Hmm…here we go again:
We’re seeing lots of investing activity around Twitter derivatives, namely Bit.ly raising $2M for a TinyURL clone…
Is it just me or did we see a lot of Facebook investing activity last year when Facebook got its nosebleed $15B valuation.
How did those fare?
Right, down about 80%. But I’m sure Twitter is no Facebook.
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WatchMojo NewsletterJust imagine if we stole a tech company’s IP and published a video about it, or wrote an article outlining the secret sauce. Ironically, that would at least be a “derivative work” and not violate copyright, since it would pass one of the tests of the fair use doctrine. Yet a tech company that builds a tool that facilitates and enables copyright violation, that’s innovation?
From the “thanks, but no thanks file”, today we bring you Scribd:
Scribd.com attracts 55 million visitors a month, many drawn by the chance to download versions of books by popular authors that have been uploaded on to the website without the consent of the writer or publisher.
(…)
Scribd was set up by Trip Adler and Jared Friedman, Harvard students in their early twenties, and in two years has become the “YouTube for books”, helped by $12 million (£8.4 million) of financing. It makes money from advertising but pays no royalties to authors. It has rapidly become the most popular site for reading books online and 50,000 books and documents are uploaded on to Scribd every day. The site was used by the Obama campaign to publish policy documents, with the aim of giving people access to information directly, bypassing the filter of the news media.
Mindful of copyright concerns, Tammy Nam, a spokeswoman for the San Francisco Scribd, says that it operates a “notice and takedown system”, where it removes books if their publishers demand it. She said: “If we get a request we usually respond in 24 hours.” This makes the site compliant with the US Digital Millennium Copyright Act, which means that the site is not held liable for actions of its users of which it is not aware.
Critics say that this is not enough, because authors and publishers are not always aware that people are uploading books illegally.
Kind of reminds me of this:
A couple of posts and reports to brighten up any web entrepreneur’s day:
Tech Crunch captures a couple of highlights from the IAB’s latest report:
- Internet advertising in the U.S. grew 10.6%, or $6.1 billion, to $23.4 billion. The $6.1 billion fourth quarter (up 2.6 percent) was the first time Internet advertising surpassed the $6 billion mark.
- If you nuke total television advertising into sub-parts, then the Web is already kicking TV’s butt:
“The IAB also trotted out some numbers showing that Internet advertising revenues are outpacing TV advertising by some measures. The $23.4 billion in annual internet advertising spending exceeded advertising on cable TV for the first time (which was $21.4 billion), and took the No. 3 spot behind national and local TV ads ($29.8 billion) and newspaper ads ($34.4 billion).”
That might be a bit unfair, because the same treatment should see online advertising broken up between “local, national and global campaigns” or at least broken up by “search vs. display” for example. But this is Tech Crunch reporting on IAB’s findings… which means we’re all biased to ham up the figures. But nonetheless, the graph looks nice, doesn’t it?
Any way you dice it though, the losses to TV and print are turning into gains for the Web, from Paid Content:
How bad can it get for TV and radio broadcasting? How about revenue declines for at least the next five years? That’s what a new report being released today by SNL Kagan predicts. Following revenue declines of 10 percent and 7 percent for radio and TV, respectively, in last year, Kagan predicts accelerated declines of 15 percent for both this year. That number will stabilize somewhat after 2009, but Kagan forecasts annual declines of about 2 percent for radio and TV for five years starting in 2010.
I’ve yet to figure out an eloquent way to put this, but I find broadband media is so “explosive” (compared to just text media, basically) that when it’s said and done, what will happen to TV/Cable as a result of the Web will make what happened to newspapers a pleasure. What exasperates this is XML and RSS, which allow for so many distribution and syndication opportunities. If the Web 1.0 crowd had RSS to leverage, I think the Web would have grown even faster.
Imagine how quickly the Web would be growing after its first 14 years, then, relative to traditional media:
And in a new analysis comparing the first 14 years of Internet advertising revenues to the the first 14 years of cable and broadcast TV advertising, the IAB found that Internet advertising surpassed cable TV advertising in Year 4 ($907 million versus $499 million) and broadcast TV advertising in Year 10 ($9.6 billion versus $8.9 billion). Now, in Year 14, Internet advertising is almost twice as large as broadcast TV advertising was in its 14th year ($13.3 billion) and nearly four times as large as cable TV ($6.5 billion).
That’s great news.
Though when you consider how large total advertising is today relative to how small it was when radio or television launched, you do have to take this with a grain of salt.
A couple of suggestions from a VC, Josh Kopelman of First Round Capital:
If you come to a fork in the road, take it.
[My first company] Infonautics was in the right place in the right time — but made some wrong decisions. (Or, as Yogi said “We made too many wrong mistakes”). We were so locked into our initial strategy and vision that we were unwilling to “pivot” in response to changes in the market. We had all of the necessary ingredients (funding, search technology, data center, hardware, engineering team, and consumer interface) but were unwilling to change the recipe. Some of the most successful companies have been “pivots”. PayPal started out as a service to beam money through Palm Pilots, while YouTube was originally a video dating site. The truth is that early stage ventures are all about experimentation and iteration. As soon as it’s written, every business plan is wrong. Good entrepreneurs recognize this, and tend to build agile teams that can quickly respond to early market information in order to identify a real business model and minimize risk.It ain’t over till it’s over.
Boy, do I wish Yogi could have been on the Board of Directors of Infonautics. We made a huge mistake by calling “game over” too early - we had already conceded the game during the first inning. (In fact, some could say that we called “game over” while they were still singing the National Anthem). When you are in the middle of the game, you don’t have the benefit of being able to look at the scoreboard to tell you what inning it is in - but I’ve learned that successful entrepreneurs typically resist the natural tendency to assume it’s later than it really is. And while Infonautics was successful enough to go public in April of 1996, the company struggled until it’s ultimate demise.
Now, a couple of suggestions from an entrepreneur (ie. me):
1- When it comes to feedback, get rid of the outliers. Your biggest cheerleader is a fake, and your biggest critic is a hack. The truth lies somewhere in between, up to you to figure out where exactly in between.
2- The people you hire will have good, bad and ugly traits. You can’t pick and choose the good traits alone. Every day, they will do things that makes you scratch your head, but so long as they more frequently do enough positive things, then it’s worth it.
3- Perspective is everything: Good news? Enjoy it because there will be some bad news coming down the pipeline. Bad news? Don’t sweat it, because it could be worst.
4- Respect? You only get it reluctantly, and if people respect you too easily, it’s because they don’t fear you and don’t expect much from you.
5- Manage with a Sense of Urgency: Wake up every day knowing that you have to grow the company like wild, but fear that this day/week/month/quarter/year is your last. Yes, life is a marathon, but the company you are trying to build might not see the light of day.
6- Patience: On the flip side, there is no such thing as an overnight success.
Anything else you can think of?
Benefits of Online Media
Online media professionals love talking about how wonderful online advertising is because of the 2 T’s:
- trackability
- targetability.
We also like to make up words, as you can see. Anyway, combined, these two benefits give marketers the opportunity to have positive ROI (return on investment) campaigns when advertising on the Web.
Campaign Efficiency vs. Effectiveness
Personally, I agree that online advertising has what it takes to create more efficient campaigns, (though I need to give it some more thought as to whether the Web can make a message and campaign more effective). We still talk about Apple’s 1984 TV ad during the Superbowl, but I doubt anyone talks about the Orbitz pop up, at least not in the same vein.
However, I don’t buy the notion that any campaign - on any medium - returns a positive ROI immediately. I think in the very short term and over the very long term, yes, campaigns can be positive ROI, but most marketing is a form of investment, and as the recent crash reminds us: sometimes investments pay off, sometimes they do not.
Marketing Builds Brands, Brands Build Empires
As sales people, don’t tell would-be clients what they want to hear, tell them the truth: expect to lose money, maybe. But if you play our cards right, then through marketing you can build an empire. Think of Red Bull, or Grey Goose. Some of these brands were literally built on marketing and today they are multi-billion dollar behemoths. Do you think Mr. Bull or Mrs. Goose ran away scared after their first dollars on marketing didn’t gain market share or garner sales? Puh-lease.
Dark Cloud on the Horizon for Investors of VC-Backed Firms
I think what the economic crisis will do is make it all but impossible for 99% of VC-backed companies to have meaningful exits (positive ROE, or return on equity, let alone homeruns). The only way for most of these companies to do multiple-returns (2x, let alone 10x) would be for founders, management, existing investors to be wiped out when they raise additional funding down the road, which never helps morale or results.
Facebook’s $15B paper valuation is but one example, and that despite Facebook’s massive growth… in eyeballs.
Advertising and marketing are but one facet of all of the expenditures a company makes. But marketing and advertising come after a product has been conceived, designed, built and shipped out. To do all of that, it takes a lot of time, and money. Yesterday I came across this story:
Hammerhead, which shut down on March 19, could be a case study of how even startups with talented teams, proven technology and lots of venture funding — about $110 million over seven years for Hammerhead — can be thwarted by circumstances beyond their control, including industry turmoil and the current global recession.
$110M in funding? I cannot even imagine what that’s like. Of course, I am not building a would-be Cisco killer, so I could not even tell you if $110M made sense, even in pre-crash boom times.
Only Jokers Burn Money
Ultimately,
- it’s not enough to build a successful company,
- you have to do and provide a positive return on equity.
Back in the day when VCs still invested, they’d ask me: “how much money do you need to grow WatchMojo.com?”
Clueless about the VC’s desire to spend all of the money they’d raise from hapless investors, I’d say “not much, we can be very efficient.” I could not fathom spending tens of millions of dollars; always trying to do more with less, in the process I would turn off free-wheeling, mass-spending, world-changing VCs with the suggestion that we could do more with less.
I don’t want to sound like a hypocrite, either. If someone actually gave me a check for $10M and said “go spend this, we have more for you”, I am not sure I’d be so cavalier about this, either.
But entering our fourth year of operation, showing an aversion to spending other people’s money recklessly has inadvertently allowed us to
- retain a simple capital structure table, without the hassles that come with draconian term sheets,
- build a massive library of evergreen content,
- overcome the challenges that online video content producers face,
- benefit from pricing power to win guaranteed revenue business,
- build a successful syndication business.
That gives us the chance to add muscle as others scramble to cut off fat. In today’s climate, that is the best currency of them all.
Reading about how Facebook is going to need to raise more money (potentially to the tune of $100M) as it continues to grow, all I can say is, I feel Mark Z’s pain. Sort of, on an admittedly different, smaller scale, mind you.
They need servers, we always seem to need more storage. We are now running out of our existing storage of 24 terabytes, which represents the media we’ve shot and produced since 2006 (we have actually bought a bit more, since we have changed our configuration as we’ve expanded storage, but we always seem to find good uses for the old stuff).
Anyway, if you want to get an idea of what 24 TB of storage can save, here is an image I found via Flickr:
And no, we don’t use the SunfireX4500, aka Thumper… in case you’re wondering… but I dig the image.
Sure, being worth $1.4B helps, but Google’s top sales executive, Omid Kordestani (and my paisano!) declined his $1.4M bonus. Bear in mind, this isn’t some banking executive who was forced to give back a massive pay when his bank lost billions, this is an executive who basically launched and scaled Google’s bread and butter back in the day and still managed the team that delivered $21B in annual sales and over $4.2B in net income in FY 2008. Since launching the paid clicks business, Google’s racked up $60B in sales.
Not bad at all.
The Boston Celtics couldn’t pull it off… but I am thinking of getting a movement going to get fans and a number of wealthy individuals, along with companies, to acquire a share in the Montreal Canadiens hockey team.
Details to come, but here is the background, from our sports blog.
I finished reading Kenneth Whyte’s The Uncrowned King on William Randolph Hearst, and I learned a lot about how to be a better businessman and entrepreneur, no doubt. Hearst was the man, for sure.
But I also walk away now realizing that newspapers as (we know them) will die, no matter how much of a fight they put up.
From the last pages of the book:
“The 20th century brought an extended (and ongoing) era of profit-taking and consolidation. Advertising came to dwarf circulation as a source of newspaper revenue, and advertisers found it more cost-effective to reach a whole reading public with one or two ad placements than with many.
The big papers got richer, the smaller ones disappeared, to the point where many metropolitan dailies enjoyed local monopolies. With reduced competition, newspapers lowered their voices and brought in their elbows.
The aggressive, crusading, politically charged, self-promoting, polarizing, audience building antics of the old warrior owner-editors gave way to to the relatively bland consensual habits of the business manager who wanted only as many readers as would keep his advertisers happy.”
What is the problem? There are two.
- The Web has cut into their audiences, and
- advertising is more effective online…
The Web will keep eating away at newspaper audiences and revenues, and if/when newspapers get serious about moving to the Web, then they accelerate their inevitable demise.
In the 1950s, television ushered in even greater reach, so the appeal of placing ads in most newspapers vanished. I think the papers who did not die when the penny presses merged and subsequently closed in the 1950s will probably go out of business by first merging and then selling this time around.
In the 2000s, the Web offered more by way of local tastes. The myth that newspapers “master” local content is a myth. They’re not bad at it, but they took advantage of an inefficiency. The Web leveled the playing field and made marketing more efficient. This fundamentally pierces through any vestige newspapers had.
Newspapers will die, news will go on… News companies have a choice to make.
Do newspapers need to get serious about the Web or should they walk away, and become print-only ventures?
Well, let’s check history:
The New York World Journal Tribune, also known as the World-Journal-Tribune, and nicknamed “The Widget” from the initials of its long and unwieldy name, was a newspaper published in New York City from September 1966 until May 1967. The World Journal Tribune represented an attempt to save the heritages of several historic New York City newspapers by merging them together into a consolidated newspaper.
The late 1940s and the 1950s were a troubled time for newspapers throughout North America. Newspapers had acquired a new competitor for the eyes and ears of the nation, television. Competition from radio and magazines for the news audience also continued unabated.
In April 1966, in an attempt to avoid closing down, the Scripps-Howard owned New York World-Telegram and Sun merged with Hearst’s New York Journal American and the New York Herald Tribune to become the New York World Journal Tribune, an evening broadsheet newspaper which would rely on newsstand sales to survive.
The management of the merged paper told their employees that to succeed the new enterprise would need concessions from the unions, but the unions, upset that several thousand workers were planned to be laid-off, demanded their own concessions from management. The result of the impasse was a 140 day strike which delayed the debut of the new paper until September 12, 1966.
What do you think?
If: {TV in 1950s} = {Web in 2000s}
Then: {Penny press newspapers in 1950s} = {Those newspapers who didn’t go out of business and managed to survive then only to go out of business in 2000s}?
No?
