Florida Venture Blog by Dan Rua

Google's PageRank Patent in Jeopardy?

2008-07-22T12:30:00.006-04:00

John Duffy has written an intriguing article over at PatentlyO about a set of recent cases/decisions putting all software patents running on general purpose computers in question; using Google's PageRank patent to demonstrate what's at stake. There's been a running debate in IP circles whether software patents would hold long-term, and as more online innovation focuses on just collecting and combining data in new ways, the attacks on software patents are getting more precise.

John shares some cases/quotes of note including:

In re Bilski: "[USPTO] takes the position that process inventions generally are unpatentable unless they 'result in a physical transformation of an article' or are 'tied to a particular machine'."

Ex parte Langemyr: “Any and all computing systems will suffice, indicating that the claim is not directed to the function of any particular machine. … Thus, the claimed method is not tied to ‘a particular machine,’ but rather is tied only to a general purpose computer.”

Ex parte Wasynczuk: “the sole structural limitation recited is the ‘computer-implemented system’ of the preamble” and that limitation “is not any particular apparatus” because the computer could be “essentially any conventional apparatus that performs the claimed functions.”

If you're in the software business, this is a topic worth watching...

Gainesville is Titletown: Back-to-Back National Champs -- AGAIN!

2008-07-19T15:42:00.005-04:00

Just in time for ESPN's Titletown contest, Gainesville just landed another back-to-back national title to go along with it's back-to-back NCAA basketball titles, multiple NCAA football titles and reigning Heisman Trophy Winner, Tim Tebow. Gainesville's Buchholz High School Math Team just won its second consecutive national championship in Sacramento, CA.

And, they didn't just win, they dominated. The 29 member team racked up 147 trophies while sweeping all three divisions: calculus, pre-calculus, and algebra/geometry. They won by 450 points, a larger margin than separated 2nd place from 9th place, and the largest margin of victory in the history of the national competition.

Congratulations to head coach Will Frazer and the whole Mu Alpha Theta team:

Mu (calculus coached by Jason Wiggins) - Kevin Fan, David Jia, Jonathan Mei, Mark Simon, Louie Wu, Tony Wu, Jimmy Wong and Shu Zheng.

Alpha (pre-calculus coached by Ziwei “Louis” Lu) - Youjin Jang, John Lu, Daniel Steffee, James Tan, Mariya Toneva, Wenda Ye, Jerome Yoon and Lucy Zhong.

Theta (algebra and geometry coached by Frazer) - Ming Cao, Bob Chen, Hansol Kang, Grace Kim, Brian Li, Jackson Looney, Katherine Qiu, Alexander Sappington, Emily Shroads, Alex Soucek, Kirsten Soucek, George Tedder and Shuyun Xue.

Lead Conversion at the Heart of RichFX Acquisition by ChannelAdvisor

2008-07-16T10:48:00.005-04:00

ChannelAdvisor CEO, Scot Wingo, wrote a great post today about their acquisition of RichFX. At first blush, RichFX appears to be all about sexy rich media sizzle (PDF), but Scot's post zeros in on the meat he's after: lead conversions.

RichFX brings to ChannelAdvisor a stable of top internet retailers, but more importantly, brings a suite of rich solutions that grow sales conversions. Some examples Scot provided are:

Saks - jewelry example (zoom/pan/multi-image view)
Saks - shoe example
Men's Warehouse - build your own tux.
Lillian Vernon - rich catalog
Disney - custom rich catalog
Wal-mart - rich circular

Scot calls the category "conversion enhancers" -- I think his marketing guys will find a better term. He then does some algebraic simplification to show why conversion rates are so important, resulting in:

Return on Marketing Spend (ROS) = Conversion Rate (CR) * Average Order Value (AOV) / Cost Per Click

Therefore, ROS goes up when CR or AOV go up, or CPC goes down. ChannelAdvisor's suite already had AOV and CPC optimize tools. The RichFX acquisition completes the trifecta, ramping CR (and further boosting AOV).

Scot's post concludes with a couple examples with real dollars worth reviewing. Congrats Scot on the acquisition and the greater capability to maximize etailer ROS...

SezWho Announces Partnerships for Growth

2008-07-15T16:37:00.006-04:00

Comment, profile/reputation and activity-stream platform SezWho spilled the beans on a few big partnerships today. I was already aware of their SocialSpark partnership, but was glad to see the Entrecard and Creative Weblogging announcements. Allen over at CenterNetworks shared his thoughts here.

SezWho is providing a piece of the SocialCMS I yearn for -- comment/reputation management across the 'sphere, but reinforcing the blog as source/end-node. Related systems like Disqus and IntenseDebate hold tons of promise too, but I like SezWho's emphasis on augmenting your content/comment system rather than replacing it.

I'm not sure which system I'll ultimately adopt as I investigate a blog redesign, but SezWho's recent announcements give me comfort they are building for the long-term. If you're not already a member of both SocialSpark and SezWho, it's worth checking them out...not to mention, SezWho is offering an iPod contest for new users!

Relate images: sezwho, entrecard, creative weblogging, disqus, intense debate

WSJ/HBR: A Manufactured Long Tail Debate?

2008-07-02T10:29:00.007-04:00

A friend of mine forwarded Lee Gomes's WSJ article questioning Chris Anderson's Long Tail theory, referencing a recent Harvard Business Review article by Anita Elberse.

Setting aside Lee's original Long Tail skepticism, possibly because it suggested the blogosphere presented an opportunity to impact journalists at the head (e.g. WSJ columnists?); I emailed the following thoughts to my friend. This feels like an attempt by Anita to manufacture some Long Tail controversy to benefit her research/writing, much of her observations actually match what Chris suggested in The Long Tail.

Did I miss something? Any thoughts?

From: Dan Rua [mailto:dan@inflexionvc.com]
Sent: Wednesday, July 02, 2008 10:19 AM
Subject: RE: Long Tail questioned

Great article. I read Chris Anderson's response earlier this week. I felt he was overly gracious about her attack on the Long Tail, but he did share some nuggets such as: "So in the data she cites, the head of the online music market represents 32% of the all plays, and the tail represents 68%. That's certainly no challenge to the Long Tail theory; indeed, it's even more tail-heavy than the data I cited in my book (probably because I used a more generous estimate of 50,000 tracks for Wal-Mart's inventory)."

I'd share that Lee's WSJ summation doesn't match what I got out of reading Long Tail: "The Web is clearly changing cultural consumption patterns, but those changes don't seem to involve the sort of drastic flattening of demand curves predicted by the Long Tail."

I may have missed Long Tail's punchline, but I didn't read the Long Tail to predict a drastic flattening of demand curves or that hits wouldn't continue to be valuable. Rather, I read it to admit a head and tail exists, but the historically inaccessible (due to physical costs etc.) long-tail can become lucrative because of online zero/low costs of manufacturing/distribution. Google's $5B+ long-tail adsense business is a very concrete example of that opportunity.

It's interesting that the opening "aha" example in the HBR article focuses on physical goods/expense decision-making: Grand Central Publishing spent $7M marketing their top book titles and $650K marketing their other titles, and the top titles were more profitable. That example doesn't even match Long Tail theory which would have suggested spending almost zero marketing the long-tail, but making it available digitally for consumers to find/discover.

Despite the HBR article's attempt at Long Tail controversy, it's nice to see that it ends with advice matching what I got out of The Long Tail in the first place. For example: "1. If the goal is to cater to your heavy customers, broaden your assortment with more niche products. 2. Strictly manage the costs of offering products that will rarely sell. If possible, use online networks to construct creative models in which you incur no costs unless the customer actually initiates a transaction."

I think the combination of Long Tail and this article suggests: 1) there is opportunity in the head and 2) there is opportunity in the tail. I'll buy that.

Cheers,

Dan...

UPDATE 07/03: Erik over at TechCrunch came away with a very similar analysis shortly after mine. In fact, his summation sounds strangely familiar:

"In the end, Elberse presents a false dichotomy. The choice is not head or tail. It’s both."

WANTED: New Kind of CMS and New Kind of Start Page

2008-06-30T14:29:00.007-04:00

I'm looking for a couple things that I'm surprised I cannot find, yet:

1) New kind of CMS, turning your site/blog into your single profile/lifestream/social graph instead of maintaining those concepts across Facebook, Twitter, Friendfeed or elsewhere. There are some lifestream plugins for Wordpress and some one-off integrated design efforts, but this feels like something worthy of a new CMS from the ground up -- the mix of profile and social graph requires rethinking refresh cycles, data location/sharing, and existing blog/page design concepts. Now that APIs are proliferating at a rapid rate, it's possible to create the truly distributed social network -- where we own/control the end-nodes. Any ideas who is closest to this?

2) New kind of Start Page, combining SearchMe's visual pageflows, in-pageflow navigation/scrolling and PageFlakes/GReader RSS organization. The result would be a Start Page for my top 10+ pages of daily consumption, allowing in-page navigation/reading and the aesthetics of coverflow. This may be possible with SearchMe's stacks (still trying), but I'm curious if any other start page platforms are incorporating the coverflow design concepts. Ideas?

I think #1 is a bigger idea, but both would bring me value.

UPDATE: @quangt mentioned Chris Pirillo's new WicketPixie design as coming closer to the SocialCMS I'm suggesting. I really like what Matt Brett pulled together for Chris, but the Social Me and Faves pages are a couple examples of why I think a new CMS structure is in order. There should be a way to incorporate blogging, profiles, and the social graph in a more elegant, inclusive way than just pages/tabs.

Israel, Feldman, Winer, Calacanis, Arrington: Take it to the Fight Club

2008-06-27T17:27:00.009-04:00

The never ending drama around puppets is just amplifying what I always suspected about the social media elites. No wonder Ted Murphy scared them so much, he took much worse and handled it much better. Those guys need to take it to a ring...

(via @roder)

Related posts: Mathew Ingram (great recap), Shel Israel, Loren Feldman, BlogHerald, Profy
Related images: loren feldman, shel israel, shel "puppet" israel, dave winer, michael arrington, jason calacanis, puppets

TinySong: Simple, Functional, and Social Music

2008-06-27T10:34:00.008-04:00

I love when a product does what it's supposed to, elegantly, and with little additional, complicating function. That is an attribute of many successful products including the original Google search box and Twitter.

I ran across another example recently: tinysong.com

TinySong was created by the music-heads over at GrooveShark, a further extension from their GrooveShark P2P community, to their GSlite player, and now to full-on music sharing across the broader social graph.

Just as TinyURL allows you to shorten long URLs for sharing in Twitter and elsewhere, TinySong does the same for sharing songs for immediate streaming. Although you could argue that TinySong is just a subset of TinyURL (e.g. you could use TinyURL to do the same thing), I see two distinct benefits:
1) Sharing a TinySong.com URL makes it clear to others they are about to click on a song; and
2) TinySong integrates music search, playback and sharing automatically.

The service works as follows. Go to tinysong.com and type in a search term for a song (e.g. artist, title). I chose "party ben":

Select the song you want to share from the search results. I chose "Another One Bites Da Funk" a mashup of Daft Punk and Queen.

Share that tinysong.com URL with others. I shared via Twitter:

Clicking that tinysong.com URL (try it now http://tinysong.com/Aaj) immediately starts playing the song and sharing other details. From here I can listen, playlist, queue for later, share the song further and even download the mp3 for a small fee that GrooveShark splits between all rights holders and the user who shared that song in the GrooveShark community.

So what does GrooveShark get for providing such a nice, little service? New users are exposed to Grooveshark every time they listen to a shared song. The quality of the GrooveShark lite player also guarantees a portion of those visitors will search/play other songs and join the GrooveShark community long-term...

Now I wonder, how long will it take for Twitter, FriendFeed, Twhirl, Spaz or some of the microblogging clients to incorporate TinySong for sharing songs and playing them in-line with a GSmicro player?

Related posts: BlogSounds, KillerStartups, DownloadSquad, MakeUseOf, SarahInTampa, WebsiteMagazine, FreshArrival, TechDigest, AndrewSWise

The Many Models of Music

2008-06-23T11:01:00.008-04:00

Wired is one of those rare magazines I usually read cover to cover during the month it arrives. Every now and then I get a nice surprise when I find an old article I somehow missed. Today is one of those days.

David Byrne wrote a brief, yet informative, article about the evolution of music distribution on page 125 of the January 2008 issue. It's a topic I've thought about since the Napster days and I hadn't seen someone map the landscape of artist options as succinctly as David has. He also did a better job than most at describing the music experience our genetics long for, not just a CD or recorded song.

David describes music as:

"Before recording technology existed, you could not separate music from its social context....Music was an experience...Technology changed all that in the 20th century....We'll always want to use music as part of our social fabric: to congregate at concerts...to pass music...to want to know more about our favorite bands....This betrays an eternal urge to have a larger context beyond a piece of plastic."

He then proceeds to share six possible music distribution models, including the varying artist opportunity, problems and control that stems from each.

Equity Deal: Every aspect of the artist's career is handled by producers, promoters, marketing people and managers. Example: Pussycat Dolls, Korn, Robbie Williams
Standard Deal: Label bankrolls recording and handles manufacturing, distribution, press, and promotion. Artist gets royalties and label owns copyright/recordings. Example: Talking Heads, most "big label" artists
License Deal: Similar to standard deal, but artist retains copyrights and ownership of master recordings. Example: Arcade Fire w/Merge Records
Profit Sharing: Minimal advance from label for recording costs and minimal marketing, share profits of record sales, not concerts etc. Example: Byrne w/Thrill Jockey
Manufacturing and Distribution Deal: Artist does everything except manufacture and distribute. Artist has total creative control, but less marketing, bigger risk. Example: Aimee Mann
Self-Distribution: Music is self-produced, self-written, self-played, and self-marketed. Sold at concerts, online with MySpace promotion etc. Freedom with significant financial constraints -- easier for more established artists. Example: Jane Siberry (Issa), Radiohead

Unlike most commentaries on the music industry revolution, David didn't point fingers or declare superior/inferior models. Rather, he recognized there are different strokes for different folks -- with repeated references to what may be best for new bands versus established bands.

I've always felt the debate between labels, artists and consumers is too black-and-white. The model that works for Radiohead or Coldplay, might be a disaster for a brand new group with minimal audience and name recognition. The black-and-white debate also fails to acknowledge that artists have varying goals: some just want to make a living while others might aspire to being the top selling artist of all time.

The different goals and different models for success reminds me of entrepreneurs and new venture funding models. Bootstrapping, friends and family, angels, venture capitalists and banks all have a role for different entrepreneurs. The entrepreneur who wants to be the next Microsoft or Google requires a different funding path than the entrepreneur who just wants a flexible lifestyle or a family business they can pass to their kids. Trying to find a single "best model" for all entrepreneurs or all musical artists is doomed for failure, it's a spectrum of options that unlocks opportunity for creators and consumers.

Related images: aimee mann, arcade fire, coldplay, david byrne, jane siberry, korn, radiohead, robbie williams, wired

I'm Back on the Grid!!

2008-06-19T13:08:00.004-04:00

For those of you wondering why it's been awhile since my last post, blame Alaska. In honor of my in-laws 50th wedding anniversary, our extended family met in Seattle for a group Alaska cruise. Our time there was amazing, relaxing, and very "off the grid".

I'm now digging out of email, voicemails, twitter, friendfeed, facebook etc. backlog. Anyone who left me a message, but doesn't hear back by Monday, please give me another ping. With over 1500 emails waiting, it may take awhile...after clearing that backlog, I hope to share some photos from the trip!

Amazon, Twitter and Operant Conditioning

2008-06-06T14:43:00.005-04:00

Twitter/FriendFeed updates announced Amazon.com was down for at least an hour this morning. It has since come up and down a few times. CNet, Mashable, TechCrunch and, thus TechMeme, eventually realized it too. It's up for me now.

I have no idea what happened, but I know Amazon gets a surge of buzz/traffic when it returns. I've seen Twitter leverage this strategy masterfully, reaping the rewards of variable scheduling to maximize conditioned behavior.

Wikipedia's description of operant conditioning has this to say about fixed and variable scheduling of stimulus:

"According to the laws of operant conditioning, any behavior that is consistently rewarded, every single time, will extinguish at a faster rate while intermittently reinforcing behavior leads to more stable rates of behavior that are relatively more resistant to extinction. Thus, in detection dogs, any correct behavior of indicating a "find," must always be rewarded with a tug toy or a ball throw early on for initial acquisition of the behavior. Thereafter, fading procedures, in which the rate of reinforcement is "thinned" (not every response is reinforced) are introduced, switching the dog to an intermittent schedule of reinforcement, which is more resistant to instances of non-reinforcement."

Image above from Reinforcement Schedules (VR line shows maximum impact from Variable ratio schedules)

Applying this to Twitter's intermittent downtime and you can see how Twitter awareness is reinforced every time Twitter comes back from an outage. Services like Twitter need people addicted and, ironically, random outages can help drive the addiction. Hopefully, Amazon's lost sales make it too painful for them to follow a similar approach...

HP's Ultimate Filmmaker Kit & 3Minutes2Launch Contest

2008-06-03T12:52:00.010-04:00

My daughter's kicking off a webshow, one nephew is a director and another is a parkour nut with his own blog/videos. I guess that explains why the HP Channelbee.com contest caught my eye over at SocialSpark. One lucky entrant of 3Minutes2Launch who creates a 3 minute video, enters it in the contest and beats out the competition, will win an internship with ChannelBee and produce a documentary of their experience. The next couple videos provide a bit more detail:

I took a look at some of the entries and I have to say this isn't your typical mentos & coke mouth explosion phone-cam contest. This is a chance for someone passionate about directing to show their stuff in 3 minutes, 2 launch a film/TV career. Although I know "real" directors aren't influenced by such material things, HP's Ultimate Filmmaker Kit looks like a great prize all by itself!

Related images: hp 3minutes2launch, channelbee, channelbee, channelbee, parkour

Tropic Thunder "Viral" Video

2008-06-02T15:24:00.004-04:00

I haven't laughed this hard in a long time, especially when the hammer comes out. Enjoy!

[It looks like MTV is forcing viewers to MTV.com -- I'll embed for now, in hopes they eventually ditch the shackles. Go watch it anyway!]

Orlando Makes FastCompany Global Dozen

2008-05-30T12:58:00.003-04:00

On a tip from Greg via Doterati, I just checked out FastCompany's list of the dozen best cities on the planet for innovation. Only 3 of the cities were in the US, and kudos to Orlando for being one of the few. The full list, in no particular order, included:

Beijing
Hyderabad
Mexico City
Kigali
Seattle
Orlando
Calgary
Moscow
Barcelona
Kansas City
Dohar
Abu Dhabi

They had this to say about Orlando:

"There's more to Orlando than Mickey. It's now a hub for two burgeoning industries: interactive games -- a lively scene has sprouted around the Electronic Arts studio behind Madden NFL -- and biotech. A new medical complex in the Lake Nona area will house a University of Central Florida med school and a branch of the famed Burnham Institute for Medical Research."

We've known this for years about Orlando and multiple spots across the state. It's nice to see others take notice...

Revision3, MediaDefender and the Building Robot Wars

2008-05-29T14:00:00.006-04:00

Over the last couple years I've diligenced a few network security products that are the internet equivalent of automated unmanned air vehicles (UAVs). They offer the ability to scan the [network] horizon for enemy behavior and take aggressive, automated offensive/defensive action.

The magnitude of such automated action usually intrigued me and troubled me at the same time. Today's detailed claim by Revision3 of a MediaDefender denial of service attack on its BitTorrent port reminded me of the robot wars that are coming in air (via UAVs) and in the "cloud" (via MediaDefender and others).

Revision3's post sure sounded like they are setting up to sue MediaDefender (or at least scare up some kind of settlement). Given the business losses, R3's claimed legitimate BitTorrent uses and the precision of the attack (8,000 packets/second at R3's BT port), it's hard to blame them.

At the same time, just as I'm allowed to protect my physical property, it seems like there should be some rights online for protecting my digital property (assuming protective action is taken against entities truly taking my property). I don't know where that line is, but I'm curious how the courts would treat MediaDefender actions if their target really was stealing digital property they are paid to protect. It's likely that most of those cases go unreported, but it would probably depend on the proportionality of their action to the risk of loss.

Anyway, R3's detailed post is an interesting read. Are these the early skirmishes of the building Terminator Robot Wars?

UPDATE: Although I wouldn't blame this one on the robots, a separate BitTorrent-related hack bit Comcast, possibly in response to their BT throttling.

Related images: revision3, mediadefender, bittorrent, comcast, terminator

Digital Savvy: Are you in the savvy six (percent)?

2008-05-27T08:45:00.005-04:00

On a twip from @bcavoli, I just reviewed Scarborough Research's "Understanding the Digital Savvy Consumer, An Analysis of the country's most high-tech consumers: where they live, who they are, what they buy, what they watch/listen to/read"

It was an interesting read, with the usual things you might expect about high-tech consumers. Although the Digital Savvy come in all shapes and sizes, making up 6% of the population, I was surprised to see how much I fit the typical profile:

Male: check
Young: check (OK, a stretch)
Affluent: check (another stretch)
Single or Married with children: check
Entrepreneurial: check
Traveler: check
Hungry for info online: check
Heavy, diverse online spending: check
On the go, rely on cell phone: check
Download video online: check
Heavier radio listener: check
Politically independent: check
Active & athletic: check

With one glaring exception:

In the West geographically: negatory

I did notice one theme that took me by surprise: sports. The top two sites visited by the Digital Savvy in the last 30 days were ESPN.com and NFL.com. I'm a big fantasy sports fan, starting a fantasy baseball league back in 1990, but those sites don't come close to being my top visits. My guess is they did their research in the heart of fantasy football season.

As free research reports go, this is worth a read. After doing so, I'd love to hear in the comments what findings, if any, were a surprise to you...

Stupid Entrepreneur Tricks: Blast Email From:Mail Reflector

2008-05-19T23:01:00.006-04:00

In between twitter updates tonight, I kept seeing replies to the same email pop up from my Outlook. That email came from an entrepreneur who was looking for "partners" or possibly funding. There's nothing wrong with that, right?

Well, try blasting that to a large VC distribution list, with that same distribution list (mail reflector) in the From: field. Bad combination.

Most of the replies are "take me off your distribution list ASAP", "how did I get on this list" or a whole bunch of "me too's" -- total replies now exceed 4075. A few firms were kind enough to reply to the entrepreneur's question, like OpenView, LightSpeed, and Mayfield, with very public declines.

Kudos to Jack Biddle of Novak Biddle and Elizabeth de Saint-Aignan of Nautic Partners for realizing that every reply only perpetuated the pain.

I was going to reply with a similar refrain, but thought this blog post might do more good...

UPDATE: @peterkaminski noticed too, counting over 75 replies, with better terminology. To be precise, this looks more like a mail reflector than a distribution list.

Microsoft, Facebook and Twispers

2008-05-19T16:02:00.010-04:00

Do you remember playing Whispers, Operator, Telephone or Chinese Whispers (UK) -- where one person whispers a phrase to another person, who whispers it another person...until the last person hears something significantly distorted from the original phrase?

I've seen it play out many times in the blogosphere, with the added incentive that bloggers gain traffic/celebrity by twisting things to give their post an "angle" and fuel controversy. The speed of distortion only increases with Twitter. It usually just makes me chuckle, but with the influence/agendas of some bloggers it can border on business tampering. If this weekend's Microsoft/Facebook story continues to morph as it already has in 2 days, there could be billions of shareholder dollars at stake.

Over the weekend Microsoft released the following statement:

"“In light of developments since the withdrawal of the Microsoft proposal to acquire Yahoo! Inc., Microsoft announced that it is continuing to explore and pursue its alternatives to improve and expand its online services and advertising business. Microsoft is considering and has raised with Yahoo! an alternative that would involve a transaction with Yahoo! but not an acquisition of all of Yahoo! Microsoft is not proposing to make a new bid to acquire all of Yahoo! at this time, but reserves the right to reconsider that alternative depending on future developments and discussions that may take place with Yahoo! or discussions with shareholders of Yahoo! or Microsoft or with other third parties.

“There of course can be no assurance that any transaction will result from these discussions.”"

Pretty straightforward, no mention of Facebook, no mention of locking anything down.

John Furrier combined that statement with some rumors he was hearing:

"Why would such a complicated transaction (just Yahoo search with all the headaches and all) be in the cards for Microsoft? After the failed bid for $40 plus billion for all of Yahoo, Microsoft’s intentions are clear. Buy the search business from Yahoo and take that team and go spend at least 20 billion for Facebook. Integrating the search team at Yahoo with Facebook puts a formidable army to take on Google."

Distortion #1: "Microsoft's intentions are clear...go spend at least 20 billion for Facebook." Clear?!? I saw no mention of Facebook in Microsoft's statement. At least John didn't claim anything would be locked down, just a formidable integration.

Robert Scoble then expands on John's post to claim:

"Google is locked out of the Web that soon will be owned by Microsoft. We will never get an open Web back if these two deals happen....It’s Facebook and Microsoft vs. the open public Web."

Distortion #2: "It's Facebook and Microsoft vs. the open public Web" Robert doesn't state any plans by Microsoft to lock anything down, but he does play the tried-and-true "open vs. close" card.

Then, Umair Haque takes Robert's bait (or maybe John's) and adds a litany of open vs. closed buzzwords for Harvard Business Publishing:

"According to an interesting rumour making the rounds: Microsoft is to acquire Yahoo's search business as well as Facebook, and lock both down, to better take on Google....Microsoft is trying to shift from open to closed....That’s what evil really means: coercing others into accepting value destruction....Mark Zuckerberg and Steve Ballmer’s hare-brained scheme for world domination...Microsoft's move is a textbook example of how not to think strategically at the edge...."

Distortion #3: where do I start? Somehow we got from a Microsoft statement about Yahoo to "Microsoft is trying to shift from open to closed" with a couple good vs. evil references for spice.

Not only does this game of Whispers continue with republished out-of-context quotes, but it even comes full circle with John's follow-up Twitter promotion of Umair:
"Furrier: @kellyrfeller you should sub to this blog by Umair http://discussionleader.hbsp.com/haque/ he's strong on strategy"

There have been many names for this whisper game over the years. I wouldn't be surprised one day to find my kids calling it the Blog Whispers game...or maybe even Twispers ;-)

Human Powered Cause Discovery

2008-04-29T23:56:00.003-04:00

As I waited for its release, I've always felt SocialSpark held great potential for spreading the word about good causes. I just didn't realize how easy it would be.

I created a free Spark (organic post idea) about Human Powered Cause Discovery and asked bloggers to do 3 things:
1) Create a Spark about their favorite Cause;
2) Blog about their favorite Cause, pointing readers to the Spark they created; and
3) Point readers to the Spark I created so readers can continue the cycle of spreading the word about worthwhile Causes.

It hasn't even been a week and I've already learned about 4 new Causes. Include the Cause I also Spark'd, Tyler's Hope, and that's five Causes immediately benefiting from SocialSpark's growing community -- at no cost to anyone. Those four new Causes include:
1) The Vasculitis Foundation
2) CRY: Child Relief and You
3) Kiva.org: micro-lending in developing countries
4) MS: Multiple Sclerosis

However, it doesn't end there. Let's keep the cycle going. Please take the time, today, to pick a favorite Cause, blog about it, Spark it at SocialSpark, and point readers to my Human Powered Cause Discovery Spark.

I Knew Ted Murphy was Superman, but Geez

2008-04-25T09:43:00.007-04:00

I woke up this morning to messages that IZEA CEO and friend Ted Murphy got jumped in New Orleans by as many as 8 guys. It sounds like IZEA's Travis Andrews saw the commotion and jumped in to help -- resulting in a beat-down of his own. Wallets and camera stolen, bumps, bruises, blood and a hospital all-nighter.

Early this morning, Ted shared this twitter stream (read from bottom, up):

canceling all credit cards. about 1 hour ago

I would so stick my face in some cake right now. travis...... wake the F up!!!!! about 2 hours ago from web

nothing to do. just makes me sad. one minute I am having a great time. 5 minutes later I am strapped to a gurney bleeding all over. about 2 hours ago from web

26 hours of no sleep. beaten by 8 guys. Happy to be alive. http://tinyurl.com/6m3gbm about 2 hours ago from web

@john_reese this is my last trip here. great food. good atmosphere but the risk outweighs the reward. about 2 hours ago from web in reply to john_reese

@taralamberson I will. just need to keep us awake to make sure we are ok. both took lots of hits to the head; about 2 hours ago from web in reply to taralamberson

@Social_Citizen no. not at all. about 2 hours ago from web in reply to Social_Citizen

my eyes are so red and both are so tired but can not sleep. New Orleans hospital almost as scary as the robbery itself. about 2 hours ago from web

eyes and face bloody. but both are ok. i was kicked mostly in the head. travis mostly in the body. both alive and breathing. thank the lord. about 2 hours ago from web

http://tinyurl.com/6hnw2w My wallet after theft in new orleans about 2 hours ago from web

police. hah. they wanted to arrest travis for helping me. dragged out of urinal by 8 dudes. crazzzzzy stuff. i was like what!?!?!? about 2 hours ago from web

just realized they stole my camera too. about 2 hours ago from web

rolled over and beaten. both of us. bad. blood all over. about 2 hours ago from web

pocket that is. i hope we are ok. about 2 hours ago from web

OMG I got jumped in new orleans. Travis jacked too. went to the hospital. just released. both wallets stolen. staying up to make sure ok. about 2 hours ago from web

It made me sick. I've been on the bottom of a multi-booted kickfest before and it sucks. Even so, I wish I'd been there with Ted and Travis. We've fought a lot of battles together for PayPerPost/IZEA, but this is something different. These guys weren't after linkbait, subscribers or sponsored bloggers -- they just wanted somebody's stuff that wasn't theirs. If they got to dole out some physical punishment as well, all the better.

Ted has taken a lot of grief from a lot of people while building IZEA and always comes back swinging. As a result, he's pioneered an industry and helped a ton of people put food on the table, pay tuition and make house payments while doing what they love, blogging. I'm just glad he kept his head down this time.

Get well guys!

Related images: ted murphy, travis andrews, new orleans

VC FAQ: Venture Capital Valuation

2008-04-21T13:05:00.005-04:00

I received a couple more VC FAQ questions. This time from an entrepreneur and investment banker who saw Angie's List close a $35M round with Battery Ventures. That large funding, and others in the social media space, left her wondering how value is measured and created in online businesses.

Her site, roxiticusdh.blogspot.com, appears to be an early step towards a "Best of" site for various cities around New Jersey and elsewhere. I say "early step" with no details, because the name and domain are clearly ripe for improvement. Her questions were:

How do VC's value an online venture?
The "valuation question" is probably the most often asked question I hear directly from entrepreneurs or on venture capital panels. Entrepreneurs are either trying to understand how crazy high valuations in the news are justified or how crazy low valuations (in their eyes) offered by early-stage VCs are justified. I've been on the entrepreneur side of the table and now the VC side and I know the answer, but it's rarely satisfying for entrepreneurs to hear.

First, there is no one way to value a company. Different funds use different methods, and when you're talking about M&A time it's highly dependent upon the synergies a specific acquirer is trying to buy. Approaches also differ based upon the stage of a company. Because I focus on seed and early-stage companies, any suggestion by entrepreneurs of discounted cash flows makes me run the other way -- the future is way too uncertain for such calculations.

So, if there isn't one way, what can I expect on the fundraising trail? A mix of Art, Science and Voodoo. The Art of valuation takes into account your Market, Management, Magic and plenty of other soft factors to create a spectrum of investor excitement. The Science of valuation takes into account private and public comparables (what price are similar companies commanding in the marketplace), and some spreadsheet work with future revenue/income potentials. The Voodoo of valuation brings in such factors as fund size, typical/expected ownership % and the termsheet competition. At the end of the day, it comes down to getting multiple funding offers so you can actually reach a "market price" -- zero or one offer does not a market make.

I've even created a short presentation that reviews the Art, Science and Voodoo of Valuation and included it below:

Applying all of this to an online venture doesn't change the process much. One oddity in online ventures is the value placed on eyeballs (by some), with the potential of a freemium revenue model (most users are free, pro users pay). Because of these oddities, I'd put more weight on the Voodoo elements -- divide your round size by the typical ownership expectation of the fund you're speaking to, and you'll get pretty close to the valuation they will offer (if they offer anything).

Do you have any advice on short, medium, and long-term strategies to maximize the value of a blog or online business?
For a blog, I'd start with the First Commandment of blogging: frequent quality content = traffic. Frequent content isn't enough alone and quality content isn't enough alone. It may be heresy, but I'd suggest frequency is even more important than quality -- assuming some periodic quality a reader can expect. Readers aren't expecting every blogger to be a professional writer, but they are looking for unique access or unique perspectives on information.

I'd also say that pro blogging is a contact sport. It's hard to do it well if you don't live the blogosphere life of social networking, bookmarking and engaging your readers. Just reporting information isn't enough.

Then, assuming traffic comes, the question becomes how do you make a business from your efforts. There are thousands of get-rich-blogging pundits, but I'd focus on the networks or marketplaces that help you earn by doing what you already love. If your blogging has to change significantly for monetization then I'm not sure it's sustainable. Write the way you enjoy and find marketplaces that will bring advertisers to you, from a variety of topic/product areas so you and your readers don't tire of the sponsors.

Last, for blogs, I'd suggest setting your expectations appropriately. Getting rich blogging is unlikely. However, there are thousands of bloggers paying a mortgage, buying new cars or taking extra vacations with their earnings. Consider anything beyond that just icing on the cake.

For non-blog online businesses, it's hard for me to give one set of value-creating actions. It really depends upon the business. As an investor who has been around viral businesses since HotMail first pioneered the approach, I encourage every online business to 1) find ways for new customers to learn about your business specifically because current customers use it and 2) streamline your referral/signup process to remove every barrier to adoption.

So there you have it, valuation and value-creation in one handy-dandy blog post. I really only scratched the surface, but I hope you find a nugget of interest. If nothing else, I must have prompted another question...if so, blog me another VC FAQ.

My Reactions for Startup Reactor

2008-04-18T10:40:00.003-04:00

Steve Spalding from How To Split An Atom and History of Blogging has kicked off an interesting concept called the Startup Reactor. It focuses on very early companies (typically pre-launch), shares their story and kicks off a conversation about their businesses. It's an easy way to dive into some new ideas and a valuable resource for entrepreneurs who join the conversation. Steve asked if I would provide some thoughts on Startup Reactor's first batch of elevator pitches and he published my thoughts via the following guest post:

First, I want to thank Steve for inviting me to guest post for the Startup Reactor. I think the Reactor is an interesting concept with value for participating entrepreneurs and those that jump into Reactor conversations. The current conversation is a review of five elevator pitches, from Transpondr, LogoBids, Publicitr, Siphs and Zambino. I should note that I was already aware of Siphs. I felt like I knew of LogoBids (or was it one of the other logo sites?). I have no prior exposure to Transpondr, Publicitr or Zambino.

The 7 Ms

I typically apply Dan’s 7Ms to evaluating venture opportunities: Market, Management, Magic, Model, Money, Momentum & Match. That’s a subject for a whole post series later this year, and too in-depth for this exercise. Therefore, I’ll assume comparable management skills across these opportunities (the #1 factor for funding) and focus on Magic (the idea), Market (size/competition for opportunity) and Model (distribution/revenue). There’s not a lot to go on with elevator pitches, but my thoughts/questions are as follows:

Transpondr

Transpondr: Magic feels too simple. I think that’s probably because you are focused on a specific problem (counting) without highlighting the broader strategic opportunity. Therefore, the market also seems small. The reference to hosting offers a hint of potential, but you need to share more than a hint — don’t make investors “do the math”, do it for them.

The revenue model sounds like freemium (good), but I have no idea how the world will find about you. Most viral businesses don’t go viral by accident, entrepreneurs specifically build in ways that use of the product automatically drives distribution of the product.

Biggest Question: How big is this problem/market?

LogoBids

LogoBids: I like the general Magic — crowdsourcing is an interesting theme across a number of verticals. The attraction of crowdsourcing also means you have or will have tons of competitors. There are graphics design and logo-specific entrants, as well as broader crowdsourcing like Kluster which have logos as a subset. Therefore, I’d ask about overall Market potential, assuming you’ll have to slice it up with 5+ other players.

The barriers to entry are low, unless you can reach scale fast enough to get eBay-like network effects: size makes LogoBay the default marketplace for logos. Revenue model is pretty straightforward (similar to other marketplaces), but like Transpondr the service isn’t inherently viral — so what is your plan to get the word out?

Biggest question: Why you win versus the mass of competitors now/later?

Publicitr

Publicitr: Magic wasn’t clear. Elevator pitch needs refinement with less buzzwords and maybe a specific example. I think the idea of analytics on a piece of content (versus site analytics) is interesting as content gets more portable/syndicated/bookmarked/digg’d, but I can’t tell if that is your secret sauce — or is it some special distribution engine.

Market potential is high, generally speaking — small business continues to look for ways to engage online customers. The model really isn’t clear either. Is this a news submission site with revenue per submission, an email distribution service with revenue per email, or revenue for some broad PR goals?

Biggest question: What problem do you solve and how, specifically?

Siphs

Siphs: I like the overarching premise: email is more comfortable for the masses than whizbang RSS stuff. However, I was left a little short on Magic. I think chicklet businesses/services can be sold small, but I have a hard time seeing the big Market (from a dollars standpoint). I’d try to understand how the button can result in a more substantial business, possibly involving ongoing email newsletters (DISCLOSURE: I’m an investor in RSS-to-email provider Zookoda) or some unique news/social property based upon what articles are being shared.

I’m assuming a freemium revenue model, but again you’ll need to offer more substantial services before people pull out their credit card. This business is inherently viral, so I like the distribution model.

Biggest question: What specific problem are you trying to solve for bloggers? I’m not convinced that an share/email-this button is sufficient enough.

Zambino

Zambino: I like the Magic here: in-video marketing offers unique ROI potential. My investment in IZEA comes from a strong belief that advertising and content will grow more and more intertwined as the world moves to on-demand content consumption (e.g. skipping commercials and/or ignoring display ads). This also suggests a very large market and company potential, if done right. Revver is a close comparable and their difficulties of late are a bit of a puzzle to me.

I would ask, “why will Zambino succeed given some other video marketing stumbles?” This leads directly to your Model. How will you, the publishers and advertisers get ROI that keeps everyone happy? It sounds like you’re already dodging the hosting expense of a Revver model by leveraging YouTube. Like Siphs, the distribution model here (good vids = more publishers/advertisers) is inherently viral.

Biggest question: Do you have the cred or the early unique publisher relationships to get content early? Just as good content can drive viral goodwill, bad content can drive viral bad will.

Now Back To You

So, there you go. As I mentioned above, the entrepreneur plays a huge role in getting funded. A great idea still needs a passionate, visionary founder to sell it to employees, partners, investors and customers. Assuming that exists for all of these, what do you think? Did I miss something or prompt any questions?