David Beisel’s Perspective on Digital Change
David Beisel’s Perspective on Digital Change
In a great post by Jeff Bussgang, he laments the fact that there are so few VC-backed consumer hits coming out of the Boston area. As a Boston-area VC with a consumer/media background myself, I’ve thought a lot about this question, too. Jeff concludes “that Boston simply lacks the key ingredients for a great consumer start-up. All start-ups require the proper ingredients to succeed – visionary entrepreneurs, savvy professional managers and sharp VCs among them.” At fist read, his basic argument makes sense: the best talent around Route 128 lies in the enterprise IT/software realm, so that’s where the strong companies emerge.
But I think that the reasoning runs much deeper than available talent. I believe that it rests on the foundation of Boston culture. California’s roots are in the risk-takers who left their original situations on a “hunch” that a better life could be found out West. I think that this theme bleeds into the mind-set of the rest-coast entrepreneur, willing to bet their company on a belief in his or her intuition of consumer adoption. It’s an “all or none” proposition. By contrast, Boston’s strong heritage lends itself to entrepreneurs who take calculated, formulated risks – more akin to the step-wise function of the early adoption of big enterprise customer sales. It is this cultural difference, coupled with the available human resources, which creates a self-reinforcing circle. Enterprise companies are started, VCs and the talent pool develop domain-specific expertise, and the cycle is further perpetuated.
Regardless of the complex and subtle reasoning for why this situation exists, I agree that the situation is ripe for change. It is true that the talent that has immigrated and emerged here in the past ten years, which will provide a solid base for innovation. But more importantly, the current economic landscape dictates a shift away from innovation in enterprise information technology. The fact that the demand for such technology has severely declined leaves Boston-based entrepreneurs and VCs no other choice but to look elsewhere. With corporate IT spending expected to grow at just 4-5%, how can that industry support a supply of new innovation at return prices that venture capitalists expect? It seems very difficult to me. The upcoming demand for consumer-centered technologies (including the infrastructure to support them) nearly requires that Boston (at least partially) shift its focus towards away from enterprise IT in order for it to survive as a viable region for entrepreneurial innovation.
So I for one am personally looking forward to an upcoming consumer hit coming out of the Cambridge/Boston area.
“New media” has been around for the past ten years or so, and interactive media ad spending has exploded since its inception. Advertisers have found and are continuing to find this digital medium as an extremely effective way to reach and influence consumers.
Now with the advent of Tivo and other DVRs circumventing the stand-by traditional 30 second television spot, advertisers are scrambling find even more “inventory” for their messages. And they are succeeding, albeit temporarily, along a few fronts. For example, advertisers have moved to integrate their product directly into shows’ content, like in Trump’s Apprentice, with mixed results. But even successful efforts of this type cannot overcome the fact that individuals are spending increasingly substituting time watching TV for other forms of interactive entertainment.
With the decreased effectiveness and usage of traditional mediums in reaching consumers, we are now seeing the emergence of an additional set of promotional outlets. I see these “New” New Media advertising types surfacing as becoming powerful venues for reaching consumers:
• Ads in Video Games – Companies (like Massive Inc.) are creating ad inventory systems to directly insert interactive advertisement into game-play on both consoles and PCs. Why drive your racing car on a generic street when you can drive by dynamic promotional billboards strategically placed along side the road?
• Ads on Mobile Phones – Despite initial consumer resistance and early predictions that this trend has been “just around the corner” for the past five or ten years, this ad type will arrive as carriers become increasingly reliant on outside help to increase per-subscriber revenue metrics. Think about the power of a button, “Press here to talk to us.”
• Ads on DVRs / IPTV Boxes / IP Radio Boxes – While it’s unclear to me just how the home media entertainment center will evolve in the future, there is one thing that is clear: advertisements will become an integral revenue component in delivering media to consumers. For example, just this week, Tivo announced ad inventory pops displayed during their fast-forwarding function.
Last week, I blogged that the “question and answer” search paradigm wasn’t dead at all. Earlier this afternoon, Google responded by launching its Google Q&A feature. Now users can type a one-line question into the search box, and if a simple factual answer exists in the company’s mining of open source encyclopedia-type information, the results page contains an answer in the OneBox section at the top. Gary Price at Search Engine Watch has a good initial write up on it.
For example, I typed in, “What is the population of Pittsburgh?” and Google responded with a simple reply, “Pittsburgh Population: 334,563” at the top of my results.
This Google Q&A is a great simple first step. But “question and answer” microcontent publishing still has a lot of progress to be made. And new startups will continue to make waves here as well, not just the old guard.
Most questions that people have can’t be answered with simple factual answers. Users already know where to get these – Wikipedia, dictionary.com, etc. This service just makes it easier by cutting out the middle man. Look for continuing innovation around answers that are deeper, more subtle, and opinion-based.
I’ve been rambling on in the past two days about Yahoo vs. Google. What does this have to do with startups and venture capital? Everything. These two companies, along with IAC and MSN, are likely acquirers of the new breed of startup that are emerging supporting the Incremental Web. All of the other topics I’ve covered in this short life of this blog so far – RSS, social tagging, microcontent, vertical search, web analytics – are fertile ground for innovation and new company creation.
Yes, there are a handful of companies in each of these “spaces” that have already emerged in the past year. On the extreme end, there’s del.icio.us, the company that was made “famous” in the blogosphere before the founder even quit his job and started full-time on the endeavor. And for every delicious out there already known, there’s a half-dozen still waiting to be discovered or even founded.
We’re in an exciting time. Even the mainstream media, exemplified by Newsweek, has a feature article this week about the new breed of startups. If a general news magazine thinks it’s a new story, then it’s been fact for the past nine months.
So when Google and Yahoo are upping their moves, vying for the top dog in the portal game, then it also means that we’re seeing just the beginning of feeding them with new startups. Now that’s a perfect topic for a genuine vc blog.
Following up on yesterday’s post, an article in AdAge yesterday points out another reason why the Yahoo vs. Google war is soon going to tip the scale away from the media-anointed king, Google. Yahoo has the wind against it back with market trends: “rich-media advertising, driven partly by video technologies and certainly buoyed by consumer uptake of broadband, is predicted to surpass search marketing as the largest-spending online category this year.”
John Battelle has eloquently drawn a distinction between Yahoo, the media company, and Google, the media company. Because of this difference, Yahoo, culturally and structurally, is better positioned to ride this trend towards rich-media advertising. In short, the company has a leg up in catering to this set of advertisers in the coming year or two. Look for Google to make some moves to play catch up in this race, but Yahoo is already in the driver’s seat.
There has been a lot of discussion in the past week about “How Yahoo Got Its Mojo Back,” as Om Malik puts it. Some go even as far to say that “Yahoo is the new Google. Google is the new Yahoo.”
I wouldn’t go that far in discounting Google, but I do claim that Yahoo has been unfairly passed over in the past year. I say “Yahoo!” to Yahoo! for making strides when others weren’t looking.
While Google was busy soaking in the riches and hype from its IPO, Yahoo bas been busy catching up in developing a competitive AdSense product: rounding out its own API, and upgrading its free e-mail product. More importantly, the company has been quick to recognize the value of the Incremental Web. Incorporating RSS feeds into my.yahoo was a momumental first step. More recently, the acquisition of Flickr and the beta launch of Yahoo360 demonstrate that the company is forward thinking about the internet’s transition to an incremental user-generated content medium. As a media company, Yahoo is placing a solid stake in the ground.
If all of the above is true, it surely hasn’t been recognized in the stock prices. Paul Kedrosky wonders when the stock price pairing of the two companies will diverge. I agree. The question becomes – when will Wall Street realize that their darling Google has an older brother Yahoo that’s flexing its muscle?
There’s been a lot of discussion in the Blogosphere talking up social tagging / social bookmarking / folksonomies. I’m deeply interested in this conversation, as I think that user-generated information organization (as opposed to author-generated or thirdparty-generated information organization) has a lot of power behind it. Take the buzz around del.icio.us and flickr as an example of this excitement.
Or is this all hype without any true foundation?
I don’t know what to think – yet. I am still reading and learning more.
But I think at great first start in learning more about this subject is this academic paper by Adam Mathes at University of Illinois at Urbana-Champaign. His conclusion, though, reads, “A folksonomy represents the simultaneously some of the best and worst in the organization of information.”
No wonder I’m having a tough time forming my own opinion. I’ll keep digging and thinking.
The acquisition of Ask Jeeves by Barry Diller’s InterActiveCorp (IAC) two weeks ago got me thinking about the question and answer model that the company originally tried to use to differentiated itself. That approach really never took off, and the company eventually shifted its attention to other aspects of the business (which yielded them a consolation prize of $1.8B, not bad when compared to say About.com’s recent $410M sale).
But it got me thinking. Is the “question and answer” paradigm really dead? It looks like a number of start-ups are trying it again. This time one of the spins is on having users generate “microcontent” responses, as opposed to having search results or experts/guides respond to you. At first glance, it sounds like the social networking sites have rubbed off on search.
But, I think that there is could be a new diamond in the old rough here. My belief is that the timing is right for a microcontent producing Q&A sites (in investments in them) to flourish now, whereas it couldn’t in the past, for a number of reasons:
1. Publishers’ eagerness in seeking additional quality content to increase their available advertising inventory. Since the bottoming out of online advertising market after the bubble, the past few years have produced renewed fundamental advertiser demand for online media. This situation has driven up media prices, inducing publishers to actively seek new content to sell under their brand umbrella.
2. Google’s AdSense and other contextual networks facilitating monetization. With the presence of AdSense and other contextual advertising networks, microcontent publishers now have a genuine ability to monetize their information pieces in a way that wasn’t available during the late 1990’s.
3. Improved search engine algorithms facilitating increased sophistication of consumer information searches. As search results have greatly improved in the past five years, consumers are more comfortable and likely to search for specific, detailed (i.e. microcontent) information – rather than just general topics.
4. Adoption of new content syndication technologies like RSS. With expectations of full RSS embracement, there will be an accepted protocol which facilitates the syndication of microcontent that wasn’t available just a few years ago.
5. Renewed interest by major portals in social input engines. Signaled by both acquisitions and in-house developments, the major portals (namely Yahoo), have recently devoted significant attention to online models that leverage a collective social input aspect in generating content (dating sites, Yahoo360, Flickr).
I’ll keep ruminating on this one and see if I can find other opinions on the blogosphere that agree or disagree. I haven’t seen much discussion about it in the blogs that I regularly read.
There’s been a lot of hype surrounding Vertical Search Lately. Search engine marketing guru Danny Sullivan claimed at the SES, “I can’t say it enough. Vertical search is going to take over.” Visionary Tom Evslin first disagreed saying that “’Vertical search engine’ is an oxymoron” and then hedged his comments a bit.
The right answer is somewhere in between these strong opinions. In a future blog, I will comment on what I think vertical search means, its importance/relevance, and where it is going.
But for now, I want to highlight my new favorite vertical search site – EVDB, a search engine for local events and venues. After signing up in the past for notification when the site went live, I received an e-mail yesterday announcing the beta launch.
Has the company bitten off more than they can chew? It is a tall order to database a set of local events and venues with the a critical mass that’s beneficial for the user. As opposed to other vertical engines with a handful, or even dozens, of sites needed to draw information, EVDB has to aggregate events from thousands of disparate sources. But, if it can be done, it will be a truly powerful proposition. It’s an interesting angle to the “local” play, in contrast to most local content/search sites centered around the location of businesses. I am looking forward to the day when I can set up an RSS feed of my favorite independent-label musicians, and have EVDB notify me when they are coming to town at a small local venue. Very powerful.
So when EVDB does place themselves on A9’s Open Search?
It seems that every day, there is one media story that’s all the buzz in the blogs and e-mail newsletters that I read regularily. What was today’s?
I’d note that I think that the investment by BV Capital in Fotolog, on the heals of the announcement of Flickr’s acquisition by Yahoo, was of significance. However, I think that the true story of the day is Google’s acquisition of Urchin. Rumor has it that the price was about $30M.
Google is starting to move down a path of offering additional services for their marketing customers. Expect to see more of this activity in the future, especially on the acquisition front. As a former professional internet marketing consultant myself, I know that there remains a lot to be desired in services for online (and especially search) marketers. There is a need for both analytics and tools to help create, refine, and test online marketing campaigns. Urchin fits in here nicely, but there are still empty holes to be filled (like bid management applications and landing page optimization). Google will continue to aggressively pursue acquisitions in this area.
And don’t believe the media hype about consumer privacy concerns with respect to online analytics. It’s just reporters trying to stir up controversy. Mediapost goes even as far to say, “Until advertisers can convince the public that market research has a public benefit, Web analytics companies such as Urchin and WebTrends will be increasingly irrelevant.”
Nonsense. Privacy concerns are indeed valid, but companies are now deliberately addressing them. More importantly, these tools are increasingly helpful for marketers to better understand and address their customers.
Are web analytics relevant? Absolutely – Google thinks so, and so do I.