One week ago, I organized another meeting of the Boston Web Innovators Group (aka “WebInno”). This periodic gathering of people interested in web and mobile innovation has swelled in the past year since I formalized the group – we had almost 200 people attend the most recent session last Wednesday night (see RSVP list). Each meeting we have two or three self- or angel- funded startups give a five minute demonstrations of their innovative service to the crowd. This segment is followed by a networking portion with five additional companies at tables along the periphery of the room giving informal demonstrations to small groups.
A snapshot from across the blogosphere speaks for the most recent event’s success:

• “…the energy of the room was amazing… The presentations were real people, honest comments.” Sudha Jamthe
• “Great location and good networking. My second so far, and I enjoy the theatre/performance of it.” Ami Chitwood
• “I got to see some interesting new web apps.” John Wall
• “My first Boston Web Innovators Group… I’m starting to feel like the Boston scene is heating up again… It was great to see all the people and feel the energy in the room.” David Evans

Last Wednesday’s gathering featured Mike Kowalchik from Grazr (RSS/OPML widget and scripting language) and Brad Powell from Calabash Music (a “global” music destination site). Side demonstrators included FineTune, StartupBusinessSchool, radeo.net, Citysquares.com, and Offertrax. All of these are examples of local companies which are utilizing the web in some unique way. And as the above comments show, these exhibitors gave the crowd plenty of material for engaging discussion in the schmoozing which followed.
This recent gathering was no exception, as the Web Innovators Group has had the privilege of hosting a number of notable startups over the past year including Sconex (acquired by Alloy), Aerodiet (acquired by About.com / New York Times Co.), Reddit (acquired by Conde Nast), Blogniscient (now part of Top Ten Sources), and MyBlogLog.
With the Boston web innovation scene revitalizing, I am looking forward what 2007 brings, and am happy to announce our next WebInno event will be held on Tuesday January 30th, 2007. You can read more details and RSVP on our event wiki page: http://webinnovatorsgroup.com/wiki/webinno10.
There’s more info about the group itself on our dedicated site and blog. And as usual, if you are interested in presenting at the coming in either format, please reach out to me at the e-mail address david at web innovators group dot com.
I’ll see everyone in January at the next Web Innovators Group…
(P.S. I am very appreciative of all past demonstrators who have helped contribute to the Boston scene: Accolade, Assembla, Bloggerkit, Blogniscient, BlueTrim, bvine, Calabash Music, Citysquares, MyBlogLog, Calorie-Count, Echonest, Fat Calico, FindFreeTime, FineTune, Glance, Grazr, Isabont, Lifeknot, Locamoda, LoudCity, Kiko, Pawspot, Plum, Proxpro, tourb.us, Nextcode, Offertrax, radeo.net, reddit, Referral Monitor, Sconex, SmackChannel, Startup BusinessSchool, Swaptree, Tourfilter, and Traineo. And additionally, I’d like to thank all of the attendees to the events – it’s you who have made this a thriving web scene in Boston.)

Most of the excitement about user-generated content usually focuses around blogs, videos, reviews, social network profile pages, etc. However, microcontributions – extremely small interactions where the user participates in the community of a website – are also becoming a notable trend, and it’s a shame to over look them because they posses a lot of power. The onslaught of AJAXy rich internet applications, giving web pages the ability to accept input without refreshing, has allowed sites to cover new ground in this area.
There are an increasing number of good examples of microcontibutions. Netflix pioneered with its simple one-lick five-star ratings review of movies. All you have to do is “digg it” to vote on a news story which could make it to the top of that blockbuster site’s home page. During the registration process for Masthead portfolio company TripConnect (a social network for travel advice), users click on places that they’ve been or want to go, so that they can later on connect with likeminded individuals. And in the past couple weeks, I’ve seen a number of sites with the meme of pitting two things beside each other to determine which one is better (photos, art, people, karaoke performances). With a simple click of a button, people are engaging with a site, and a community.
Microcontributions are simple and elegant way to get people to connect, to defeat the resistance not to contribute at all. By reducing a user workflow into a series of incremental contributions rather than just a large one, sites which use this tactic can overcome the initial resistance to participate. Once a user is familiar with interacting with a site at a minimal level, s/he is more likely comfortable to expand that relationship. More importantly, in addition to becoming lead-ins to entice people to contribute larger portions of content, microcontributions also become content in and of themselves. Aggregated votes and clicks become interesting, and can be even central to engaging consumers with a facing web app. I think the lesson here is that when designing a social site, it’s important not to just concentrate on gathering content from creators, but also consider gathering microcontributions from participators who may not (always) be creators themselves.

Analyst Spencer Wang of Bear Stearns just published a very good overview of the dynamics of the entertainment industry which argues that “aggregation & context and not content are king.” There isn’t anything entirely ground-breaking in the report, but it’s a great overview synopsis of a lot of the trends occurring in the industry.
Nicholas Carr summaries the report well, “Wang argues that both ends of the value chain – content creation and content distribution – are increasingly characterized by oversupply and hence weak profitability. Value, as a result, is migrating to the center of the value chain, where content aggregation and branding take place. The profit, in other words, is in packaging.”
Wang makes a number of valid points, but it’s also worth highlighting an additional trend which wasn’t cited in the document. Although user-generated content is proliferating because new technology is affecting economics (of content creation, storage, and distribution), it is also flourishing because new technology allows the incorporation of connectivity into content itself. Previously, we saw two distinct forms of communication – point-to-point communication of individuals and produced content communication – which manifested in the telecommunications and entertainment industries, respectively. (This somewhat stale academic paper which I’ve cited before makes a good case why the former has been historically more important.) However, the distinctions between these two communication forms are blurring, as people are increasingly entertained by connecting with other people. What is MySpace other than a value-added site messaging platform? What about the multitude of conversations that occur on YouTube about the videos in addition to the consumer-created videos themselves?
I largely agree with Wang’s conclusions – that “new competitors… [of] viable aggregators [are going] to emerge” and that “startups are likely to be more nimble [than incumbent creators of content],” However, I’d like to add that messaging with others, and the intersection of that activity with content creation is a large piece in the puzzle. Yes, the profit is in the packaging of entertainment, but also in the packaging of messages as well.

Nearly all of the online video successes in the past year or two have been of pre-recorded video content. YouTube as a primary example, but the dozens of other key moments in online video have been time-shifted non-live content, save perhaps AOL’s streaming event of the Live8 concert. This leads to the question – does glass-to-glass live video matter on the web?
Are the successes of pre-recorded content an artifact of where we are in terms of supporting infrastructure? Or are they a result of demand/consumption patterns? We can first turn to broadcast television for an analog analogy to frame our thinking. If you examine broadcast TV, there are three primary types of truly live content: news, weather, and sporting events. And of the first of these, news, how much is really truly live? In reality, the fading-in-importance nightly news is comprised of recorded segments pulled together and packaged by a live moderator. While there are a number of talk shows which are conducted and broadcast live, many of these are also taped and rebroadcast, still retaining their consumption value.
Moving from just a qualitative look to a quantitative one, Accenture analysis reveals that only 3% of broadcast television viewing time is actually live. Smaller than I would have anticipated, but perhaps “live” television is more salient so it seems like it should be larger. And there are many reasons why truly live will be even less on broadband than on broadcast. First, an increase the supply of long-tail pre-recorded content available and the discoverability of that content could draw viewers even further away from live broadcast. Second, the web affords alternative methods of communicating what was previously live content, like text headlines for weather and play-by-play summary with on-demand highlight clips for sports information.
Moreover, the current infrastructure trends appear to facilitate pre-recorded content – we’re in the midst of massive improvement in the price / performance of storage both in home and portable video viewing devices. Plus, while we have the potential to utilize P2P technologies for movement of pre-recorded files, existing broadcast models for delivery of live content broadcast don’t appear to be going away soon, as they largely meet the needs of the consumer (at lease in the home).
The counter argument here is that as an infrastructure becomes available to produce and publish long-tail live content – concerts, international sporting events, along with user-generated material – that it will provide a set of content to an audience that was completely unavailable under previous broadcast distribution architecture.
Perhaps what’s important isn’t that a program is truly live, but rather that it is near-live. Yes, there’s something intangibly special about having video actually live – Saturday Night Live is a perfect example in which the format wouldn’t work without it, but that’s likely an exception. These above illustrations direct us to consider the idea that being “nearly live” is good enough and that the live broadcast could become a legacy artifact. What matters is that video content is time appropriate. Content value generally deteriorates in value over time, but different types differ as to what degree. News has a short half-life, whereas some sit-coms live in syndication for decades. The transition to broadband video should resurrect a number of pre-recorded videos lost in the archives, but will it resurrect the golden age of live television? Talk shows where viewers call in and game shows with viewer participation necessitate at least the semblance of a live interactive session – but are these meaningful categories of content? It will be interesting to see what will be coming live to a laptop near you – maybe not much more than today.
(Thanks to Robin Murdoch of Accenture for helping me with much of the thinking and data behind this post.)

After really enjoying last year’s event, I am looking forward to attending the Web 2.0 Conference next week out in San Francisco. Like all conferences, it’s really about connecting with people, as opposed to the content in the sessions themselves. If you’ve been meaning to reach out or just want to ensure that we reconnect while we’re both at the show, drop me an e-mail at [david at genuinevc dot com], and we’ll try to meet.

Just under a year ago, I blogged about “(the beginnings of) social commerce” services which would “would provide consumers with rich social context and relevancy to the purchases which they are making.”
Steve Rubel soon after picked up on the theme and called it a “trend to watch” in 2006, saying last December,

“Social commerce can take several forms, but in sum it means creating places where people can collaborate online, get advice from trusted individuals, find goods and services and then purchase them. It shrinks the research and purchasing cycle by creating a single destination powered by the power of many.”

Since that time we’ve seen an onslaught of developments in this area, most notably by startups, some of which I’ve blogged about (like the emergence of badge proliferation). But I personally am now refocusing on the categories of services which have emerged in the past year as new startups have begun to fill this space.
Most notable is the field of “social shopping.” Social shopping is about sharing the act of shopping itself with others, and I view it as a subset of social commerce as a whole. Just as some people enjoy shopping with others in the real world, some will enjoy doing it virtually within a social network. Nearly all of these players have promoted a meme of three activities which people can do collectively: discover/find, collect/organize, and promote/share/connect/recommend/publish. It is these three acts which compose the endeavor of shopping together with others.
It’s interesting to see that while the number of startup companies launching services in this space has exploded (in additional to Yahoo’s Shoposphere), the new players clearly fall into two camps: the leaders and the laggards. The laggards – MyPickList, StyleFeeder, Slister, ClipClip, and I am sure there are others – just don’t seem have garnered any user traction (at least according to Alexa stats). On the other hand, the leaders – ThisNext, Kaboodle, Stylehive, Wists, and Crowdstorm – are all currently running neck and neck in terms of traffic, despite having launched at different points in the year. Also note that while this group has generated some traction, it clearly isn’t knocking the ball out of the park like other unrelated consumer web services launched in that timeframe have. [see link to graph]

Some consumers, however, will prefer not to shop with others. That doesn’t mean, however, that these people who don’t purchase goods and services in a social vacuum. Nor does it mean that they won’t benefit from information about social relevancy and context in the goods that they are purchasing. An element of social input in online shopping services augments the experience, even if it isn’t central to it. There are numerous opportunities to add a layer of social features to an existing set of commerce functionality or to new services which aren’t primarily social. These instances of social commerce aren’t social shopping per se, but rather integration of social software features into an entire commerce product.
A good example of these is the emerging set of deals focused sites. While deal-tracking sites have been around since the late 90’s, the newest generation of them add social input into which are the “best” and “most relevant deals.” The revamped Judy’s Book is taking a spin at this, as well as Dealplumber, Dealspl.us, and Clipfire. Other cool services which I’ve seen recently that I’d characterize as social commerce, but not strictly social shopping include Shopwiki & to-be-launched Zanbazaar (wiki-style buying guides) and Rightcart & Bloggerkit (tools for bloggers and small publishers to integrate product content), among others. And, of course, the big players like Amazon and eBay are making strides towards incorporating social elements into their offering as well.
There’s been a lot of progress made in the past year in social commerce, but it’s clear that there is still quite a long way to go. We are at the beginning of exploring the opportunity that adding social context and relevancy information to products can create. Social commerce can encompass and influence a wide array of points on the purchase process, both before and after, and I continue to believe there are multiple large opportunities for startups to capitalize on this basic thesis.

Very interesting article in this week’s AdWeek about “advertisers… taking a broader view of search, buying terms they want consumers to associate with their brands, even though the searchers clearly aren’t hunting for their products.”
It cites an example, “Honda has bought thousands of such keywords as part of a new campaign for its CRV. While it continues to buy auto terms as well, the carmaker is acquiring keywords related to its new “Crave” theme, like “chocolate,” “banana splits” and “celebrity gossip,” all designed to bring searchers to a community Web site Honda created for users to collect and share craves.”
This campaign is indeed a salient example of traditional brand advertisers experimenting with online media buys that have traditionally been in the pay-per-performance realm. I believe it gives a nod to the implicit notion that advertisers do receive “branding benefits” from online pay-per-performance campaigns, whether it is intentional (as in this case) or not.
Many online retailers that heavily use affiliate programs have known this fact for years. Surely Amazon.com receives more than just the direct gain from the traffic by having is products and links featured throughout the web on its affiliate sites. I’ve been in more than one conversation recently where someone has argued to me that affiliates (not just Amazon’s, but generally-speaking) are consistently and systematically undercompensating affiliates because they only measure direct sales generated by the traffic for the retailers, not the residual traffic that it generates in stores or the increased branding effect inducing purchases long after the cookie is expired.
In reality, though, branding benefits from pay-per-performance largely depend on the brand doing the advertising itself – I would maintain that this traffic has a greater impact if it is reinforcing and strengthening an existing well known brand (like Honda in the above example) than it does necessarily creating brand awareness for a lesser-known one. I suspect it’s the products’ brands, not the merchandisers’ brands, which will continue to experiment more in this realm, as they are the ones who are losing their pull from disruption in their traditional brand-building outlets.
The difficulty, of course, is the perennial ability to accurately measure the effectiveness of brand advertising. The AdWeek article doesn’t avoid the issue, “While brand-building search campaigns are not held to strict sales metrics, the ability to track results helps quantify their effect.” The article claims 50K visited the site in a month, while a comment on Search Engine Watch from the agency responsible for the campaign claims that the campaign has generated “nearly ½ of a million visits to the crave.honda.com.” As of this morning, however, there are only 348 user-submitted “craves” – the action the site is enticing consumers to take to further engage with the brand. Is that success? Is less than one-hundredth of one percent of people interacting in the intended way good? As pay-per-performance and branding campaigns begin to converge, these are the questions that advertisers wrestle with. Regardless, these advertisers who are on the fringe experimenting with new outlets will reap the benefits from them, whether they are easily quantified or not.

Last Friday, I was meeting with a set of entrepreneur founders who are very in their process of developing their consumer web application. And when the subject came up about features they intend to implement, they indicated that “of course” they will offer web badges for users to paste on their MySpace and other social network pages. What struck me was the tone of the comment – it was assumed that this feature would be implemented and I completely concurred – and that just around six months ago we likely wouldn’t have even considered it. Web badges and widgets aren’t completely new, but in 2006 they’ve suddenly come to the forefront of requisite features for many consumer facing apps that interact with social networks.
I’ve been spending a lot of time thinking about the implementation of and the implications of their use for a couple months (see my recent previous post on badge proliferation). In fact, I would argue that widgets/badges could become the platform mechanism which will interconnect currently disconnected and disjointed social networks. Of course it’s obvious that the YouTube player connects the two social networks of YouTube and MySpace, but with the increasing appearance of vertical social networks, the common thread that provides the glue among many silo’ed communities could be the displayed widget/badge.
However, the purpose of this post is to examine the case study of information dissemination throughout the blogosphere using MySpace badges as an example. Check out this Technorati graph which traces the number of mentions of both “badge” and “myspace” in blog posts over the past year:

The idea went from barely mentioned to commonplace in just a few months, and this illustration shows that the race to feature parity by web startups is hastened by the rapid dissemination of information through the blogosphere. How can a company compete when any demonstration of success will soon be replicated by other services? How can a company take an original innovation and run with it? It’s interesting to note that I know of numerous startups which are currently operating in semi-stealth mode to partially avoid this problem – they are completely open to the public and new users about their service, but they aren’t “screaming in the blogosphere about what they’re doing” to give them an information edge. A likely helpful strategy, yes, but certainly a temporary and fleeting stopgap.
Features – even ones that are difficult to implement – are not barriers to entry. Instead, innovation around marketing (communications and positioning, not just tactical moves), business development relationships, and instillation of network effects are and will increasingly differentiate winning web startups from the also-rans.
When I look at a consumer-facing startup, I assume feature parity of competitors within six months if not sooner. What can be accomplished in that time-period which creates lasting value beyond the next feature? What relationships are being forged with partners which aren’t easily replicated? How is the company targeting a specific demographic with understanding and expertise? How quickly will the service obtain a significant network effect which soon escalates?
Near-time feature parity benefits the web user community as a whole, as it quickly brings the best new inventive features to fruition everywhere. However, it brings difficult challenges to web entrepreneurs looking to make a mark with an innovative service.

There’s a lot buzz today (here here) about Netflix’s offer to pay one million dollars to whoever can improve the accuracy of predictions of its movie-recommendation system. And it looks like there are number of people eager to throw their hat in the ring.
To this I ask: the prize is only a million dollars?
Consider that this contest is coming from a company with $830M in annual revenue (ttm), $66M in net income, and $1.6B in market capitalization. It obviously has already had the means to employ a number of distinguished people working on the existing system (a few of whom are now the judges of the contest) and surely has spent in aggregate well over $1M to develop their current technology. In addition, with a number of personalization & recommendation technology startups in the market at various stages of development, there are plenty of companies out there to acquire that would presumably command (or at least desire) a higher price.
Yet the company chose to go the route of a contest, making strides in pioneering “prize outsourcing research and development.”
Obviously, Netflix has all of the leverage here with their distribution and existing customers to which it could apply any technology. So of course it can and has offered whatever bounty it wants (which I’d argue is largely for PR purposes).
In reality, what this move does is call into question the viability of startups out there working on personalization and recommendation systems. Without the leverage of a huge market presence (read: customers) that a Netflix has, I wonder how they are going to be able to adequately monetize their offering. Surely these systems will lead to an increase in media purchases, and I’ve long been an advocate for the power of personalized predictive media. However, there is a significant distinction between being able to create value and the ability to capture it, and the power of distribution in this case appears to overwhelm. If you’re a genius who can compete “with 15 years of really smart people banging away at the problem” and it’s only worth $1M to you, then what does it say for everyone else – individuals and companies – working on that very same problem?

In the many startups that I’ve worked in/with or got to know in my experiences, there is one thing that almost always rings true: the initial idea and incarnation of the company isn’t the one that results in the end. In other words, whatever the early notion of the business, it just doesn’t work as planned.
Instead, startups after they’re first formed go through a stage of shifting and weaving, as they find the road which is the right path. Customers react differently than anticipated, revenue streams morph as the value proposition becomes defined, and costs (in time and money) of development and product vary.
Early stage startups are about experimentation. Good entrepreneurs know that.
But do the other constituents of a startup (employees, investors, advisors, customers, etc.) know it? Entrepreneurs should set appropriate expectations with others about how much experimentation is needed given their current stage. This process is difficult given that it must be weighed with confidence in the current plan.
When the experimentation works, it becomes innovation. When it doesn’t, the experimentation can become frustration. But those early frustrating experiences provide learning and market information which couldn’t have been gathered via any other means. Without the experience of small failures, a startup will not experience big successes.
Take a straw poll for yourself, and ask a successful entrepreneur if the business he set out to create is the one today s/he finds him/herself in charge of (or recently exited from). Somehow along the way s/he kept everyone involved excited about the endeavor during the riskiest stage of the company – the beginning.