Web 2.0 – Living and socializing online

Web 2.0 – Redefining How We Live and Socialize Online and Offline

Here are my thoughts on another great panel at the TieCon 2007. It was a great discussion and Jeff Clavier of Softtech VC moderated the panel and did an excellent job of holding the panel’s feet to the fire.

Moderator(s):

Jeff Clavier, Founder and Managing Partner, SoftTech VC

Panelist(s):

Sab Kanaujia, VP, Product Strategy & Development, NBC Universal’s Digital Media Group
Max Levchin, Chairman, Founder; CEO, Slide, Inc.
John Lilly, COO, Mozilla Foundation
Ravi Mhatre, General Partner, Lightspeed Venture Partners
Mike Speiser, VP Community Products, Yahoo! Inc.

When asked what it takes to be successful, Max Levchin of Slide, Inc., said flexibility is key. If you see activity in any part of your business, focus on that, regardless of your original intent. Slide backed into their business model when they saw a need for widgets and now they are the largest widget-maker in the industry. Mike Speiser of Yahoo! also had an excellent point – Don’t think about starting yet another community, think of solving a problem.

Since in the Web 2.0 we are all about the users, Clavier gently probed NBC about some of their popular shows, which that were taken off-air and the public backlash that followed. In his words, it doesn’t take long for a ‘mob’ become a lynch mob in this day of free expression and asked how NBC managed public opinion. NBC reiterated their bottom-orientedness and stated that shows that don’t have a sizeable audience will be canned. However, one has to wonder about their commitment to the audience. Should they be looking at alternate distribution models, get a handle on their cost structure, or some other way of harnessing that user-generated-goodwill.

On the other extreme was the VC firm who is investing in companies targeting niche markets and sees potential in highly targeted social sites like fantasy sports, travel etc. Again the question came up about recruiting new users and again the panel was equivocal in that you shouldn’t pay to get usage. That’s not sustainable. Organic WOM is still the way and the key issue is branding. Define your value proposition!

Creative approaches are needed and seeding is recommended. MySpace got their first generation of users from friendster and most of them were attractive women with large address book. Which goes back to my earlier post that attractive women are key to any social/dating site. This strategy may not be appropriate for all social sites, so the key is to find good people into the community who are passionate about your site and recommend it to all their friends. Traditional advertising was derided as spam and not effective unless the purpose is to trigger awareness. There was a great emphasis on build a good product and they will come. I don’t buy that. Having a good product is just the basic requirement, you still have to do your part in promoting the site. If you can do it in a non-sleazy way, that would be great Mozilla did something very creative and got a two page spread in the NY times where any of their developers could get their name in for $10. It was a brilliant approach and catered to their small but loyal audience. Stories about you do rather than the product are more valuable and interesting.

One point that came up via Slide and I particularly liked was good old fashioned disciplined approach to customer acquisition. There is a need to do seeding and expose your product to target group of user but there’s a difference between first-gen vs. second-gen seeding. Your acquisition cost/user should be going down not up.

I love this one and it always comes up in any discussion of Web 2.0 companies and that is whether advertising is a sustainable model and other ways to make money beyond advertising. Paid-subscription is one of the alternate revenue-generation idea mentioned during the discussion. One gem that new web 2.0 ventures should remember is that is ad dollars are discretionary. They tend to follow the economic cycle. The larger sites are not affected as much but that could make or break a smaller company. So startups should focus on keeping costs down, while growing their user base. Keep headcount low and hire engineers who have experience in building products. For example, mozilla has 110mil users (15% penetration of worldwide online users) but they only have 81 people of which 40 were added recently.

Clavier joked that it shouldn’t take more than 2 pizzas to feed your entire team and of course if you are venture funded, the revenue should come from your investors. Hear! Hear!

Google spurs M&A frenzy, eBay joins the fray

Google’s dominance of the search advertising, its ambitious forays into areas dominated by note-worthy tech and media giants, and recent acquisition of Doubleclick has set off a frenzy of M&A activity in the tech industry. The latest one to join acquisition-hungry pack may be eBay according to GigaOM’s Om Malik who reports,

eBay, the San Jose, Calif.-based auction giant is likely to announce its acquisition of Stumble Upon after the close to markets today, according to informed sources.

(I bet there are many who would give an arm, a leg, and then some..body part, to get access to Malik’s informed sources :) )

Malik’s rationale for the deal is as follows,

Look at this from the toolbar-and-Skype lens. StumbleUpon makes a toolbar that provides collaborative serendipity to find web sites. The toolbar, if you ask StumbleUpon users provides more useful and productive results, than say Google.

By marrying the toolbar to Skype client, eBay can do an end run around Google’s dominance of the search business. A simple search box inside Skype client is all it would take. It is not that far fetched: Skype has been slowly integrating various different services (including PayPal) into its client, and slowly becoming eBay’s desktop backdoor.

Any technology, tool, or any derivative there-of, which allows $$$-endowed companies like eBay, MS, Yahoo! etc. to avoid having to deal with and compete directly with Google is and will be welcomed with open arms, even if it means paying obscene amounts of money for a small company like aQuantive.

I think that at end of the day, any move that benefits consumers by providing a better (finding) experience (even if it is motivated by deathly competitive streak) is a good thing. Dominance of any industry by one giant is just plain evil and not to mention, this recent flurry of activity keeps it fresh and interesting for those of us who are in the tech industry :)

Building and Monetizing online communities

You know you are a serious entrepreneur when at 8am on a Saturday morning, you are at the TieCon 2007 to mingle with other entrepreneurs and industry luminaries. The theme for the conference was The New Face of Entrepreneurship and the huge crowd at this event was very enthusiastic and highly engaged. Here are some insights from the TieCon panel on Building and Monetizing Online Communities from Ground Zero:

Moderator:

Patricia Nakache, General Partner , Trinity Ventures

Panelist(s):
Vinay Bhagat, Founder, Chairman & CSO, Convio
Christopher P. Michel, Founder & CEO, Affinity Labs
Neal Mohan, SVP of Strategy and Product Development, DoubleClick
Steve Polsky, President & COO, Flixster, Inc.
Laurence Toney, Chairman, ProfileLinker

Patricia Nakache started off the panel discussion with a very interesting quote,

"Vision without execution is hallucination"

The five-person panel had great insights on how to move from vision to execution and skipping the hallucination stage. The first question to the panel was if ‘Middle-America’ was ready for web 2.0. The panel was equivocal that ‘viral’ is a mostly young phenomenon and it will take some time and lot of patience to reach the older audience. Laurence Toney, Chairman of an ex-eBayer mentioned eBay, the original social community site, as a great example of successfully building a community that is highly ‘middle-america’ in composition and global. I think the key here is to build a community that delivers value to your user base and they will come.

Steve Polsky of Flixster, highlighted the importance of reiteration – "deconstructing failure and reconstructing success" as the key to sustainable success. In other words, learn from the successes and mistakes of other companies. Get experts on board either as employees or advisors and leverage their expertise. I agree, convincing industry experts to become advisors for your company is definitely the way to go if you want great advice on the cheap.

A great question was about strategies for building that all important critical mass for your online community and there were several gems that came up:

1) Viral marketing is (of course) at the top of this list
2) Piggybacking on other successful sites was another way to get noticed
3) Incentivize and motivate your users to contribute content, this increases the engagement and loyalty to the site and makes it more interesting
4) Search engine marketing was also mentioned as one option of driving traffic to your site (Many thought this was a blatant plug by DoubleClick)
5) Understand Customer Lifetime Value, have a good balance between your acquisition costs and monetization
6) Last but not the least, build a good product, if your product sucks, no matter of virality or WOM is going to save your site

Having a great product is key but getting a critical mass to use it is challenging, especially if you don’t have the first mover-advantage. Christopher Michel of Affinity Labs, had a great point that virality can not be replicated and it’s just a matter of trial and error. Toney had a good point the need for distribution of content to end of the network. He gave the example of Art.com, which leverages widgets to distribute information from emerging artist’s pages. He went on to say how easy-to-use widgets are some of the fundamental building blocks for supporting virality.

The panel discussed strategies for repeat usage is to increase stickiness of the site by improving user experience. Simplicity of the site and ease of usage along with motivational elements lead to increased user engagement. Polsky highlighted the passion for a particular issue or topic such as movies drives engagement and retention. However, the current models for measuring online marketing effectiveness are counter-intuitive because high CTRs indicate low stickiness and less engagement with users, which is a death knell for any socialization site. In case, you missed this news – In March, Comscore announced ‘visits’ as a new user engagement metric and I think it’s about time.

I am very leery of advertising-only revenue model, I don’t think it’s sustainable especially if you are not #1 or #2 site/blog in your chosen market, so I especially loved this part of the panel discussion. In response to the all-important question of monetization, at a time where everyone is looking at advertising as a revenue source, Toney pointed to successful models like Art.com and eBay, that have combined commerce with socialization. This is a very powerful combination and effective model for driving monetization. Neal Mohan of DoubleClick highlighted a little-known fact that 72% of the advertising revenues goes to larger social media sites like MySpace and FaceBook. However, a vast majority of ad inventory on these site remains unsold, indicating there is an oversupply and smaller social media sites need to look at alternate sources of revenue.

I am big believer of niche marketing and highly focused messaging to a target audience. I think trying to appeal to a mass audience (one-size-fits-all) dilutes the value of any marketing program. Michel remains skeptical about brand marketing via social media sites because of several reasons, the main one being the current metrics are inadequate in measuring marketing efficacy. His view was echoed by Mohan who said the biggest challenge, brand marketers face is that while large socialization sites like MySpace can drive huge traffic, they don’t have a clear handle on their demographic. Moreover, brand marketers are unable to control unfavorable brand exposure because of the open (uncontrolled) nature of the online media. Hence there is an opportunity for niche sites like Flixster that have a small but highly target audience, so the quality of the user base is much better.

Mohan went on to say that online communities were a great avenue for lead-generation and this was grossly overlooked by marketers. And niche networks (other than Yahoo! and Google) could also provide better value in search-related advertising. Vinay Bhagat of Convio highlighted the need to track offline behavior not just online metrics. Online communities are influential in driving offline behavior and this should be measured and taken into account when determining the return on any online marketing investment. Michel brought up a great point that we have to stop looking at advertising as disruptive and position it as a benefit to the consumer to ensure effectiveness of any advertising effort.

Mohan pointed out the total current US ad spend was $600billion and there is a gradual shift of offline dollars to online advertising. Toney concluded the discussion on a very optimistic note. Currently there is a disproportionate allocation of media spend in favor of traditional media, given the substantial amount of time that consumers spend on the Internet. He sees this changing and more media spending dollars flowing to online media. He also provided one interesting prediction and that was how we might see social networking not just as stand-alone communities but as a feature for enhancing user experience.

It was a brilliant discussion and providing tremendous learning for those who already have their social sites up and running as well as those starting new online communities. There is much more that I haven’t been able to cover here, but you get the gist of the discussion and trends in the social media space.

Social media, web 2.0, distributed services, widgets etc.

Here is a great observation by Lawrence Coburn, founder of Rate it All, on this month’s New Tech Venture meetup:

"Nice summary Mia.  I found it interesting that a recurring theme among each of the four presenters was how each was racing to become a distributed service.  Mobissimo through a browser extension, Tangler through Bizdev, BlogRovr through a download, and RateItAll through widgets."

Distributed services also seemed to be a leading theme at TieCon 2007: The New Face of Entrepreneurship conference at the Santa Clara convention center this weekend and probably at the Salesforce.com conference starting on Monday. It was a phenomenal gathering of the valley ‘s new-age entrepreneurs, tech evangelists, and VCs. Over the next few days, I will share my findings from the various panels on social media and mobile technology that I found very interesting. I was tickled pink to find both Google and Yahoo! on the same Mobile Multimedia panel..more on that later.

I am trying out the beta version of the Rate it All widget, which I think is the neatest little information distribution/sharing tool and a great way to get more traffic to your blog. Check it out!

Silicon Valley New Tech Meetup

This month’s Silicon Valley NewTech Meetup had a huge turnout (standing room only) and a phenomenal lineup of new tech presenters. Here are some details on this week’s lineup,

Rateitall is an opinion network, where users can rate the sites/people of their choice and earn cash for various activities on the site. Lawrence Coburn, the founder of RIA (not to be confused with RIAA), demonstrated a neat little widget (still in beta) that lets your site visitors rate your site or you. The RIA rating is not based on individual postings or news items(like Digg) but on the entire site or topic or even person. The cool thing is that not only do you see the ratings on your site, they are also displayed on the RIA site, thereby driving more traffic to your site.

Tangler.com is a new network for advanced discussions ie. tricked out discussions with video, audio, graphics, etc. The advantage of Tangler over other Internet forums is having all your discussions in one place and making it easy to link conversations. It is not trying to compete with Yahoo! groups or other forums. It has positioned itself as a place where companies can host their beta products and get them tested. The site makes it very easy to include graphics, videos and you have to be a member to use, which helps to keep out the riff-raff.

Mobissimo.com is touted as the Google for travel. It’s a travel search engine with an interesting twist. It searches travel suppliers and carrier sites (excluding Southwest) in United States and around the world, so you don’t have to scour millions of sites trying to find the best deal. The site is absolutely free, it generates revenues from the carriers and advertising. Another significant differentiator for Mobissimo is it’s ability to find you the best deals based on your chosen activity. For example: If you are interested in beaches, Mobissimo will find you all the deals (air, hotel, car) for beaches around the world. You can even search by your favorite wine, just select wine-tasting in the activity form, put riesling in the key word search and voila, it brings up all the places, local and international that offers Riesling wine tasting. How cool is that?!

Blogrovr.com is a neat little tool that ‘fetches’ posts to your browser on whatever you are interested in and browsing for. The Rovr tray slides in on the side showing summaries of the posts it finds. You can read the posts right there without going to the blog. It even lets you twitter any page you are on. If you are a blogger, you can add a BlogRovr chiclet to let readers add you to their Rovr subscriptions.

All in all, quite a stellar group of ventures. These companies use a mix of subscription fees and contextual advertising to generate revenues. Most of them are already revenue-generating and even profitable.