August « 2009 « Raja Jasti’s Blog

August 18, 2009

Startup lessons: Beware of the Platform

Filed under: Entrepreneurship — Raja @ 4:14 pm

Building your startup on a dominant fast growing platform can be very alluring to entrepreneurs. In some cases it can be pretty smart. Here are a couple of good examples: Citrix (windows platform) and Virsa (SAP). I generally think leveraging fast growing platforms to acquire customers is a winning idea. Ask Youtube which can thank myspace for its initial growth. Samething for paypal with ebay. But I think one has to be very careful when you bet your sucess and life on someone else’s platform, particularly if that platform is new and evolving. I made this mistake with one of my companies that bet on Java3D (a java extension API for 3D grapics). Java3D was a very appealing idea (write once and run everywhere for graphics and games) but it never quite fulfilled the promise which hampered our product adoption.

There are several startups that are betting their fortunes on platfroms such as facebook, twitter and iphone etc. The attractive thing about these platforms is that you can build interesting things with small teams (since you are only building apps that live inside these platforms as opposed to standalone products) and gain huge viral distribution. But it is a slippery slope as many are finding out. These platforms are still evolving and they themselves haven’t started making too much money. Also they are still trying to fugure out what they want to own and what to leave for others. This is the bitter lesson learnt by once high flying social music startup iLike. Gawker chronicles their journey from a VC darling to a fire sale item.

Two years ago, music service iLike appeared to be set: Its CEO said it was “made,” its investor mused it could be a “billion-dollar winner,” and the press was enthralled. Now the poster child is a cautionary tale.

iLike became something of an icon for a certain class of startup: Built on social networks, fast-growing, unprofitable, advertising supported. The company’s impending sale to MySpace at a fire-sale price could hardly be a bigger wakeup call to these fellow makers of software “widgets.”

The company was once valued at $53 million, back when Ticketmaster bought a 25 percent stake in late 2006, according to the Seattle Times. iLike amassed a total of $17 million from Ticketmaster and other investors like Silicon Valley venture capitalist Vinod Khosla and former AOL exec Bob Pittman. Now it’s negotiating to sell for just $19.5 million, All Things D reports, and $6 million of that is contingent on retaining certain employees in coming months.

It’s quite comedown. But it’s easy to see how iLike became a media darling and a hero to other makers of widgets. In the late spring of 2007, iLike ported its music recommendation service to Facebook, and in the process spiked its user base dramatically, to 15 million from 3 million over six months. In one week just after the Facebook launch, four venture capitalists asked CEO Ali Partovi (pictured) to lunch, the Seattle Post-Intelligencer reported; the company reportedly added close to 200 servers over the course of the summer.

There are some very important lessons in this iLike saga for all these startups that only live inside of these platform ecosystems. It is very difficult to build multi billion dollar companies on top of someone else’s platform. I am surprised at how even top VCs get carried away sometimes.

PS: I am not saying that you can not build successful businesses on these platforms. Just don’t look for huge IPO potential companies if you are a facebook, twitter or iphone apps company. Companies such as Zynga and Offerpal are smart in not betting on any one site/platform but built services for a network of platforms. This spread their risk and increases their scope. They are betting on social phenomenon not one partuclar player. That is a much better approach in my book.

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August 17, 2009

DNA reinforced silicon

Filed under: Technology, Trends — Tags: DNA, Silicon — Raja @ 12:54 pm

From BBC:

Triangular “DNA origami” were made to assemble on etched carbon and silicon

Shapes of DNA have been used to enhance the production of circuits for next-generation computer chips.

Researchers reporting in Nature Nanotechnology have now shown how to get engineered “DNA origami” to self-organise on silicon.

The origami can be designed to serve as a scaffold for electronic components just six billionths of a metre apart.

Making chips with components closer together leads to smaller devices and faster computers.

The six nanometre mark is nearly eight times better than the current industry produces.

Several research groups have shown that DNA itself can be used to store or manipulate data, and the juggling of DNA in a test tube or within bacteria has been shown to solve simple computational tasks.

The current method, by contrast, leverages the ability to design DNA strands into regular shapes such as triangles.

I hereby name this DNA aided manufacturing (DAM).

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Myspace acquring iLike for $20M? Facebook music must be coming

Filed under: Entertainment, Internet, Media — Raja @ 9:15 am

Mike Arrington reports in Techcruch that Myspace is close to acquring iLike the social music site for $20M.

MySpace is close to acquiring popular social music service iLike, we’ve confirmed with multiple sources. The deal, which should close this week, will be MySpace’s first acquisition since new CEO Owen Van Natta took control of the company in April 2009. The price is “around $20 million.”

iLike, which launched in late 2006, is a social music recommendation service that now has more than 50 million registered users. It tracks what you listen to and like and gives you recommendations on new music based on that data as well as what your friends are listening to. It is the top music application on Facebook, Bebo, Hi5 and just about every other social network other than MySpace, which has MySpace Music.

iLike also hosts band pages which are second in popularity only to MySpace Music. By acquiring iLike, MySpace solidifies their already leading position as the most popular online identity for bands. Last week iLike also launched their own music download store.

Details are still flying in, but at first blush the deal is particularly interesting for two reasons.

First, simply because iLike is so deeply integrated into the Facebook experience. Nearly 10 million Facebook users use the iLike application every month. And iLike has also been a key part of Facebook’s ongoing struggles with what-to-do-about-music. MySpace is now going to own this.

Second, it’s MySpace, not the MySpace Music joint venture with the music labels, that is acquiring iLike. We’ll have more to say on this shortly. We’re hearing that a key driver of the deal is the iLike team, particularly founders Ali Partovi, Hadi Partovi and Nat Brown, and the underlying technology.

Competitor Last.fm was acquired by CBS in 2007 for $280 million. June 2009 Comscore stats show Last.fm with 12.9 million monthly unique visitors. iLike had just 3 million monthly unique visitors, but that doesn’t take into account the massive usage of the service on social networks.

The company has raised a total of $16.5 million from the founders, Scott Banister, Bob Pittman, Vinod Khosla and Ticketmaster to date. But their last round of funding was in 2006, where Ticketmaster put the bulk of the capital in via a third round of financing that valued the company at a whopping $53.2 million.

This is a nice deal for Myspace and excellent tactical move agaisnt Facebook for just $20M. It is synergistic to Myspace because of their entertainement/music focus. It is not a great outcome for iLike investors and its founders. I suspect they know something we don’t know about facebook’s own music plans. The fact the facebook did not go hard after iLike (if they did the price would not be $20M) tells me that they plan their own music service.

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The Newspaper that doesn’t want to be free

Filed under: Media — Tags: news — Raja @ 8:51 am

NYT has a feature on how the Financial Times buckled the conventional wisdom and charged for access to its site.

The Financial Times, read by business people, has gladly kept its online content behind a pay wall. Pinched by falling advertising revenue, even mainstream newspapers may follow its lead.

Not long ago, when other media executives were convinced that the only way to succeed on the Web was to give away their content, The Financial Times played the eccentric.

“We were regarded as slightly freakish,” says John Ridding, the newspaper’s chief executive.

Indeed, the newspaper started charging readers for access to its Web site in 2002. Now, with few signs that advertising is rebounding from a deep slump, and with other publishers moving to imitate FT.com by erecting so-called pay walls, Mr. Ridding feels vindicated.

“It was pretty lonely out there for a while in paid land,” he said last week. “But it has become pretty clear that advertising alone is not going to sustain online business models. Quality journalism has to be paid for.”

Now The Financial Times is adding to its paid-content strategy with a plan to accept micropayments for individual articles, as an alternative to a subscription.

And one by one, other publishers are starting to see wisdom in the paper’s ways. Rupert Murdoch, chief executive of the News Corporation, said this month that the company intended to charge for all its news Web sites. That plan would have the company’s major newspapers in the United States, Britain and Australia joining their sister newspaper, The Wall Street Journal, which already charges for access to most of its site.

Executives of The New York Times have said they are considering ways to get readers to pay for online access, though they have yet to disclose specific plans.

That is a big change from 2007, when The Times site abandoned a pay wall for some content, concluding that it was restricting the potential for online advertising, despite the site’s having attracted 227,000 paying customers.

Around the same time, Mr. Murdoch was saying publicly that he might drop the pay wall around the Web site of The Wall Street Journal, which the News Corporation was in the process of acquiring.

Pearson said last month that operating profit at FT Publishing, the unit that includes The Financial Times, had fallen 40 percent in the first half of the year, with revenue down 13 percent.

The print circulation has also fallen, with sales in June down 7 percent from a year earlier, to about 412,000 copies, according to the Audit Bureau of Circulations in Britain.

FT.com has not attracted a huge paying audience, with about 117,000 worldwide, up from 101,000 in 2007. That is far short of the one million paying customers of The Journal’s Web site.

Yet FT.com is lucrative because it charges a premium for its content. A premium subscription to the Web site, with access to all content, costs $300 a year in the United States. Adding the print version costs $100 more.

Because of rate increases by FT.com, revenue from Web subscriptions has risen 30 percent over the last year, Mr. Ridding said. The Financial Times has also raised the price of its print editions.

In another effort to generate additional digital revenue, the newspaper restricted access last year to its content through databases like Factiva and LexisNexis, requiring users to buy special licenses to read archived articles. More than 600 corporate customers, with a total of about 50,000 users, have done so.

The price of a subscription to the databases “wasn’t reflecting the value of what we were producing,” Mr. Ridding said. “So we took control of the pricing,” he said, adding that the change led to “robust revenue growth.”

While FT.com is certainly a trendsetter and should be complimented for it, it’s pay wall strategy may not work well for other types of newspapers. It is clear that people are willing to pay for information that directly relates to money such as WSJ and FT. But would they be willing to pay for general news? There is no past evidence to support this.

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August 16, 2009

startup marketing tips

Filed under: Entrepreneurship — Raja @ 11:41 am

Entrepreneur Corner at VentureBeat has some nice articles with tips for startups from various guest authors. Scott Olson wrote a good post on startup marketing called ‘Five key marketing priorities for a startup’.

Prioritizing your marketing time and resources can be a daunting task. Having previously discussed five marketing time wasters that startups should avoid, it seems wise to examine five marketing priorities you should consider as you put together a plan.

In general, your marketing efforts have two goals: reach potential customers and help them find you. If you can successfully navigate the following marketing deliverables, you’ll be well on your way to providing a strong foundation for your company. Stop me if they sound familiar.

Validate market need assumptions

Define and deliver your first working version of the product

Validate pricing and business model

Establish a strong web marketing presence

Put the tools in place to track key marketing metrics

Please go and read the original article if you have a bit of time.

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August 15, 2009

Value of an inbound link

Filed under: Media, Trends — Tags: news — Raja @ 9:06 pm

Recently there seems to be growing sentiment among news media that aggregators are parasites that destroy value . Here is another such argument made by Arnon Mishikin in a post Paidcontent.org.

Arnon Mishkin is a partner with Mitchell Madison Group, where he consults for media companies on improving legacy businesses as well as making the internet profitable. Prior to MMG, he was a partner at the Boston Consulting Group, where he did some of the firm’s earliest work on the web.

People who “get the web” will explain to you that the economics of the web have everything to do with linking and getting linked to. The more links one can get, the better off one is. Few disagree with that guidepost.

So when the AP and the newspaper owners demanded that they get revenue from the linkers, it was clear that they just didn’t understand the web and didn’t appreciate all the value they were receiving from link traffic. (Here are just a few examples of that critique.)

Well, the data suggests that the web – the “blogosphere”– is less an ecosystem than a one-way street.

The vast majority of the value gets captured by aggregators linking and scraping rather than by the news organizations that get linked and scraped. We did a study of traffic on several sites that aggregate purely a menu of news stories. In all cases, there was at least twice as much traffic on the home page as there were clicks going to the stories that were on it. In other words, a very large share of the people who were visiting the site were merely browsing to read headlines rather than using the aggregation page to decide what they wanted to read in detail. Obviously, this has major ramifications for content creators’ ability to grow ad revenue, as the main benefit of added traffic is the potential for higher CPMs. (Disclosure: I have consulted for the AP and other content creators, though not on this particular issue.)

Even in an absolute best-case scenario for producers of original content, the aggregators get at least as much traffic on linked stories as the creators of those stories because anyone who clicks on the link does so from the aggregator’s site (so each site gets a page view). If you don’t believe the data, consider how often in an average day you visit the home page of your favorite news site vs. how often you click through to the underlying story.

Actually, it shouldn’t be surprising to anyone who’s thought about how people have historically read a newspaper: They’ve scanned the headlines and then turned to the sports, movie listings or recipe pages, depending on their real interest. As the saying goes, “People don’t check the news to read about the fire, they check it to learn that there wasn’t a fire.”

Historically, the value of those casual browsers was captured by the newspaper because the readers would have to buy a copy. Now all the value gets captured by the aggregator that scrapes the copy and creates a front page that a set of readers choose to scan. And because creating content costs much more scraping it, there is little rational economic reason to create content.

This is an interesting debate. I wonder if Arnon and others think all aggregators are same or if there are some that actually add value. In other words are all the inbound links the same? More specifically google is the one I am most interested in. If these media people believe in this argument then they should find a way to not be listed on the google index. Then I would say they are walking the walk. That is the acid test for me. Until these media companies do that this argument doesn’t hold water for me.

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Happy Independence Day, India!

Filed under: India — Raja @ 12:48 pm

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Deconstructing Twitter

Filed under: Internet — Raja @ 9:39 am

Kevin Marks, an entrepreneur, has a fantastic blog post titled ‘How Twitter works in theory’. It tries to make sense of what makes twitter tick.

It is said that an economist is someone who sees something that works in practice and wonders whether it works in theory. Twitter clearly works in practice - and if you want practical advice, watch Laura Fitton’s Tech talk at Google, or read her Twitter for Dummies. I’ve learned a lot from talking to her and others about this phenomenon, and I wanted to write about some theories that help me understand it.

Flow

At it heart Twitter is a flow - it doesn’t present an unread count of messages, just a list of recent ones, so you don’t have email’s inbox problem - the implicit pressure to turn bold things plain and get that unread number down. Instead, you can dip in and out of it, when you have time, and what you see is notes from people you care about.

Faces

Indeed, what you see are the faces of people you know with the notes they wrote next to them. This taps into deep mental structures that we all have to looks for faces and associate the information we receive with people we decide to trust, through what we feel about them. This is also why automated tweets not by them are so obtrusive, as they break the trust. Using friends’ faces in ads is even more pernicious, as ads are by definition recommendations from people we don’t trust.

Phatic

The key to Twitter is that it is phatic - full of social gestures that are like apes grooming each other. Both Google and Twitter have little boxes for you to type into, but on Google you’re looking for information, and expecting a machine response, whereas on Twitter you’re declaring an emotion and expecting a human response. This is what leads to unintentionally ironic newspaper columns bemoaning public banality, because they miss that while you don’t care what random strangers feel about their lunch, you do if its your friend on holiday in Pompeii. This is something it shares with Facebook and other social networks, but this brings me to another key difference, which is asymmetric connections.

Following

Historically, web fora were open to anyone, leading to the tragedy of the comments, where annoying people showed up and spoiled things.

Social network sites changed this by requiring mutual agreement on friendship, thereby making a natural in-group area where you only saw your friends’ comments. This also created a venue for the phatic behaviour, but it was rather self-limiting, as you ended up with piles of friend requests from vaguely unfamiliar people that it feels rude to ignore, creating another inbox problem.

This is analogous to the pre-web hypertext systems that insisted every link would be bidirectional, thereby preventing the power-law distributed link structure that builds a small-world network to connect the web and provides the basis for Pagerank. Being able to link to something without it having to give you permission by linking back is what enabled the web to grow.

Making following asymmetric is similarly freeing for social relationships - it means you can follow authors or film stars without drowning them in friend requests, and get the same phatic sense of connection with them that you get from friends.

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Bollywood King Khan hassled at US airport

Filed under: India, Personal — Raja @ 8:48 am

Shahrukh Khan is the king of Bollywood and is a global super star. The whole world knows him apparently except in Newark airport. Reports say Newark airport security detained him for a few hours and only released him after the Indian consulate intervened. King Khan and his fans are unsertandably very upset.

MUMBAI (Reuters) – Indian Bollywood star Shah Rukh Khan said he felt angry and humiliated after he was detained and questioned at a U.S. airport, sparking an uproar in India among his fans.

Khan, 43, one of India’s best known actors, was enroute to Chicago for a parade to mark the Indian independence day on Saturday when he was pulled aside at Newark airport Friday, he said.

“I was really hassled perhaps because of my name being Khan. These guys just wouldn’t let me through,” he said in a text message to reporters in India.

After a couple of hours’ interrogation, he was allowed to make a call, he said, and he got in touch with the Indian consulate who vouched for him and secured his release.

“Absolutely uncalled for, I think. I felt angry and humiliated,” said Khan, who had just finished a month-long shoot in the United States for his upcoming film “My Name is Khan,” which is about a Muslim man’s experience with racial profiling.

A U.S. consul official in India told a television channel they were inquiring into the matter.

I am not sure how airport security can detain him for such a long time even after being made aware of who Shahrukh Khan is. Imagine Brad Pitt or Tom Cruise getting detained for few hours at an airport. Indian president APJ Abdul Kalam had a similar embarassing moment when he was frisked by contenental staffers desipte being told who he was. The fact that both of them were muslims probably has something to do with it. I understand that not everyone has global awareness and the ariport staff were trying to do their job but they need to be more respectful once they are made aware of who these people are.

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August 13, 2009

Automating search marketing

Filed under: Internet, Trends — Tags: advertising, search — Raja @ 9:11 am

Google wants to automate search marketing by looking beyond keywords. As the term adwords indicates it is based on the concept of keywords. An advertiser has to bid on a set of keywords that closely match what their customers type in the search box. But there are potential advertisers such as plumbers, handyment etc that do not know what a keyword is or how to go about using adwords. Google wants to tap into those type of advertisers by offering a system that doesn’t need bidding on keywords.

“Keywords work very, very well, but we think we can do better,” Nicholas Fox, the business product management director for Google AdWords, said in an afternoon keynote here today at the Search Engine Strategies conference. Fox said Google (NASDAQ: GOOG) was investing in approaches that wouldn’t require keywords.

“It’s hard to say how that will work out, but we’re doing continued investment and research,” he said, adding that there’s a huge opportunity for Google, its partners and competitors to “revolutionize search.”

“Imagine if I’m a plumber in San Jose and I fix sinks and toilets, and Google could automatically match you to the users you’re looking for,” Fox said.

He gave another example of an electronics Web site. “What if I could just point Google to my site and have it crawl the site and automatically build targeted ads matched to queries?”

Fox gave no timetable or indication of how far along Google might be in presenting such a system.

It makes sense though it remains to be seen how well such a system can work.

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