I thought I would share a quick update on my blog about my professional plans.  With the support and encouragement of my Venrock colleagues, I am pleased to share that I am moving on to co-found a new Micro VC […]

I had coffee with an entrepreneur friend the other day who is in the early stages of putting a company together, and he recounted how his informal conversations with a venture capitalist had quickly escalated into a full partner pitch in just a few weeks. That situation sounds very positive in theory, but the problem is that this founder wasn’t ready for this interest and is trying to play catch up in other capital raising discussions (with both angels and VCs). He lamented that if the meetings with this venture firm soon led to a term sheet, he’ll be faced with a tough problem of a binary decision – take whatever they offer him (which was likely too much money for what the company needs now at not a great price) or risk losing any funding options. A high class problem, certainly, but one in which the entrepreneur could have easily avoided by generated alternative funding options and as a result, a better outcome. I’ve seen this scenario play out often; as VCs are aggressive in pursuing hot new companies and entrepreneur (especially first-timers) are flattered and eager conversations with VCs. Given this situation happening, I’ve even heard some people strictly advise entrepreneurs never ever to talk to VCs unless they absolutely need to… in order to raise money.
All of this led me to think about the question – when is a good time for an entrepreneur to talk to a venture capitalist?
At the recent March Web Innovators Group event, I invited a panel of serial entrepreneurs to talk about their founding stories, during which David Cancel said that “one of the most unproductive things new founders do is talk to investors too early… I test all my ideas on the web.” I completely agree that the best way to test market demand for a business is with customers, and spending too much time with investors early on can be unproductive. Recently Chris Dixon wrote that in developing new startup ideas that founders should be the “opposite of secretive” and talk about startups ideas with “every smart person you can get a meeting with”… including VCs. He continues “VCs are good at telling you about similar companies in the past and present and critiquing your idea in an ‘MBA-like’ way: will it scale? what are the economics? what is the best marketing strategy? I would listen to them on these topics but pretty much ignore whether they think your idea is good or bad.” Fair enough.
Like most things, knowing who, when, how much, about what, and how often to talk to VCs about your startup is not clear-cut. As a guiding principal, I believe there is a distinction between informal discussions with an individual venture capitalist and formal capital-raising with a venture capital firm. Of course, as an entrepreneur you’re always selling to all of your constituents, including (potential) investors. But I think there’s a bright line between socializing your startup with one person and formally presenting your startup to a firm’s partnership (or a subportion of it).
First, I thought I’d enumerate a quick list few reasons and benefits in talking with venture capitalist before you’re actually ready to raise institutional capital. I am sure there are additional ones. An early conversation with a VC is a great way to:

1. Hear another smart person’s gut reaction opinion. Venture capitalists hear numerous startup ideas, benefit from the ability of pattern recognition, and can share that understanding. Of course, it’s important to incorporate knowledge of VCs’ biases into the feedback, but that’s true in any conversation you’re having about your startup.
2. Learn a top-level perspective of what’s going on the market and how your idea fits into that space. Many VCs closely follow specific industries and subindustries, and have been for a while. Especially if it’s an entrepreneur is exploring in a somewhat unfamiliar territory, a VC conversation can help add to an entrepreneurs understanding of the market.
3. Make connections to people who will be able to improve your business in some way. VCs spend a good portion of their time networking and interacting with a variety of people within the startup ecosystem. Chatting with a venture capitalist could lead to warm introductions to advisors, industry connections, other entrepreneurs who have worked on similar endeavors in the past, potential partners, etc. If a VC thinks an early-stage company has promise, he’ll want to help out in some way to prove his “value add” worth, and providing introductions is a easy one.
4. Receive feedback on when or even if the company will be ready for institutional capital versus private angel investment. Many entrepreneurs I speak with who are starting a company don’t fully understand some of the differences between the capital sources, the ramifications of raising from either, and when (or even if) in a company’s life-cycle it is appropriate for venture capital. Having one or two early discussions with VCs can help clarify those scenarios.
5. Obtain important value-creation milestones from an investor point of view. Similarly, an experienced venture investor can share valuable thoughts what achievements and traction points a startup must reach before it becomes attractive to an institutional investor.
6. Establish a relationship and assess fit. VCs like to fund people that they know, so if you can develop a real connection and dialog with him before you’re actually out fundraising, it definitely aids in that process. And more importantly, an entrepreneur can use (an) initial informal conversation(s) to get a sense of if there’s a match, both in investment profile and intangible interpersonal dynamics (i.e. personality fit).
7. Demonstrate your ability to execute. The best way to sell a VC on your startup is to tell them what you want to do and how you’re going to do it – then actually go accomplish that plan. It’s much better for an investor to “see a movie rather than the picture” as a way for him to assess the capacity to perform. An early conversation empowers an entrepreneur to set goals and benefit from achieving them. VC deal with a lot of startups, so they are very aware that plans and timing do always change. Having a relationship with a VC allows him to understand why those changes happen to see (and get excited about) the accomplishments as they happen.

In many ways, the old adage is very true: the best way to receive funding is ask for advice, and best way receive advice is to ask for funding. So I do believe there are real benefits to informal conversations with VCs before you’re really fundraising – in moderation. After all, entrepreneurs have a company to build. And venture investors are just one of the many many different constituents that are important to speak with early in a company’s lifecycle.
However, it’s important to realize that as soon as you present your idea to another person within the firm beyond your primary contact, you’re officially fundraising. This situation means that your best foot should be forward. At this point you’re not seeking feedback and help, but rather you’re seeking investment. And if you’re looking to optimize the outcome of a fundraise, you should be talking with more than one capital source.
Some would argue that if you’re talking with VCs that your company will develop a reputation in the marketplace of being “shopped around.” But again, I would draw a distinction between individual conversations and presenting to more than one person at the firm. Scuttlebutt in the marketplace is just that, and is a reflection on reality. If you really are actually fundraising for a long time then that reputation will indeed develop; but if you’re truly seeking open advice/feedback/input/connections, that will resonate instead especially if you set those expectations in the conversation.
So what is the entrepreneur at the beginning of the post doing facing his situation? He put the full partnership pitch on hold and is starting a real fundraising process when he is ready.

If you ask any VC what they look for in an investment opportunity, they’ll tell you that the people are at the top of their list. Extraordinary companies can’t be built without extraordinary entrepreneurs, especially at the earliest stages. I’d argue that successful founders must actually possess real a superpower to make the nearly impossible task of getting a startup off the ground become a reality. But just like various superheroes have different superpowers, so do entrepreneurs – but all of them give them the ability to perform superhuman tasks. It’s quite often that I’ve remarked about a founder’s exceptional ability in one area, and I thought it’s worth noting a few of them in an initial list of “Founder Superpowers”:
• Seeing the Future (Precognition). Some founders, most typically those who have been working in a specific industry for a number of years, possess an uncanny ability to envision the future. They’ve watched a marketplace unfold for a decade or more, and because of this intimate knowledge, they’re able to position a new startup exactly as it should fit to capitalize on an emerging opportunity. Outside observers may comprehend or logically agree with this founder’s perspective, but he or she has a true unwavering conviction about the opportunity, as their superpower allows them to know how events will unfold so that their company can benefit exactly from what’s coming. It’s these entrepreneurs who have a steadfast vision from the beginning, stick to it… and turn out to be right.
• Heat-Seeking (Enhanced Senses). Just like missiles, some entrepreneurs follow heat. These founders surely have a degree of gut feel about how the future will unfold, but more importantly they’re in tune to be flexible to changing market conditions, feedback from customers, and reactions from competitors. When starting a company, these entrepreneurs don’t know exactly where it’s going, but they posses the astonishing ability to find the right initial spark and evolve the company over time in following the most lucrative path. Especially in a fast-changing marketplace, these heat-seeking entrepreneurs thrive.
• Walking through Walls (Teleportation). Some entrepreneurs are so persistent and so relentless that mere facts about the reality of obstacles they’re facing don’t get in the way. Period. They have the ability to literally transport themselves to the other side of problem walls, and then do it again and again. An observer looks back and wonders in disbelief how he got from one place to another, but he did.
• Super-speed (Speed). There are a set of founders who simply can go faster than anyone else, including their competitors. Usually you’ll receive 3am emails from these people, as they always seem to be working. They just get things done faster than it seems like is humanly possible, and it shows.
• Spontaneous creation (Animation). Some people have the aptitude to literally create something out of nothing. With extremely few resources, these scrappy founders are able to cobble together product, customers, and partnerships out of merely thin air. They can bring a company to life almost magically and with little investment, which is a testament to what they can and will achieve with additional resources.
• [I see this post as a live work-in-progress, as am curious to hear other’s suggestions on other founder superpowers…]
Just like the voluminous number of superheroes and corresponding superpowers in the comics, there are probably dozens of other superpowers that exceptional entrepreneurs employ. In fact, in looking at entrepreneurs in our own portfolio which have been successful, it’s not difficult to indentify at least one remarkable ability which each of them had. And because of that fact, pinpointing an entrepreneur’s one truly stand-out quality is a great litmus test for potential early stage investors to use as a screen when selecting among dozens of projects. So to prospective founders I ask: what’s your founding superpower?

For the past five years, I’ve been organizing a regular event here in Boston called the Web Innovators Group (aka “WebInno”). Every couple months, 700-1000 web & mobile entrepreneurs, techies, startup junkies, and investors gather for one big meetup of the community. It’s been personally fulfilling to start something which begun as a small informal gathering grow into a real component of the local startup scene (and now drawing people from New York and Washington DC). I had no intentions of becoming a large event organizer (nor do I now have aspirations to become one more than I have). However, as a venture capitalist I believe that it’s incumbent on me not just to be a member of the entrepreneurial community but also truly participate in and contribute to it. Having started WebInno with no previous “events” experience, I’ve fumbled my way through putting them together at times. But along the way I learned a few general lessons which can be applied more broadly to organizing events, so I thought that I’d share them:

1. FREE is the right price. Not that people aren’t willing to pay. I am sure that a subset of attendees would. But a cash outlay, of any price, raises the bar to committing to an event in advance. It just adds an incremental amount of friction in the decision as to whether or not to attend. We have great sponsors* which affords us the opportunity to accommodate the crowd with a reasonable space, but when the event was smaller with a modest (read: no) budget we found venues which held us for free. People just showed up when they heard about it and of course they could leave just as easily. But it turns out they stayed… and came back for the next event. If you polled people if they would like (a) free drink(s) or food included with an event, of course they’d say yes. But I don’t think that’s a necessary ingredient. People want other people, and if they want a drink they can buy one. I’d attribute much of the success of WebInno to the fact that it was free when few other events around town were.
2. Listen by loudly asking for feedback… It sounds cheesy but it’s true. Some people will tell you their opinion anyway, but it may not be a representative cross-section of the attendees and likely not the best sample from the people you’d ideally like to attend. But if you specifically and repeatedly ASK the entire crowd, they’ll share their voice, as everybody liked to be heard. I’ve tweaked the event in many many ways (from adding a separate room for demo tables to alphabetic check-in folders) based on direct input from attendees.
3. … but stay true to your vision. With many opinions, you’re bound to hear conflicting inputs. When soliciting feedback, I think it’s imperative that you take each suggestion and run it by a gut-check of your own vision of what you want the event to become.
4. Content isn’t your main draw – the people are – but it’s a helpful anchor. People attend events because they want to meet and see other people. Period. But I think adding content gives them something to talk about, something to hang a hat on for an initial conversation with a new acquaintance or an old friend. Programming content, in the case of WebInno the demos and sometimes speaker/panels, transform it from a mere gathering into an event.
5. The web is your friend. Organizing and promoting an event without all the helpful web applications would have been so much more difficult ten years ago. I’ve used Eventbrite for the registration logistics and can’t sing enough of its praises. The www.webinnovatorsgroup.com website is built on Wordpress with automatic updates maintained by Feedblitz. I use Constant Contact for the mass emailings. And of course social media has helped spread the word, from the nearly two thousand Twitter followers (@webinno) to all of the blog posts attendees write as follow up.
6. The details matter. How bright the lights are. Where the podium is. How the chairs are arranged. Pauses during the program. Expectations about who’s attending. These are little things that affect how the event runs and how it’s perceived afterwards, and there are a lot of them. It’s imperative that you keep on top of them. All of them.
7. Be nimble. An event changes over time, both in the size and the composition of the crowd, but also in the context of the environment. When I started WebInno it was a dozen people gathering in a bar with nametags, now it’s certainly a production. Along the way I’ve tweaked the format quite a bit, sometimes for the better and sometimes with less positive results. I’ve found that people forgive authentic mistakes but not contrived errors. When I’ve been open and honest about experimenting with new features and they don’t go well, I surely hear about it, but for the most part attendees understand and return.
8. Ask for more feedback. I write it twice (and at it to a list of seven) because this one is the most important. Events spark magic when the right people go. I often hear stories about people meeting a cofounder of their company at WebInno, finding a customer, or connecting with a new employer. All of those stories make the work in organizing the event worth it. And so to that end, if you’ve attended the Web Innovators Group recently or in even the (way) past, and you have a suggestion, idea, or comment: I am open to hearing them. Feel free to comment on this blog post, message me @davidbeisel on twitter, or send me an email at [david at web innovators group dot com].

Wrapping up, I wanted to put a quick plug for the next WebInno event which is going to be held on March 1st: http://webinno25.eventbrite.com/. It’s open to everyone in the entrepreneurial web and mobile community here in Boston and outside it.
* Thanks to the 2010 platinum co-sponsors, Microsoft and Venrock, as well as newly added gold sponsor, Silicon Valley Bank.

Back in 2003 Google acquired Applied Semantics for just over $100M. This startup had a little technology called AdSense which allowed for the presentation of contextually relevant ads on a set of distributed publisher sites. Obviously this moniker lives on in Google’s ad network, Adsense for Content, which serves as a base for a significant chunk of Google’s revenue today. In a decade in which we saw the web become increasingly distributed with a proliferation websites and content, this acquisition served as a foundation to empower Google to move beyond their core search Adwords product. With it, Google monetized via advertising not only on their own search pages, but beyond. I nodded my head in agreement reading Tristan Lewis’s post last month calling it the #1 tech deal that defined the decade.
Fast forward to this week (in a new decade) and Apple agrees to acquire Quattro Wireless. Like with Google’s acquisition of Applied Semantics, this deal adds a fundamentally new business model to the company. Not only will Apple now be able to monetize through physical product and content (first-party software & resold entertainment media) sales, it will be able to generate real revenue via advertising. In a decade where we’re going to see a proliferation of mobile device incarnations and media content manifestations, adding the ad network bow to the Apple quiver gives the company that ability to monetize not just at the core of what consumer experiences they control, but everywhere. Sound familiar? It should be duly noted that, unlike Google, Apple isn’t very acquisitive (14 vs. 59 in the past ten years). So when they buy something… it’s meaningful. And I think this move means a whole lot.

Whenever I am navigating through the notorious Boston traffic, I am often reminded of the cognitive bias of illusory superiority. That is, the “above average effect,” which “causes people to overestimate their positive qualities and to underestimate their negative qualities, relative to others.” The Wikipedia article on the subject cites the classic study where a full 93% of U.S. drivers put themselves in the top half of the driving population. I can assure you that that percentage of drivers here in Boston I wouldn’t even consider “good,” let alone impossibly above the median.
The one other group which seems to exude this type of thinking is venture capitalists. I can’t tell you many times I’ve been at breakfast/lunch/cocktails with another one or a couple VCs and someone talks about all of the other “bad” VCs who don’t know what they’re doing. That they’re bad for the business and should get out. (It’s funny, but it’s always remarked that the present company is undoubtedly excluded.)
Yet the reasons discussed in these conversations are always different. Some VCs are aggressive in their willingness to “pay up” for a deal in a segment which is hot; some are biased not to follow the latest fad and invest for the long term. Some VCs are thesis driven and deliberate in their investments; some prefer to be flexible in their approach because, after all, real opportunities are just that – opportunistic. Some VCs prefer very early stage; some VCs prefer to see more traction and invest later. Some are at large funds with the ability to put significant amounts of capital to work; some are at small funds which can benefit from smaller exits. Some are “entrepreneur friendly”; others push “tough love” which works. Some VCs are at new firms which are nimble; some are at firms with heritage and a track record which matters. Some are VCs young and hungry; some are wise with experience. Some are former operators and entrepreneurs, so they’ve experienced both sides of the table; some are career VCs who benefit from the pattern recognition of having been involved in so many startups.
At the end of the day, all venture capitalists will tell you that they’re above average. Go ahead – ask one. Of course, they have to be… we’re eternally optimistic or we would be doing something else.
Naturally, not all venture capital returns can be above average (…or even good, but that’s the subject of another post.) But for the entrepreneur, I’d argue that you can and SHOULD have an above-average VC. And that situation is made possible because different VCs are right for different entrepreneurs. Of all the dimensions listed above (and a myriad of others which are important), many are qualitative and a reflection of the individual’s personal style. That approach should synch well with how an entrepreneur operates and what’s going to help him best achieve the goals for his business in maximizing shareholder value. Different entrepreneurs have disparate needs and qualities which a VC can compliment and partner with, and those aspects can even change for the same entrepreneur depending on where he is in the company life-cycle.
“What do you want from your VC?” I am often surprised how many entrepreneurs who are embarking on a fundraising process who can’t answer this question well. Because while not all venture capitalists can be above average, VC-entrepreneur relationships should be. And it makes sense to know what you’re looking for when you seeking it.
And yes, of course, I do consider myself to be an above average driver.

Posted via email from genuinevc’s posterous

Over the past year, I’ve kept my eye on ComScore’s monthly press releases of the Video Metrix service which outlines the market share of online videos. It’s been amazing to see Google (98% of its video traffic comprised of YouTube) steadily increase its market share for six months straight (see chart below where I aggregated the info from a few months of ComScore press releases). It seemed as though this juggernaut was defying a strong current internet trend – the deportalization of content. Whereas “traditional” traffic has been continually flying towards the ethers of the long-tail of sites, video content has been doing the opposite in consolidating around this one big player. And unlike the other recent emergent category of sites – social networks – the network effects of friending should be in theory weaker in this realm. It appears as though YouTube has been enjoying the a position reminisce of the early days of the internet in which consumers just first go to their choice portal destination looking for general entertainment/information, rather than a specific piece of content, and never leave. People think “online video” and head directly to YouTube. Period.

However, over the past two months, it appears as though the trend has shifted. According to ComScore, YouTube’s market share of total videos viewed has decreased notably. I am surprised that yesterday’s ComScore press release didn’t make mention of it. Maybe they’re treading more cautious after the debacle earlier this year about predicting slowed growth in Google’s paid clicks. Part of decrease in video market share explanation can be attributed to a stronger FIM/MySpace presence, but not entirely. Also Hulu.com, a joint venture of NBC and Fox featuring full-length broadcast TV programs, officially debuted in May with .7% share. But whatever the specifics explanation attributed this current month, I wonder if this will mark the beginning of the next phase of online video where the emergence of a broader spectrum of video sites begin to take meaningful share. Even if the data is only directionally correct, there’s a kernel of truth somewhere within.
I am not suggesting that the me-too UCG sites which YouTube has clearly already beaten will make a surprising comeback. It seems that battle is over… but will they win the war? Last week’s report by the Diffisuion Group, which suggested that while UCG accounts for 42% of streams but only 4% of revenue both now and for years to come, put a damper on how big a prize YouTube has triumphed in that space. Last Wednesday’s Wall Street Journal article about YouTube’s revenues further highlighted the challenges on the monetization side.
Meanwhile, I believe we’re entering a second phase of the online video space in which the discovery mechanisms for (semi-)professional content, coupled with the increase of professional content available online in a distributed fashion, will facilitate a willingness of users to venture beyond YouTube to consume video across the net. But it won’t happen overnight. Especially when I hear that the dirty little secret from many independent video producers which maintain their own destination sites is that an overwhelming number of their views come via YouTube and not on their own distribution. While Google’s universal search in theory should facilitate this transition, given that in this case Google owns the both content (YouTube) and the discovery mechanisms (Google search), their incentive to push the latter is in conflict with their other own interest. Herein lies the problem – how do you find good video without going to YouTube?
This open question has inhibited the shift in video consumption past its original portal through to the distributed net – where the rest of web content consumption occurs. Perhaps the results of the past two ComScore surveys have signaled a change in consumers habits in which they’re finding video content wherever they just happen to be surfing anyway. The best (or at least a better) discovery mechanism will come in time, perhaps via a startup which eclipses Google while it’s conflicted… but regardless, eventually measuring “video sites traffic” will be redundant given that video will proliferate to all corners of the web on a predominant number of pages. There’s a good chance we’ll look back at this summer then and point to it as when it all really began to happen. Last week’s announcement of VideoEgg’s new set of experimental video formats reminds us that we are still in the early days of this space, despite the fact that so much has happened thus far.

After the crash at the end of the last decade, web startups clamped down to focus on their core value proposition and were forced out of necessity for survival to hone their revenue models. However, for the past couple years, the metrics of “success” with early-stage digital media startups (especially consumer-facing ones) have clearly focused on distribution, as opposed to monetization. The stories of tremendous growth in adoption with the promise of revenue later on has been enough to excite both entrepreneurs alike. Yet, with the current economic climate driven by the looming recession, it’s been interesting to see the pendulum swing the other way in the past couple months.
If the notion has reached the popular business press, then it’s indeed a pervasive story. A few weeks ago Businessweek’s article Widget’s Worth talked about “cracking the monetization code,” wondering how social widget applications are going to make money.
The old playbook six years ago was that the web distribution could be bought for a price with Google Adwords. Now the new plan for distribution is facilitation through low-cost viral strategies via Facebook and other social media. In fact, Facebook literally published a playbook just over a week ago on marketing virally through their platform. I am not arguing that distribution has been commoditized, but it does point to the fact that the bar has certainly been raised for what meaningful traffic/distribution means without a business model behind it. Not all traffic is created equal, and that is certainly more the case than it was five years ago before the mass proliferation of social media pages (and a new floor for pricing of remnant inventory).
But it goes beyond just widgets and social networks. Of course, with the numerous notable acquisitions in the advertising network space has resulted in a proliferation of companies looking to help publishers monetize their content through new technologies and packagings. And even beyond the media front, there’s a renewed sense of optimism that the Enterprise2.0 could be the next big thing, especially given that there’s real potential customers willing to pay real dollars in that domain.
Of course, with any trend, there are notable exceptions. And there should be – the true high flyers command tremendous network effects which create value well beyond an immediate revenue base. But for the typical web startup, thinking about a business from the mindset not of “how do we get big fast?” to “how do we get big fast and monetize it?” is a progression in thinking.
I found it notable that just in the past week, I’ve seen a handful startups of startups seeking Series A financing – all with significant traction on the adoption front – with pitch decks touting phrases like “projects profitability”, “roadmap to profitability… [with] high margins [to] enable positive cash flow”, and “path to profitability.” Those terms were largely out of place in most plans a year ago.
Theoretically-speaking, entrepreneurs raise capital (whether it venture or otherwise) to accelerate growth ahead of cash flows because of the opportunity-cost of time involved in self-financing organically. So in reality profitability isn’t the first order step in creating real enterprise value. As it was put by Keith Richman on a panel at the EconSM conference on Tuesday, “profitability… is a choice.” Or at least the goal is to work towards having that choice. Starting without a revenue model in mind, even if it will change a few times along the way, leaves that choice to chance. It’s always possible to get lucky, of course, but less likely so in an economic climate which is less forgiving. So it isn’t surprising to me to see startups realizing these facts and incorporate this thinking into their pitch, and more importantly, their plans. The pendulum has begun to swing back the other way…

Ben Kunz wrote an interesting article in this week’s BusinessWeek, but it wasn’t the controversial and inaptly-named title (“Why Widgets Don’t Work”) which caught my attention. Rather, it was his framework for the “history of the web” which did. He outlined a transition among three distinct phases of consumers’ primary activity online from receiving, to hunting, and now doing. While the web started with people passively receiving content from AOL, it soon transitioned to people hunting for information with Google. He says “’do’ is where the web is headed in 2008,” citing social networks and other social services (e.g. editing spreadsheets on Google docs, watching bank account with credit card balances, twittering). While the shift towards doing has been already well-underway for some time, I think the construct of understanding people’s mindset as they’re using the web, and how it is changing, is useful in discerning where it’s going and where the pockets of innovation (and corresponding startup opportunity) will be.
There is certainly a natural progression of the web as a media outlet and how we use it – we first learned to receive information with this new medium, then we learned to look for it proactively. We are now so comfortable with the platform that we now are at ease spending time on it “doing”, acting, and performing endeavors in and of themselves. I would say doing is really comprised of two activities: true point-to-point person-to-person communication and performing other real stand-alone activities which are further enhanced with point-to-point communication. (Online casual gaming is a good example of the latter – we’re seeing a trend towards incorporating social functionality into gaming activity, but the services themselves are primarily about the games which are then supplemented with communication).
A notable insight here occurs if we layer the do’er construct on top two other key internet trends – the deportalization of the web and the rise of online video – from which we can gleen some interesting areas for disruptive opportunity. With traffic proliferating towards the far reaches of the net (way down the long tail, if you will), advertisers are having a more difficult time reaching these corners. Widgets are certainly one way to do this, but it isn’t necessarily always a personalized experience. The true challenge is how to identify what advertising messages a user will be receptive to (not using personally identifiable information) in the absence of the contextual relevance afforded by “receiving” and “hunting”-based content. That is essentially the prime challenge that social networks are facing; it’s hard to monetize their content because it’s difficult to know what people want when they’re doing and not receiving/hunting. Behavioral ad networks are beginning to solve this problem, but only partially. And of course we’re seeing experimentation play out (with difficulty) with Facebook’s recent Beacon episode. It’s still going to take a few years and numerous innovations by startups (not just the large social networks and other social services) to figure out how ads should effectively reach the “doers” on every corner of the net.
The other intersection of this construct, with the online video adoption trend, indicates we’re still just in the early stages of being comfortable with the video format. Almost all of the video we watch online is in receiving mode. People fire up YouTube and watch the latest most popular clip forwarded to them, or you turn to Hulu to catch an episode of “It’s Always Sunny in Philadelphia” that was missed last week on FX. We are just beginning to hunt for video, but it’s really right around the corner as a mainstream use-case. Soon users and producers will be creating more informational-based content in addition to the entertainment-based video content which is the current norm. The web’s freeing from the binds of 500 cable channels will have the same effect on video that unshackling from physical printed materials had on text. The shift to universal search by Google (i.e. incorporating video segments in addition to text pages into search results) will really facilitate this change. Many VCs have anticipated this shift to hunting video with numerous fundings of how-to sites over the past few months, but there are many opportunities for informational-based video content for hunting consumers beyond the how-to. And in following this schema, the intersection of doing and video is one step further off, but it will come much sooner than it did with text+image content. YouTube just this past week hinted towards incorporating live video onto the site, which is potentially just one manifestation.
Kunz concludes his article essentially acknowledging widgets do actually work, just that some widgets are going to be more effective than others – it depends if and how it engages the right audience. At the end of the day, widgets are merely one arrow in an online advertisers’ quiver, not the only shotgun. They’re just one piece of the ever evolving puzzle of the web, which is “doing” more now than ever.