giving away products to consumers rather than charging for them. He writes: “There really is a free lunch. Sometimes you get more than you pay for.”

The obvious criticism of Mr Anderson’s work is that, as Mandy Rice-Davies said of Lord Astor’s denial of an affair with her: “Well, he would say that, wouldn’t he?”

Wired is a West Coast magazine, grounded in Silicon Valley’s software culture, where companies such as Apple profit from the free availability of “content” that runs on their far-from-free hardware.

Silicon Valley, and particularly Google, has a brutal variation of King Gillette’s razors-and-blades business model. According to this theory, the razor is sold cheaply in order to get consumers hooked and then be inclined to buy pricey disposable blades. And in the case of the biggest company of the internet age, it gets newspapers, music, television and film companies to take the losses while it accumulates the gains.

Furthermore, the book is being published at a time when many US newspapers that followed the urging of internet seers and published everything free on the internet are going bust.

Mr Anderson has already been treated to a sceptical review by Malcom Gladwell, the New Yorker writer.

But it is not fair to dismiss Mr Anderson as a digital utopian who is in intellectual and financial hock to Silicon Valley companies: Free is more than propaganda for the West Coast clan. It is largely an insightful, steady and scrupulous analysis of the past and present of free products and services, and how digital technology encourages fresh experiments.

But it is not fair to dismiss Mr Anderson as a digital utopian who is in intellectual and financial hock to Silicon Valley companies: Free is more than propaganda for the West Coast clan. It is largely an insightful, steady and scrupulous analysis of the past and present of free products and services, and how digital technology encourages fresh experiments.

Well, if you give soemthing away from free you need to sell something else that free brings. It is simply as subsidization of marketing costs. If these costs exceed the money you can make then there is no business. It is as simple as this. One can analyze this to death and write books, case studies and blog posts on the viablilty of free model, but it is nothing new and follows the age old requirement of any business. Sell more than you spend.

« Newer Posts — Older Posts »

Powered by WordPress