July 2008 Archives

I tried cuil, and I did not like it.  Far from satisfactory.  Too many irrelevant search results in the first two pages.  But regardless of its quality I agree with what Seth Godin says:

"Google, of course, is the Marilyn Monroe of search. I have no doubt that someone will develop a useful tool one day that takes time and attention away from Google, but it won't be a search engine. Google, after all, isn't broken, not in terms of solving the iconic "how do I find something online using my web browser" question."

Read the full article at Seth's Blog: Marilyn Monroe, the Mona Lisa and Jackson Pollock.

I usually don't get to write about the events I attend, but with two events in a row (Facebook's F8 and Venture Beat's MobileBeat 2008) and two more to come (TechCrunch's Mobile Web Wars Round Table and TechCrunch's Annual August Capital Meet Up) I need to organize my notes -- and why not do it here on the web.

F8 was a waste of time in general - Mark Zuckerberg's keynote was fine but the next talk that followed him on stage was long and mostly just asking-for-applaud.  it became boring rather quickly, and the different tracks did not offer much.  I switched between sessions in hope of finding useful talks, but at least to me the time could have been better used.  I left early.

MobileBeat was a different story.  There were four panel discussions, and pretty much all of them offered useful information.  The panelists knew what they were talking about.  I for one learned quite a bit.  I'm sure different people left with different takes -- here's mine.  These are not necessarily related - just notes from the event:

• A lot of talk about iPhone.  However, people did mention a few times that internationally the number of iPhones is insignificant compared to other handsets.
• Nokia has a 70% penetration in India.
• The problem with Apple's iTunes App Store is that it's another walled garden.  And the same old pattern is happening there:  A small number of apps show at the top of the list, they get more downloads because they are at the top, and they keep staying at the top.  Vicious circle.  Few apps will find a chance to be "discovered".
• About 6500 apps exist for BlackBerry today.  About 70% of these apps are vertical.
• Unless you have a specific network and customer line up, being vertical makes apps less attractive to the VCs since there's already a small percentage of people who download apps, and for a vertical app this makes the number of downloads (hence growth) even smaller.
• For the same reason VCs prefer to see apps that would work across all platforms, not just iPhone.
• At the same time, a number of companies such as Loopt has found iPhone a good platform for the initial launch - call that your beta.  Do it on iPhone because development is short and download problems are not huge.  Then study the reaction of your users, who are usually the early adopters.  If that works out well, then think about releasing the same app to other platforms such as Windows Mobile or Symbian.
• Despite all the talk about how Apple is eating AT&T's lunch with the app store, AT&T is not much interested in the app revenue.  The revenue from the customer, including the voice, SMS and data plans, dwarfs the app revenue.  So they prefer to focus on the infrastructure and the "network", not the apps.
• VCs are less interested in replicated what's available on PCs on the mobile devices, that's usually done by larger companies anyway and is hard to compete with.  They look more for things that would have not been possible if the devices were not mobile.
• Games are the most popular apps on mobile devices.
• Among interesting topics to mobile VCs are edge issues (such as acceleration), identity management, and discovery of content/apps.
• iFund seemed to be pleased with the investments so far, and they seem to be ready to expand their fund if they see more iPhone opportunity.  Before iFund they have practically never seen a "successful" mobile investment.
• Numbers are amazing (or I should say scary):  In all these years only about 143 mobile M&A transactions have happened in the market, of which less than 20 are more than $200M, and less than 35 are more than $100M.  This means little success in mobile VC investment.
  
• Advertisement is still considered the biggest way to monetize.  However, brands do not prefer deep-inside-the-app advertising, because the user experience does not allow the user to easily "click through" to the target site - user usually does not (or cannot) leave the app.
• Referral fees are also a good business model.  It's possible, for example, to have an app on iPhone that refers the user to a song within iTunes.  If the user buys the song the app gets a cut.
• Also using Virtual Goods as a monetization strategy came up a few times.  Interesting.
• MySpace has about 1.7M users on their mobile web portal.  Facebook seems to be about the same.  These are US numbers.  MySpace also has downloadable apps, but they did not disclose numbers.  I guess if download was in the same ballpark as mobile web users (or more) they would disclose, so it should be considerably less.
• Some interesting numbers in terms of mobile usage in the US:
• Number of subscribers:  232M in '07 ---- 255M in '08
• Those using SMS: 140M in '07 ---- 198M in '08
• Those using MMS: 77M in '07 ---- 123M in '08
• Those with data plans: 74M in '07 ---- 95M in '08
• Of 95M users with data plans ony 40M actually use Internet services, of which 30% are on smartphones.  4% on iPhone (part of the 30% smartphone), but the iPhone users' usage is 5X the average smartphone user.
• The discussion on whether one should write the app for mobile web or as a downloadable app did not coverage to a specific black and white answer.  The consensus was that you should look at your audience.  For example, if it's a business app you would probably want to write an app for BlackBerry.
• AdMob's CEO was emphasizing that advertising on mobile is already happening.  They are serving 3.5 Billion ad impressions (sorry - can't remember if it was "per day" or "per month" - but the number is too huge anyway) internationally.  The CPM is $10-$30 in the US.  A lot lower internationally.
  
• Forget about Java development for handsets in the US.  The download issues are just too much hassle.

I'm sure there's more, but this is most of what I remember from my notes...

I really liked this ad. It's a bit old, but very interesting:




I can start talking about why I like it, but then you'll know once you see. That's why it's viral!!

The iPhone App Store has arrived.  It requires iTunes 7.7, and the interface, while a lot is left to be desired, is very simple and easy -- a breakthrough in mobile applications industry.  You buy apps just the way you buy songs.  People will get it.  One click, and it's downloaded to your iTunes.  Sync your phone, and you're set to go.

Currently there are 27 pages of applications currently available. A huge number of apps are games - not my forte so I can't really talk about their quality.  Also a lot of books are listed as applications, and a bunch of language tools (translations, phrasebook, etc).  And then there's a host of various types of Applications.  "135 of these apps are free, while the remaining 417 range in price from $0.99 to $69.99, with the vast majority ranging between $0.99 and $9.99."

Read more at TechCrunch's iPhone App Store Has Launched (Updated).

I browsed through the apps and aside from a couple of location-based applications such as Loopt and Whrrl which we already knew about I can't say I saw anything that would really catch my attention - but hey, this is the first day this thing is live.  Think of PCs before word processors.   There will be a storm coming.

Yahoo! has made a game changing move in the search space -- opening its core search technology as APIs to any developer who wants to use it:  "BOSS allows developers to submit queries (and their associated parameters) via an API to retrieve up to 50 web, image, news, or spelling results in XML or JSON format at a time."

The API is free with unlimited access.  Developers will agree to show Yahoo! ads along with the results.  Read the full article at Yahoo Radically Opens Web Search With BOSS.

I have seen a lot of material on how to prepare a VC pitch, and based on VC meetings I have been to I can tell you that in general this article covers a lot of good points.  Notice that it's B2B, so a consumer play pitch would be a little bit different (specially more on marketing and go to market strategy is needed).  Also in general the article tends to assume it's not a seed round:

"When it comes to presentation, it goes without saying that the best pitches:

• Tell your audience what you're doing, why the market will be big, and why you will win.
• Provide an imperative and a sense of urgency - they answer the questions "Why now?" and "What's changed?"
• Provide real insight - into the market, customer pain, or a unique approach.
• Hook the investor - with compelling customers or user numbers (unless it's a seed stage deal - even then, potential numbers or customers are helpful).
• Are delivered with knowledge, passion, and conviction by the entrepreneur."

Read the full article at Tech, Startups, Capital, Ideas. » Perfecting Your Pitch.
 

This is a classic paper, published more than 50 years ago.  It compares the economics of out society with what happens in a Prisoner of War Camp.  Amazingly, the POW Camp seems to be an accurate model of the society in large!

"After allowance has been made for abnormal circumstances, the social institutions, ideas and habits of groups in the outside world are to be found reflected in a Prisoner of War Camp. It is an unusual but a vital society. "

Read the full article at Economics of POW Camp.

There has been quite a bit of discussion around the article by Anita Elberse, a professor at Harvard Business School, on the Long Tail theory and its validity: "She focused on the music and home-video industries--two markets that Anderson and others frequently hold up as examples of the long tail in action--reviewing sales data from Nielsen SoundScan, Nielsen VideoScan, the online music service Rhapsody, and the Australian DVD-by-mail service Quickflix. What she found may surprise you: Blockbusters are capturing even more of the market than they used to, and consumers in the tail don't really like niche products much."

I did not post anything here until I got a chance to read the whole article for myself (it's six pages long and can be found at Should You Invest in the Long Tail?) and now that I've read it I think it has some very interesting valid points, although in my opinion it does not invalidate the Long Tail theroy.  Like many other things in life, it boils down to interpretations.  I think both the Long Tail theory and Elberse's thoughts are important when one is thinking about a market, and they are not contradictory.  To understand this better, it's important to read Anderson's response (although it's a bit light), and more importantly a comment posted underneath it by Ali Partovi, founder of iLike.  Partovi's observation is very interesting.

Also, Elberse refers to McPhee's Thoey of Exposure in her article, which I think deservers to be noticed and is a great descirption of mass consumer behavior.  This is one of the areas where I think Anderon's conclusion on taste for niche products is wrong and Elberse's idea (i.e., McPhee's) is closer to reality in large.

This one is cool!  You have to see it for yourself.  Welcome to the Interactive Linux kernel map.