I wrote a post today giving advice to entrepreneurs pitching VCs. Check it out on Techcrunch. If you are presenting your business to Mayfield i think it would be great if you read this before sending or presenting your exec summary or powerpoint.
Best wishes and happy holidays!
I believe Not for profits (non-profits) are disrupting for-profits on the internet. These organizations - often started by a community-oriented founder - create a simple application or database, grow their user base thru word of mouth and community and eventually use the community to crush all the for-profits trying to provide a similar product. Large companies try to compete but the power of the community is too powerful vs a monolithic "borg-like" competitor with a top down, control-driven approach to content/software creation.
Social networks are here to stay...100s of millions of consumers now use them as an indispensible tool to stay current with friends and interests. There has been a lot of debate on how they can make money. Let's keep in mind that they ARE making money today (facebook over $300M annual revenue and LinkedIn well over $100M) - more than most internet sites - but just not a lot on a per user basis.
The current economic crisis and looming recession is going to unfortunately result in a lot of unemployment. It's estimated that the US already shed 1.2M jobs so far this year -- and the worse may yet come in 2009....
I believe consumer marketing has fundamentally changed – online has been the catalyst of this change as every user, intention, and action is trackable and hypotheses can be tested and validated in minutes. This will move into other marketing channels – e.g. TV as it goes more digital (note the Google-NBC announcement for the selling of broadcast TV in their online marketplace), print media (e-books), and of course outdoor (digital signage). Its not just change in customer acquisition either – it extends into the areas of customer retention and loyalty as well. Again, every action is trackable and hypotheses on why consumers buy at the right price points or become loyal can be tested and changed in real time.
Meanwhile, I feel the academic world of marketing education has not kept up with the change. Marketing is often viewed as a “soft” and less rigorous major that one takes if they are more interested in boozing their way through college. The “brains” go for engineering, math, or medicine. The reality is that in todays world technology innovation is increasingly commoditized and the marketing edge is what matters. Marketing is more like applied math or engineering where the scientific method (hypotheses followed by testing followed by conclusions) yields the results - with a twist of psychology thrown in… The marketer has to use their understanding of human behavior, needs, wants via psychology and come up with hypotheses on the best way to get the consumer to an action – then test all these in real time (often multivariate testing as each text or image or color can and should change) and deploy – and then test all over again….
There is clearly strong demand for these type of people in every startup I’ve worked with. There have been countless mistakes made in hiring a “brand marketer’ who doesn’t get “digital marketing”. We are in need of more talent – even here in silicon valley. I think schools should step up and help fill the long term void by teaching the new marketing. Marketing engineering could be one of the most valuable professions and become what every smart bright-eyed college student aspires to conquer…
I've noticed an explosion of services around what is called the "live web". This is about synchronous communication (e.g. chat vs email which is asynchronous) and live events. This is happening more now because the web is more social, input devices are more common (webcams, microphones), communicating via IP is cheaper than using old telecom networks, broadband enables a better user experience with less latency, and the growing demand for the long tail of content. Aside from these drivers, I think a key desire being fulfilled is the social nature of viewing a live event together. This is why chat is integrated into many of these apps (MMOs, live video broadcasts) and has high usage. It's not just the viewing of the event but the excitement of seeing it unfold live with other people - that can't be replaced by a PVR or on demand web video.
This has been tried in the past but web-focused solutions seem to have caused a swell in usage - with low friction and an easy UI (e.g. meebo, tokbox). Several companies are breaking new ground in this area:
- Meebo, Userplane, FB Chat - enabling live text communication (e.g. chat) embedded in websites
- Skype, Jaxtr, Rebtel, Jajah - enabling live voice communications on the web or via phone - cost is a big driver here.
-Ustream, Mogulus, Justin.tv - enabling live video broadcasting - whether you are a guy in a closet or a big broadcaster trying to reach a new internet audience. This is enabling everyone to have their own broadcast channel - allowing the long tail to broadcast as spectrum is no longer a constraint.
- Tokbox, Woome - live video communications ranging from plain old video conferencing to video introductions (Woome's video speed dating)
- MMOGslike World of Warcraft, 2Moons (acclaim), etc - live massively multiplayer gameplay
Each of these areas has its own challenges. For example, while phone calls and chatting are relatively ubiquitous (which is why those services can have broad reach), how broad based will video broadcasting and video communication become? Not everyone wants to be seen or see the other person when communicating...another challenge is monetization vs the cost of delivery - without fancy technologies like multicasting (which never took off), live requires lots of bandwidth and is harder to use cost saving measures like p2p distribution.
That said, this is a fertile area for investment - send me your ideas!
The web is evolving fast from a simple web page/website destination model to one of distributed data (which is synonymous with content) and applications that appear wherever the user needs them the most - whether its on a social networking profile page or a merchant page where you are about to transact.
This may seem like a simple shift but the effects on the ecosystem are profound and new winners will be created. A web publisher can no longer think in the paradigm of a website only and driving traffic to a destination. Sure, you have to have a destination - but in many cases its becoming a showcase site vs where the real action is. The extreme examples are widget businesses - and Mayfield has made several bets here from Gigya (providing widget distribution infrastructure to anyone with content or apps) to Slide (vertically integrated network of widgets - now the largest in the world). Both have significant momentum (billions of impressions per month) which would not have been achieved in the old paradigm.
Why is this happening? Very simply, because the user is pulling the web in this direction. More deeply, because publishers want to take advantage of traffic and context on other sites and present relevant info when the user needs or wants it most - and both sides of the equation - publisher and data/app provider - are playing nicely. A website is really nothing more than data and applications on a page so it makes sense that a publisher puts some structure around these items, makes them discrete, and "atomizes"/redistributes it everywhere. Web services, APIs, and to some extent the standards set forth as part of the "semantic web" effort are making this possible - along wth an important general shift to openness in all businesses. The destination owners (like facebook) are realizing they can't satisfy all their users needs but have great context (in their case a powerful social graph of people you care about) for others to use.
What does this mean for investing? Well, there are a lot of new infrastructure needs (like Gigya) but there are also new opportunities for disruptive content providers. A content provider needs to think of themselves as a database provider now more than a text or media publisher. I think there will be big companies created that own the most important databases in verticals - the new wave of publishers embracing concepts like crowdsourcing and UGC. One example is an investment I made called Fixya - where users provide tech support and tips for consumer products to other users. It's now the largest user generated tech support site in the world - with over 7M unique visitors and growing like a weed(thanks to Google SEO'ing all the solutions - kinda like wikipedia).
What makes the Fixya database so valuable? It can scale infinitely as more products are launched, old ones remain on our shelves, and users generate the content. The data is categorized (by product SKU and category) and can be cut up in many different ways providing deep knowledge where the consumer needs it. It is self policing (like wikipedia) as the expert community is rated and the best content rises to the top (like youtube). Since it's treated like a database, this info can be presented to users where its most relevant - at a manufacturer site, in a shopping search engine, discussion forums or a merchant page.
I think every publisher of content or applications needs to change their mindset and think like a database provider - it's no longer optional. I'm looking for other "fixya"'s out there in large consumer and b2b categories - let me know if you have one!
In today's world, the largest risk in a consumer internet startup is typically consumer adoption. VCs ask ourselves the question - how many users will the service attract, engage, and monetize and how quickly and easily can this occur?
One simple design factor I've noticed that can be influenced more than others is the position where the product requires user investment (in terms of time) to receive benefit. The simple premise is that human nature is such that we are more willing to engage in products that require little upfront investment. Even if the short term cost will produce 5x returns in future use, we are moving too fast around the net to make this tradeoff - we like to find the path of least resistance. That said, we will tolerate increasing time investment as we use and get addicted to the product.
Too many products require a significant investment of time upfront (e.g. long registration forms, entry of preferences, creation of a large profile, etc) before any value is received. The consumer may be excited about the proposition (e.g. meet new friends, save time doing X with our service, find the lowest prices) but attention spans are increasingly tuned to short term benefits (e.g. search results from one query vs a multi-faceted advance search). The "UI" was even worse in consumer products which required reading a 25 page manual before you can benefit - of course, now the smartest product manufacturers include a one page graphical quick start guide which I would bet is used far more often than any other manual.
One way to solve this problem is to collect only what's absolutely needed initially and then gradually ask for more information - even if the product won't be as flexible or sacrifices some of the long term benefits. These changes seem easy but have huge implications on databases, customer tracking, etc. For instance, at Snapfish, we first made the user do a lengthy registration process before uploading a photo to snapfish. After we noticed the dropoff, we thought it would be easy to allow upload first and registration later once we have the user's photos and they take an action which requires registration (e.g. buy or share photos). It seemed simple but it required us to rethink the way we store customer data as some users would have "orphan" accounts and this issue rippled thru all processes that involved customer data - needless to say it was very tough to even test this change. With new services, its a lot easier to "do it right the first time" (we called it the DIRFT process) - which is advice I give all our startups.
In summary, think about the fastest path to user benefit with least cost/pain (time or data investment) - even if it sacrifices functionality or long term benefit. Once you get a user hooked, you will have their attention to move them up the cost/benefit continuum.
As you know from previous posts, the social cause that I am spending time on these days is Climate Change (see the Critter Crisis post for why and what i'm doing about it).
I recently saw the screening of 11th Hour which is a new documentary from Leo DiCaprio and Directors Leila Conners Peterson and Nadia Conners. I highly recommend the movie to those that are skeptical or simply interested in the issues facing our planet Earth. Inconvenient Truth does a great job using the star power of Al Gore to lay out a compelling case for Climate Change. 11th Hour is different in two ways. First, it provides the audience an overview of the many problems facing Earth - not just climate change (e.g. overpopulation, overuse of land, deforestation, etc) - the meta theme is overuse of our resources. The second difference is that almost half the film is dedicated to the solutions that are being worked on to address these issues - the audience leaves the theater with a sense of hope and motivation vs fear and helplessness.
The downside of the film is that it is done in a documentary style that is very informative for the "intellectuals" of our world but is missing the story arc and characters resulting that's the hallmark of cinema to make it a mass market success. That said, this is a good start in bringing it all together and perhaps will inspire more film makers to blend characters/storytelling to get the message to a wider audience.
I'll leave you with a great concept from the film - we are wrong to say our planet is in crisis when its the human race which is at risk - the earth will do just fine in the long run without us....
I'm a Managing Director at Silicon Valley venture capital firm Mayfield Fund with an energetic type A personality that likes to explore, learn, question, and enjoy.
Recent Comments