David Beisel’s Perspective on Digital Change
David Beisel’s Perspective on Digital Change
As I posted last week, I am here at the Syndicate Conference in New York City.
The opening speaker Bob Carrigan, CEO of Computerworld, identified two major trends that are emerging in online media: “More Choice” and “Online Voice.” Coincidentally, J.B. Holston, CEO of Newsgator just posted a thoughtful blog entry on the same subject, merely giving the ideas two different labels, “My Media” and “I am My Media.”
What do these labels mean?
“More Choice” and “My Media.” Because of technologies like RSS, consumers are increasingly more able to dictate how, where, and when they consume content. To compete in this sea of content, it becomes more important that publishers offer content not as a one-size-fits-all, but in the format and venue that users truly want it.
“Online Voice” and “I am My Media.” Bloggers, podcasters, and all other forms of user-generated content are giving individual consumers a voice to express their opinions, thoughts, and ideas. And the ability to syndicate this content has empowered these individuals to find an audience. Very powerful.
Both themes are driving new innovation. NewsGator, for example, gives users the ability to read RSS feeds on multiple devices – desktop, mobile, media center, etc. But RSS aggregation and reading is just one way that start-ups can and will capitalize on this trend.
Jeff Bussgang reported from the annual VC Conference, “The enterprise software business model is dead… VC appetite for standard enterprise software appears to be dwindling to nothing.” And Jeff Nolan simply replies, “agreed.”
But even though enterprise software is dead, it’s not really going to die. Despite indications otherwise, VC’s will continue to fund enterprise software companies for three reasons:
1. While the overall model and outlook admittedly looks grim, there are still a few remaining pockets where innovative start-ups will fill in gaps with new technologies facilitating localized change.
2. Fledgling enterprise software companies will dress up and adopt buzz-word monikers like Software-as-a-Service and open source. Then it’s sexy, and more likely fundable.
3. VCs, especially those on the East Coast, are used to funding enterprise software companies. It’s really tough to change, as old habits die hard.
While many hypothesized on why Google acquired Dodgeball last week (for example, Gary Price and Russell Glass), I think one of the most interesting posts came from Marc Canter. He wrote a semi-satirical semi-serious post describing the new way for internet entrepreneurs to hit:
“OK – so first you graduate from Clay Shirky’s exclusive school of thought, eat the red pill, drink some koolaid and do something Clay thinks is cool. Then you use the blogosphere to launch – but you never really achieve critical mass – but that’s OK. As long as Cory Doctorow or Xeni think it’s cool – you’re set. There’s not need to achieve positive cash flow or even have more than 2 employees. Just build up a “little traction” and come up with some cool model like “Stoli Vodka” wants to be your friend. Come here to meet Stoli (or was it Skye?) Then just stand back and wait to get bought out. It worked for ODDpost, Flickr and now Dodgeball – who’s next?”
George Bernard Shaw once wrote, “When a thing is funny, search it carefully for a hidden truth.” And I think that Marc has hit upon some truth in his parody.
Entrepreneurs are discovering a New Startup Model: bootstrap and build a product, generate buzz on the blogosphere and the early adopter community, skip vc financing, and sell to one of the portals.
Everyone wins in this game. Entrepreneurs innovate and cash out early. Google and Yahoo outsource their innovation to the best and the brightest without paying a hefty price tag.
Well, almost everyone wins. VCs are left out without the ability to invest and make returns for their LPs. What’s a VC to do? It’s up to us to demonstrate to entrepreneurs that with additional investment, their potential quick flip can become a solid and enduring company where genuine and significant value is created.
It will be interesting to watch Yahoo and Google over the next few years – will they increasingly acquire early-stage companies or are these recent examples just symptoms of the fact that we are early in this innovation cycle?
John Battelle’s blog identified Fathom’s recent announcement that search engine keyword prices increased 11% during the month in April. Despite a slight drop during the first two months of the year, it appears that the trend towards rising keyword prices is continuing. What is driving this sustained escalation of keyword costs? My thoughts are that the possible set of reasons includes:
1. Better conversion rates on advertisers’ website landing pages make each click more valuable for return on investment calculations.
2. Realization by marketers that there is additional ROI value in search traffic beyond immediate clickstream conversion is slowly being factored into prices.
3. More advertisers coming online fill in bottom-half purchases of specific keywords are thus raising the average price for that word (i.e. filling in coverage vertically).
4. Keywords previously underdiscovered – further down the long tail of terms – are being filled in, and previously undervalued specific keyword prices climb as a result (i.e. filling in coverage horizontally).
5. Margins are getting squeezed on the advertisers’ end as more advertisers are bidding on terms.
6. Seasonal opportunities (like mortgage-related terms) are baked into more recent figures.
7. Irrational spending is happening as novice search marketers unwisely jump on the search bandwagon. Yes, a keyword bubble.
My true hypothesis is that keyword prices are rising due to a combination of the above factors, with some being more influential than others. Perhaps there is a keyword price bubble as some have suggested, but most likely irrational spending is localized to specific sets of keywords, not symptomatic to the market overall.
What do you think? Are there additional reasons why keyword prices have been rising that I haven’t enumerated above?
My original post reacting to Jeff Bussgang’s thoughts on why Boston doesn’t have any great consumer hits argued that it is primarily due to culture. The West Coast general psyche is more comfortable with taking big risks for big rewards, whereas the East Coast frame of mind steers towards calculated, formulated risks.
There were two articles in the Boston Globe earlier this week, both here and here, that speak to the differences in venture capital investing cultures between the two tech centers. If you have an interest in this coastal comparison, you should read both articles, especially to hear quoted perspectives on the issue from a number of VCs.
The second article from Robert Weisman states,
“While many trends can be seen on both coasts, Silicon Valley venture capitalists who spend time in Boston see some differences: a venture industry in the Valley that invests more than twice as many dollars as New England, the nation’s second-largest venture market; a less clubby environment here in the West, with more tolerance for failure; a greater emphasis on consumer-oriented investments, from digital media to personalized medicine…”
But as I’ve argued previously, this situation – especially with respect to digital media and consumer-facing technologies – needs to change. Weisman continues,
“[The] focus on consumers, stand[s] in contrast to the 1990s, where the most profitable niches in California and New England were selling software and telecommunications gear to corporate data centers. But those niches are being squeezed today, with businesses cutting back on spending.”
That assessment is absolutely correct. The continued demand for consumer-centered technologies (including the infrastructure to support them) will force the Boston entrepreneurial community to at least partially shift its focus away from enterprise information technology and towards what has been traditionally West Coast territory.
Paul Kedrosky is saying,
“This IDG Syndicate Conference in New York May 17/18 is turning into a real coming out party for RSS.”
I, for one, am looking forward to attending the event next week. The speaker list definitely includes all of the “who’s who” in the RSS-related space. I will report back in my blog with my takeaways and impressions from the conference.
If anyone attending wants to connect in between sessions, just drop me a note and let me know – it would be great to meet in person.
I usually don’t merely provide a link to another site without some commentary or opinion, but I really like Tim Yang’s post, “15 things you can do with RSS (it was supposed to be 10, but I got carried away).” It provides some additional examples that complement my post, “RSS Isn’t Just For Blogs.”
RSS is for so much more than blogs.
People often mistakenly derive extraneous meaning out of the fact that two things are merely correlated. They will say, “A increases as B increases; if we change A, then that will affect B.”
It’s actually more than a pet peeve, a minor irritation. It’s really flawed logic.
Correlation simply doesn’t imply causation.
Just because two trends are correlated doesn’t mean one causes the other. Often, a third related factor causes both originally identified trends.
For example, just because in the past few years we’ve seen an increase in both search engine spending and the number of SEO/SEM firms, it doesn’t mean that one of these caused the other. Will increasing search engine spending directly increase the number of SEO/SEM firms, or vis-versa? Perhaps the real driver is the number of advertisers who have experimented and enjoyed successful results from these marketing efforts. Or maybe it’s a virtuous cycle in which it’s difficult to truly unmask the true cause.
Along those lines, we often see business plans here at Masthead that claim “because Factor X increases as the customer’s revenue-per-user increases, our product which affects Factor X will increase revenue even more.” Really? Maybe, but often there is a Factor Y which is the real cause of both Factor X and revenue. A company’s product offering should really get to the heart of the issue and the real driver of value.
When people present correlation graphs, I stop paying attention when they don’t know the difference between the two ideas of correlation and causation. This mistake is very dangerous, as it often leads people to chase the wrong goals.
In an AdWeek article, Brian McAndrews, CEO of aQuantive is quoted as saying,
“The Web site is going to replace the 30-second commercial as the expression of a brand.”
Yes, as content accessed via the web replaces prime time television as the preferred means of reaching consumers, digital media will become the it media. But as Julian Smith argues in this article, “Online Video Ads: Think Web, Not TV,” advertisers can’t just drop in their 30 second spots onto the web. There is a lot of power in internet advertising, but marketers need to be extremely conscious of the differences between the mediums.
Just a few days last week after I blogged that we should “expect to start seeing more grumblings of dissent claiming that the blog promise is overhyped,” the NY Times ran a story titled, “A Blog Revolution? Get a Grip.” The quick summary,
“Other critics of the blog movement wonder whether the hoopla over the commercial viability of blogs – particularly as publishing ventures – is overstated.”
My belief is that this is just one datapoint along the way on the Gartner Hype Cycle. So when voices begin to inject some realism into the discussion, don’t believe sky is falling as we realize that it isn’t an absolutely picture-perfect blue.