Running With Foxes

Joost launched last year to quite a bit of fanfare. Heck, even I was excited. I once thought they had it in the bag. They had a slick player, were nearing a million users (a tough number to hit for a download), and were even backed by Viacom, CBS, and Sequoia.

However, the market’s changed considerably. First, Hulu launched and was a lot better than expected. Second, Adobe announced plans to incorporate a slicker codec. Now Joost is finding content deals harder to come by.

These kinds of difficulties are nothing new. We’ve seen them before in online music amongst deals between the large record labels and online vendors. In that case, as in the case of online video, it appears that publishers are calling the shots. However, they haven’t been in complete control. In a large part, pirates have forced their hands. Piracy has in large part been democratized by the arrival of user friendly media distribution channels like YouTube, Deezer, or any number of other streaming media services.

In fact, I’d argue that online, media publishers are more in competition with pirates than each other. There’s plenty of demand for high quality media content online and pirates have no qualms in supplying it. Comedy Central had its own fight with YouTube over Daily Show clips until it finally put everything online on its own site. The same has played out for a multitude of other shows including South Park, which also finally got it’s online counterpart.

While publishers can’t beat pirates on price, they can win the audience back with quality and user experience. But make the ads too annoying or obnoxious and users will flee back to pirates. Publishers can make large libraries of their content easily searched and in high definition. I get a sense that all online media will move toward points of aggregation. For music, Steve Jobs hopes it’s iTunes. Hulu has the potential to be the same for television. There will likely be a few other syndication partners as well.

At about 2am PST, the much anticipated Facebook chat went online for me. While a blow to many developers on the application platform, it’s really a no brainer for Facebook. Chat will undoubtedly increase time spent on the site for a lot of the “13-22 nothing better to do demographic”. But it will also make it a lot easier for me to connect with people I only know through Facebook, sans email.

Still playing around with the privacy controls.

One of the things I felt hurt me when I was writing or analyzing search engines was that I was soooooo incredibly used to Google search. I started using Google back in 2000 or so when my brother introduced me to them and haven’t really changed since. I’m sure everyone else in the tech industry has a similar story.

So, to broaden my horizons and see if the grass is greener on the other side of the fence, I’m going a week without Google search (as opposed to just a day). Every time I get the impulse to run a query, I’ll go to Yahoo, Ask, or Live. I hope running real queries as opposed to the canned ones you use while testing a new engine will give me a better understanding of the search landscape.

Here’s a list of some of the engines:
Yahoo.com
Ask.com
Live.com
Quintura.com
Powerset.com (private beta)
Hakia.com
SurfCanyon.com

SocialMedia is holding a “Business School” event that will be stuffed with all sorts of practical information about building a business through social applications and take a look into the future. Find out more information here. We’re still in the early days and a lot has changed over the last couple of months. If you’re already operating a social site or looking to get on one of the platforms, it’s a must.

I’m also going to be hosting a panel on advertising at SNAP summit tomorrow. It’ll be a great opportunity to hear about what’s going on in the future of social advertising from some highly qualified panelists (Yeildbuild, Blue Lithium, Chirp, Circos).

The event is free for SocialMedia developers. Get tickets here.

This time my paid SocialMedia email account on Google is giving me a “Temporary” 502 error. I’m left wondering whether it’s temporary as in they fix it soon, or temporary as in we’re all temporarily on this earth. Google’s support system is abysmal. I’d feel a little better if I got someone on the phone at least. But alas, bulletin boards are algorithmically more efficient at blowing customers off.

Update: 12 hours later, email restored.

So it seems that Yahoo continues to befuddle me and has started advertising their search engine on the radio. Once again it’s another misguided advertising venture bound to not win them a fraction of a point in market share.

Their ad budget for old media would make a lot more sense being put to use developing new features or at least advertising the product online. Maybe bidding on keywords through Google :). The point is, and this goes for all tech companies, the best form of advertising is your product itself (as I’ve said before). Google advertises their product by giving away search for free for any site on the internet. People integrated Google search into their sites. It worked well and exposed a wider userbase to their product.

Other startups like Feedburner got a lot of publicity through people using it. Twitter opened an API and got a lot of other people to effectively publicize the company.

FriendFeed generated a lot of press over the last couple of days. Techmeme was filled with battling headlines, notably between Duncan and Louis. People are still talking about it.

But why?

FriendFeed benefited from somewhat of a perfect storm of news aided by having a rockstar team and well crafted product relevant to the blogging community.

So looking at the news, you see FriendFeed was rather dormant until they announced funding and launched publicly. The story was carried along with the launch of SocialThing. There’s a big lesson here, the right competitors can be a boon to press for your company. Every time a publication like TechCrunch writes about one of the feed startups, they generally reference the others.

Lesson: Be honest about competitors, there’s a certain benefit to just getting coverage as an industry.

FriendFeed also has a concise mission: social feed aggregation and processing. This tied into the larger theme of social networking that’s been driving a lot of creative thought in the community. Social networking is still exploding and curious minds are wondering how we’ll manage all that data. Inquiring minds opined early and often to get to the head of the parade in crafting new thoughts about the space. FriendFeed gave them the closest concrete vision so far.

Lesson: Tie your company’s story into major themes. People don’t want to be a corporate shill and talk just about your startup, but they will talk about general trends and include you in the conversation.

Lesson: Have a simple message and value proposition. FriendFeed is a feed of your friends information. Do you really have to understand that much more? Other startups like Plaxo currently have the same functionality (yes, including comments), but have companies that aren’t as laser focused on the problem.

Finally, FriendFeed has a great team and cleanly designed product. All the founders are from Google and naturally and deservedly the brand is rubbing off on them. Fortune did a video story to that effect.

Lesson: Leverage the stories behind your employees.

Finally, and what I think had the greatest impact in FriendFeeds media blitz sans PR firm, was the design of their product and launch process. Lets be honest, most of the people who got into and signed up for the beta were the Twitters and Bloggers of the world. Just look at my friend feed graph (as an aside, I second some of Duncan’s current skepticism. We’ve seen bumps like this before).

So, the PR pump was primed by having a bunch of people who can generate publicity signed up for the service. These people are also some of the main users of the service, and they tend to have larger than normal egos. That leads me into why the launch process went off so well.

FriendFeed is a very low friction application, meaning that it does a lot of the thinking for you. You just grab an account and put in relevant feed URLs and FriendFeed does the rest. And by rest I mean automatically adds your friends from other networks if they’re on FriendFeed too.

There’s nothing more that people who love to broadcast their opinions love to see than an audience lining up to hear them, or in this case subscribe to their feed. By default it generates a lot of notification emails as more people subscribe to your feed. The basic process outlined below:

1. People who twitter and blog signed up for the FriendFeed beta
2. FriendFeed launches
3. FriendFeed auto subscribes you to your friend’s feeds.
4. Same bloggers and twitters get a lot of subscription requests in their inbox
5. There is much rejoicing and blog posts (Techmeme conversation did the rest)

Lesson: Appeal to people’s sense of vanity when possible. Effective social tools make people feel more important, smarter, maybe even sexier, and well connected.

Originally I was going to title this “OMFG Can We Stop Talking About FriendFeed”, not because I didn’t like the service, but rather because I feel it was too early to start declaring the service the next anything. People (Louis and others) just saw a parade and wanted to get out in front of it. Th idea was to be early and declare a winner so that you seem visionary when the company’s bought by Google or something a year from now.

However, FriendFeed has so far just come up with the lowest friction social feed aggregator. There’s still a lot of work in processing the feeds to turn that stream into a clear signal of relevant information. There’s still a great deal of integration and utility the service needs to prove before it’s success can be assured.

Matthew Creamer of AdAge had an interesting piece on web advertising. Interesting, namely because he questions the whole notion of “advertising” on the web. His argument is that traditional forms of advertising (banners, emails) are ineffective online because the internet is a user controlled medium and users revolt at the sight of advertising.

Creamer uses the ineffectiveness of banner ads as a support for the downfall of traditional online advertising. The metrics on these ads aren’t stellar. However, that’s relevant to performance based advertisers, not the brand advertisers currently on TV. Big brands are paying a lot more for what I see as a lot less on TV. Advertisers only get an estimate of how many people watched their ad and are paying $40 - $50 CPMs. I don’t see how this should go down because we have better metrics online. We just need better creatives. This is what makes video advertising interesting.

Moreover Creamer notes that marketers, once at the mercy of media channels, can now participate as their own media channels online. “In other words, marketers can build website that do cool, useful stuff.” Johnson and Johnson’s Babycenter is cited as an example.

However, the article’s conclusion, to “create advertising that has value” doesn’t leave us with much. It’s about as useful advice as “build a great business”.

The reason marketers pay for advertising is because they’re notoriously bad at creating value outside of their core product. Bud.tv failed. Amazon and EBay have launched Facebook applications that don’t seem to be going anywhere. We don’t need more of these.

The market determines what media properties survive. Marketers need to find out how to inject their message on to these properties. Some are doing it through campaigns on blogs, others on social networks through the likes of SocialMedia. Advertising is far from a dead medium online.

The more relevant question to me is how will marketers adjust their advertising to these new media properties. Will it be through earning placement, or paying for it. For years advertisers have had to pay for access to their audiences. Media channels like newspapers, T.V., or billboards charged premiums to publishers because they were the only way to broadcast to an audience of any significant size.

But social syndications systems (blogging, bookmarking, videos, pictures) let marketers earn their audience by creating engaging/entertaining content. If a company creates an entertaining video (or even someone else does), it can become distributed amongst their target group through “word of mouth” in a much more genuine way. Take for instance the Coke/Mentos videos. The entire series of videos on YouTube have over an eight figure view count. Human Lab Rat on Justin.tv is another interesting promotion.

For those that like pictures, it looks like this:

The question is does self promoting content selected by users get you more value than paid placement? Are social networks inherently viral enough so that creating innovative ad copy is more valuable than paying for distribution? Or is the whole idea of advertising bunk because user recommendations will essentially replace the idea of advertising? I strongly disagree that advertising will cease to function online. Rather, each method will simply find its price based on what marketers want. And viral distribution of conversation about brands is great, but brands still need to get their message out and a simple advertising buy with somewhat predictable reach is still an attractive commodity.

Furthermore, creating viral content isn’t easy and isn’t predictable because you don’t know how wide an audience you’ll reach. Maybe you spend $100,000 on a video that gets 5 views maybe 5 million. Brands also have to frequently move off message in order to be invited in by users. Being raunchy, sophomoric, or handing over your brand to users to play with may get more views, but doesn’t help promote the idea the company is interested in. The fact is that creativity doesn’t scale.

And this is precisely the problem, coming up with a new ad solution that strikes a balance between not being too odious for users and too unreliable for advertisers to buy. That’s why I’m at SocialMedia.

MySpace has softly launched their app directory to the public today, but I’m not seeing intense interest from developers. Most are so tied up in developing for Facebook and don’t want to get distracted by a buggy platform. That being said, there are over 160 million reasons why the MySpace platform will eventually work, with or without OpenSocial. There are simply too many users to ignore.

We’ve ported SocialMedia’s application tracker, Appsaholic, over to the MySpace platform and will have some stats coming out soon. However, I’m not expecting anything that amazing over the next couple of weeks. MySpace will be spinning up a lot slower compared to Facebook’s platform, which launched, crashed, and later saw explosive user growth for applications like iLike.

I’m not expecting as much because of a few reasons: OpenSocial is still buggy, MySpace isn’t good at courting developers, and MySpace has some legacy issues.

From what I’ve heard, OpenSocial is a pain to work with. Although porting our own application (Appsaholic) has been a breeze (no social interaction), other developers have had considerable trouble. I’ve heard Causes doesn’t feel they are able to move as fast on the platform despite having their best Javascript junkies hard at work on porting the application. Facebook’s standards (FBML, FQL) also closely followed familiar standards.

MySpace has always been bad at talking to developers. If there’s one thing I’ve learned in the valley, it’s that developer’s chief motivation isn’t money, that’s about number two or three down the list. Developers, like entrepreneurs, are aspirational. They believe that money will follow a good product. MySpace has been pushing a focus on money instead of technology from the start and are seen as lagging behind the weekly updates to the FB platform. That’s way more exciting to developers.

Finally MySpace has a legacy problem. A lot of users have already added widgets of one sort or another via cut and paste on MySpace. It’s going to take some time for users to see the additional value of adding applications if they already have widgets on their profile.

I think any success story attached to MySpace’s platform will be more of a statement of Google’s ability to execute rather than MySpace’s. Despite pushing a rhetoric of one size fits all, Google still has a long way to go in making the platform plug and play. Individual platforms can turn on and off portions of OpenSocial, meaning that there is a de facto customization required anyhow. I’ll hold my overall judgment for another month, then we’ll know how far they’re getting.

Some new stats from a USA today article about VC financing:

More VC financing info available through Price Waterhouse Moneytree.

In venture capital, here are the fastest-growing U.S. regions by companies and total investment dollars over 10 years.
	Number of companies			Total investment (in millions)
	2007	1997	% change	2007	1997	% change
New Mexico	21	3	600%	128.26	27.03	375%
Pittsburgh	44	12	267%	198.17	32.32	513%
Seattle	132	65	103%	1253.41	403.2	211%
Los Angeles	124	72	72%	1149.92	450.28	155%
Washington Metroplex	180	105	71%	1282.16	558.24	130%
San Fran/Berkeley	303	194	56%	2520.53	1134.63	122%
San Diego Metro	129	83	55%	1989.48	495.98	301%
Boston	314	222	41%	3173.98	1164.45	173%
Austin	65	46	41%	674.72	242.86	178%
San Jose	669	497	35%	7581.26	3514.29	116%
South NJ/West Pa	27	22	23%	163.67	79.73	105%
New York Metro	216	187	16%	1694.66	1282.94	32%
Denver	70	63	11%	536.6	350.69	53%
Research Triangle	53	48	10%	508.98	208.1	145%
Other US	382	352	9%	2906.79	1940.86	50%
Great Lakes	118	110	7%	699.76	525.43	33%
Philadelphia	88	83	6%	664.89	427.4	56%
Orange County	56	53	6%	522.19	350.96	49%
Portland	28	28	0%	250.97	124.57	101%
San Antonio/S.Texas	6	6	0%	22.5	10.55	113%
Atlanta	52	61	-15%	457.39	326.55	40%
Dallas	42	51	-18%	487.05	334.44	46%
Nashville	14	17	-18%	65.37	101.5	-36%
Chicago	48	61	-21%	426.42	333.43	28%
Houston	27	35	-23%	242.64	247.41	-2%
Twin Cities	39	54	-28%	402.2	227.28	77%
West Texas	0	3	-100%	0	9.17	-100%
Sources: PricewaterhouseCoopers and National Venture Capital Association, Thomson Financial