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Archive for April, 2011

How Facebook Can Beat Groupon: By Making Deals Social

Posted in Board Of Intellectual Capital, Investments, Market research, Social Networks, Strategy, Technology, Venture Capital, tagged , , , , , , , , , on April 17, 2011| Leave a Comment »

Article from GigaOm.

“Facebook is planning to roll out a new version of its Groupon-style Deals feature over the next few weeks, starting with a number of cities such as Atlanta, Dallas and San Diego, according to the company’s director of local. Not surprisingly, the new version of these digital coupons plays on the social nature of Facebook and its ability to influence a user’s social graph. While the social network may be late to this particular party, doing that is going to focus attention on one big hole in the Groupon model: namely, the fact that it isn’t really social.

Emily White, a former Google ad exec in charge of the effort, describes in an interview with Internet Retailer how the site will highlight in a user’s news feed if they have indicated interest in a particular deal, and also if they have actually purchased one. Presumably, users will also be able to opt out of this feature, given Facebook’s experiences in the past with ventures such as Beacon — which publicized purchases users made at other websites and was eventually shut down after a firestorm of criticism from privacy advocates. According to White:

The fact that every step of the process — from interacting with the deal, booking the deal and experiencing the deal — is tied to friends makes it more likely that you’ll have a positive experience.

Obviously, a lot of that is Facebook’s spin on why its new service is going to be competitive with Groupon, which has become the 800-pound gorilla of email marketing by expanding rapidly over the past two years into more than 500 markets. The company’s revenues are estimated to be in the $2-billion range on an annualized basis, and it’s said to be planning a public share offering that could value the company at more than $25 billion. What Facebook is to social networking, Groupon has become to email discounting.

That clearly poses some challenges for Facebook, as my colleague Ryan noted recently. But Facebook’s view of its strengths compared to Groupon isn’t just spin. It reinforces that deals from Groupon — and even from competitors such as LivingSocial, which is also valued in the billions of dollars on the private market — aren’t that social. I wrote about one of the drivers behind Google’s reported $6-billion offer for Groupon being the fact that advertising is becoming social, and that is true. And when it comes to being social, Facebook is light years ahead of Groupon or LivingSocial.

It’s true that you can see how many other people have signed up for a deal when you go to the website from the email Groupon sends you, and there are some standard web-sharing buttons that let you post to Twitter or say that you “liked” the deal on Facebook. But that’s still not terribly social. What if you could see these deals — and which of your friends signed up for them — right in your Facebook news feed? The immediacy of that, mixed in with the other social signals and activity you are already looking at, could make you more likely to click on a deal, or even to be aware that one is available. Add the ability to comment on a deal, and it becomes something much more social that anything Groupon offers.

The news feed — the same thing that made Beacon so appealing, but at the same time so disturbing to some — is Facebook’s not-so-secret weapon, and the new version of Deals is clearly going to take advantage of that in a way it hasn’t before. Competing with a $2-billion monster is not going to be easy, even for Facebook, and signing deals with retailers is one area where the size and scale of Groupon represents a fairly compelling competitive advantage. But Facebook has the news feed and the social graph, and if advertising really is becoming social, that is a very powerful force indeed.”

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The End: Cisco Shuts Down Flip, a $590 Million Mistake

Posted in Board Of Intellectual Capital, Business models, Distressed IP, Economy, Gerbsman Partners, Investments, Market research, Strategy, tagged , , , , , , , , , , , , on April 14, 2011| Leave a Comment »

Article from GigaOm.

“Cisco is giving up on its barely two-year-old $590 million purchase of Pure Digital Technologies, announcing today that it is closing its Flip business unit and cutting 550 employees as part of a larger restructuring. The move comes after clear signs that the outsized deal was not paying off for the technology giant, which is in the midst of refocusing its business on its core networking business.

Cisco said it will close the Flip business, but will continue to support current Flipshare customers who upload and share media to the web. Cisco said it will also refocus its Home Networking business to make it more profitable and connected to the company’s networking infrastructure. It will also move Umi, its consumer Telepresence, into the business Telepresence line and sell it through an enterprise and service provider go-to-market model.

“We are making key, targeted moves as we align operations in support of our network-centric platform strategy,” CEO John Chambers said in a statement. “As we move forward, our consumer efforts will focus on how we help our enterprise and service provider customers optimize and expand their offerings for consumers, and help ensure the network’s ability to deliver on those offerings.”

The closure of the Flip unit comes a couple months after former Pure Digital CEO Jonathan Kaplan left Cisco, prompting questions about the direction of the Flip line of video cameras. Cisco bought Pure in March of 2009, saying the purchase was about extending its presence into the consumer electronics business. The company was also looking to use Pure’s smarts in simple consumer electronics design to rework its home networking business. While the deal has helped Cisco create a new line of more consumer friendly home routers, it didn’t really change the company much, a task that Om mentioned recently is incredibly hard for large companies. And it hasn’t resulted in a big revenue driver in video cam sales.

That’s because while Flip grew fast with its single purpose design, which managed to move millions of units, its continued growth was checked by the rise of smartphones that can increasingly shoot HD video while offering more wireless sharing options, something Flip’s camera’s never included, an irony for a networking company. Another new consumer business, Umi, a home video conferencing product, has also failed to capture a lot of buzz, in part because of its high price. With Kaplan headed toward the door, we speculated that the deal for Pure had turned into a flop.

Now it appears that Cisco is making that conclusion official. CEO John Chambers earlier this month laid out a major reorganization for the company in a memo to employees outlining how the company would refocus on five areas: core routing, switching and services; collaboration; architectures; and video. While Chambers said Cisco would still focus on video, it appears he was not referring to Flip. This deals a major blow to the idea of a single-purpose simple video cam, which may still have a niche place in the market. But while Cisco jettisons Flip, and admits defeat, the move shows the company is clearly serious about retrenching and getting back to basics.”

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Silicon Valley teens new wave of tech innovators

Posted in Board Of Intellectual Capital, tagged , , , , , , , on April 12, 2011| Leave a Comment »

Article from SFGate.

High School Memories, an application on Facebook, lets people share recollections of their teenage years. It might surprise those users to learn that the app’s creator isn’t old enough for high school himself.

Cyrus Pishevar, a 13-year-old from Palo Alto, developed High School Memories after seeing how popular it was for his friends to “tag” photos of one another on the social network.

“The big idea is to make memories a social thing to do,” said Cyrus, who learned entrepreneurship from his dad, the founder of five startups. “When you type in your memories, it speaks more than just pictures can, especially when your friends help you through.”

Cyrus is part of Silicon Valley’s second generation of Web innovators – teenagers who grew up with the Internet and witnessed the rapid ascent of Facebook Inc. and other nearby companies. Raised by technology workers and introduced to computers and business early on, many local youngsters have chosen to build their own apps or start whole companies in lieu of after-school sports or summer camps.

“I was surrounded by tech everyday for so long that I gained a natural interest for it,” said Daniel Brusilovsky, an 18-year-old from San Mateo, whose upbringing by a software-manager father and Oracle Corp. veteran mother led him to found two startups before he was old enough to vote.

Fewer skills needed

It’s easier for teens to become Web entrepreneurs these days because writing software is cheaper and simpler, said Daniel Gross, the 19-year-old founder of Internet-search startup Greplin Inc., based in San Francisco.

“The tools require less expert knowledge,” Gross said. “Building a Facebook app doesn’t require you to have four years of computer science.”

Mentoring programs also have sprung up to help young entrepreneurs build their companies. In September, Facebook investor Peter Thiel pledged to make 20 grants of as much as $100,000 apiece to teenagers with startup ideas. He says he wants teens to pursue their dreams, rather than college, because traditional education steers them away from entrepreneurship and into steady jobs.

“We need to encourage young Americans to take more risks,” Thiel, who co-founded PayPal Inc. and now runs the investment firm Clarium Capital Management, said at the time.

‘Child soldiers’

Such efforts have drawn criticism for encouraging students to drop out, in the same way that a dream of playing in the NBA might prevent some kids from staying in school.

Pursuing entrepreneurship shouldn’t come before an education, said Vivek Wadhwa, a visiting scholar at UC Berkeley’s School of Information.

“These are Silicon Valley’s child soldiers,” he said. “The vast majority of them will fail miserably. Then they’ve screwed up their careers.”

Facebook CEO Mark Zuckerberg didn’t drop out of Harvard until his company was gaining traction, when he was 20. That’s a model that young people should heed, Wadhwa said.

“If by any chance you happen to achieve the success that Zuckerberg did, then drop out of school,” he said. “But don’t screw up your education until you’ve done that.”

Board meetings

For Cyrus, who was present at his dad’s company meetings since he was a toddler, inspiration came well before he had to make decisions about college.

“He used to crawl between board members’ legs when I had meetings at home,” said Pishevar, who helped found Web development software maker WebOS Inc., mobile-app startup Social Gaming Network and three other companies, all since 1997.

By the time he was 6, Cyrus was learning how to use a computer and giving feedback to his dad on apps. Last year, Pishevar introduced him to Zuckerberg, now 26, at a movie screening in Palo Alto. Around that time, the preteen was coming up with his idea for a Facebook app.

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Internet/Digital Media and Software Industries Silicon Valley and Seattle 2010

Posted in Board Of Intellectual Capital, Investments, Strategy, Technology, Venture Capital, tagged , , , , , , on April 8, 2011| Leave a Comment »

Article from Fenwick and West.

“In 2002, Fenwick & West began publishing its Silicon Valley Venture Capital Survey. The survey was published in response to dramatic changes in the venture capital financing environment resulting from the bursting of the “dot-com bubble”, and our belief that there was a need for an objective analysis of how the venture capital environment had changed. The survey was well received and we have continued to publish it – a copy of the most recent survey is available here.
We believe that in recent years there has been a significant change in the angel/seed financing environment primarily in the internet/digital media and software industries. We believe these changes are due to the following factors:

The nature of these industries is such that products can be developed and introduced to the market quicker and with less resources than other industries. The development of new technologies has further accelerated the speed, and reduced the resources needed, to introduce new products in these industries.

These industries have now been around for at least a decade, if not longer, and as such a generation of successful entrepreneurs having the expertise, financial resources and interest is now available to assist and finance the current generation of entrepreneurs.
Venture capital has become harder to obtain, with venture capital investment in the U.S. overall declining from $29.9 billion in 2007 to $26.2 billion in 2010, and with investment in venture funds by limited partners declining even more precipitously, with $11.6 billion invested in 2010, the lowest amount since 2003, according to Dow Jones VentureSource.

As a result of these factors we believe that there have been the following changes in the angel/seed financing environment:

  • There has been a shift in the composition of investors, from largely friends and family, wealthy individuals and a few organized groups, to a larger percentage of professional angels, seed funds and venture capital funds willing to invest smaller amounts of capital.
  • The amounts raised in angel/seed financings have increased, and can exceed $1 million. Investors in these financings also have deeper pockets with the ability to participate in later rounds.
  • The terms of these financings have become more sophisticated and arms length, as investors are more likely to be true third parties investing larger sums, with an interest in being more active in the oversight of their investment.

In light of the increasing importance of angel/seed financings, and a desire to make objective information about such financings available to the community at large, we undertook a survey of 52 internet/digital media and software industry companies that obtained angel/seed financing[1] in 2010 in the Silicon Valley and Seattle markets.”

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Will Amazon cloud service rain on Apple’s parade?

Posted in Board Of Intellectual Capital, Business models, Market research, tagged , , , , , , , , , , , , , , on April 5, 2011| Leave a Comment »

Article from SFGate.

“Here’s how effortless it is to move your digital music collection from Apple’s iTunes software to Amazon’s new Cloud Drive music service:

1. Visit Amazon.com, enter your user name and password, and find the link that says “upload files.”

2. Agree to the terms of service and solve a Captcha, one of those tricky image-recognition puzzles that prove you’re an human being.

3. Download Amazon’s MP3 uploader software, which scans the music on your hard drive.

4. Select about 1,000 of the gazillion songs you own and mark them for upload.

5. Wait around six hours for the upload to finish.

6. Download Amazon’s separate Cloud Player app for Android to stream that music to your phone, or use a Web browser to listen to it from any PC.

Sounds easy, right?

Welcome to the awkward stage of the digital music revolution. Online song sales have stagnated, depriving the endangered music industry of one of its last remaining lifelines. Yet digital music continues to be a vital battleground for Google, Apple and Amazon to try to lure users to their other devices and online offerings.

Now, Jeff Bezos & Co. have boldly tried to leapfrog Google and Apple in the quest to liberate people from the decade-old practice of buying and downloading digital songs to a computer and then manually transferring them between devices.

The idea behind “cloud music” is to let people stream their music collections from the Web to any computer or device. Analysts believe such services are inevitable – even if Amazon stumbles.

“Having access to your music on all your devices has to be the starting point of any next-generation music service and product,” said Mark Mulligan, an analyst at Forrester Research.

That’s the vision, but right now, the convoluted uploading process is the result of key trade-offs Amazon made to get to the cloud music market before its rivals.

Licensing deals

First, major labels want new licensing arrangements for cloud services and a bigger cut of the online music pie. Their demands have slowed down the introduction of cloud music features, and Amazon designed its service without their permission, instigating a wave of complaints from Sony Music Entertainment and Warner Music Group.

“We’re disappointed by their decision to launch without a license,” said Brian Garrity, a spokesman for Sony.

Bill Carr, Amazon’s vice president for music and movies, claims Amazon “highly values” its relationship with the labels, but compares uploading songs to the legally harmless practice of attaching a hard drive to your PC and transferring music files to it.

Amazon primarily designed a service to comply with copyright laws – not to make shifting music to the cloud seamless. Amazon requires users to upload their own copies of songs that it could more easily supply from its digital store. Services like MyPlay and Mp3tunes have tried the same basic approach over the years. None attracted many users.

Amazon, which controls only about 13 percent of the digital music market despite four years of battling iTunes, apparently believes it has unique advantages in the coming cloud music battle.

Thanks to the massive server capacity backing its successful cloud computing business, in which it rents computing power to other companies, Amazon can offer its streaming music users 5 gigabytes of music storage for free, or 20 GB if they buy just one album from Amazon. The company is also prominently advertising the service on its home page.

“We observed from our other digital media businesses that buy-once, play-anywhere really resonates with consumers,” Carr said.

The service Amazon released last week has been criticized for being difficult to use and incompatible with Apple iPads and iPhones.

Not social

“There’s nothing social about it. How can you launch anything on the Web today that doesn’t integrate social?” said David Pakman, the former chief executive of eMusic and a partner at Palo Alto venture capital firm Venrock.

David Hyman, founder of Berkeley music subscription service Mog, says of Amazon’s cloud offering: “It’s a stepping-stone. This is Amazon putting its feet in and testing the waters.”

So what does the future of cloud music look like? Google, Apple or Amazon might finally get the major-label licenses that will allow them to make storing music collections in the cloud seamless for users. (Instead of uploading each song, the service could simply scan the names of songs in a collection and reproduce them in the cloud.) Or subscription music services such as Mog, Rdio and Rhapsody that offer unlimited access to a broad catalog of Web-based music for a monthly fee may find the mainstream success that has long eluded them.

Such an unlimited cloud music offering may be Amazon’s ultimate goal; Carr doesn’t rule out developing a music subscription service and offering it for free to members of Amazon Prime.

“This is an exciting Day One,” he said of Cloud Drive. “We always have an open mind.”

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