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Could consumer ignorance hurt mobile advertising?

Posted in Board Of Intellectual Capital, internet, Investments, Market research, Mobile, mobile 2.0, Mobile Phone Usage, Strategy, Technology, Wireless, Wireless 2.0, tagged , , , , , , , , , on July 6, 2010| Leave a Comment »

By Tony Fish – member of Gerbsman Partners Board of Intellectual and principal at AMF Ventures. Visit his blog at: http://blog.mydigitalfootprint.com

Summary

Virtually unlimited mobile usage tariffs means that advertising is perceived as free from the users perspective, as there is no additional cost of bandwidth to the user.  These tariffs have lead to an unprecedented growth in mobile applications and the emergence of  a new eco-system. However,  “all you can eat” pricing models for mobile have become increasingly risky with the advent of new devices and operating systems from Apple and Google.  With the prospect of a return to a pay per something, users may change their view of “free” advertising and this could lead to a change in behaviour, as they will be un-willing to pay for the bandwidth for the advert.  Whilst this may seam ridiculous to anyone who understands, explaining to the user they have the wrong perception or that this is not the reason for a significant monthly bill, could be difficult.  This viewpoint therefore opens the debate; “Could some selfish business decisions be destroying the mobile eco-system that has just been created and what scenarios are worth considering?”

Unlimited Growth

We have all benefitted from the introduction of unlimited mobile tariffs.  Voice, SMS and data usage has exploded.  Economically it made sense to the operator as they had spare capacity and in reality “unlimited” has caps but these caps are set so high that a user was unlikely to reach them.

Mobiles (smart phones) have evolved and today, web site and applications (inc games) for mobile are now built with an advertising model in mind and with this has come the download requirements of, in some simple cases, banner ads to some thing complex such as video and multimedia.  With network improvement, the ability to deliver a near web experience, advances in connection management and now the iPad, users can find it easy to get close to, or pass their “unlimited” data caps.

Mobile applications driven by adverts work and the application method of delivery made up for a number of early shortfalls in network constraints and mobile web browser capability. However, due to the improved experience and performance of the mobile there are now less reasons for a Brand to have a specific mobile version.  However, in this move adverts are also served in full form from the web to the mobile.  This transition will become more important as Apple looks to force applications to use their own iAd serving technology and analytics.  These forced change are likely to speed up the migration from mobile specific application to webapp – just adding a web address and icon to the mobile desktop and also removes the dependence on apps stores as the controlling point.

So what has changed?

Apple launched OS4 with a 7th temple, which is the ability to deliver a fabulous advertising experience as “most of it sucks”.  The move is to deliver emotion and interactivity as this will help the developer community who want to build advertising revenues in exchange for free apps.  This advertising experience does come at a cost – bandwidth. OS4 also introduces background processing (multitasking), “yippee!” says the developer. However this means that the phone can hack thought the battery really quickly and chat to the network constantly.  Pushed updates become streaming.

Changes to the OS and how much data phones require for a great experience mean that the unlimited data package become very attractive to the user and advertiser as they don’t care about bandwidth, developers love it as they can deliver the real time applications and services they want for mobile. However, for the operators who are already struggling with capacity, this becomes a real headache and introduces value chain conflicts.

Implications

If the operators choose, and the evidence is currently pointing to this fact, to remove from the market unlimited packages, or such a high cap it is perceived as unlimited and lean back towards some form of pay-by-how-much-you-eat model then there could be some significant changes to the market as the users, device and applications guys try to reduce a swing to a doom loop scenario.

Here’s the crunch.  For those reading this we can find arguments why all of the above is not a concern, however, the issue may not be the reality of the situation we find ourselves in, but from the user perception, it could be very real.  If the user believes that there is a cost, irrespective of reality; they may change behaviour!

The simple newspaper headline that reads “Your paying for advertising” is difficult to counter with the argument that informs a user how big an advert is in bytes and that there is a trade for free services.  If the reason for adverts is interactivity and engagement then a technical explanation may not be that useful or that someone is exploiting your data to sell you more.

Behavioural or targeted adverting depends at some level on understanding the user which is an output from the analysis their data – My Digital Footprint.  If users find that the real monetary cost of sharing that data is too high, it kills the input.  If users find that the real monetary cost of engaging with ads is too high, it kills the value.

Given that eco-systems require trusted players who can balance risk and reward together and be reliant on complex inter-dependences; mobile is no different.  However, it would appear that some of the players are trying to play for themselves rather than the community.

Scenarios to ponder over coffee

  1. Restrictive – in this scenario the user decides to restrict their use and applications to focus on a few that are a priority and will not experiment or discover.  This could have a significant impact on social media tools and applications.
  2. Blockers – in this scenario the user decides that they are unwilling to pay for the bandwidth and introduces a blocker service to prevent their costly bandwidth being used.  This in turn destroys the fee advertising model and an outcome could be that the user ends up paying for applications.
  3. Selective – in this scenario the operator decides to become selective about which handsets can have unlimited (capped) data plans and which handsets are forced to have a PAYG data pricing model.  This forces users into a choice and device manufactures start to work with the operators to produce devices in tune with the network to gain a competitive advantage.
  4. Side-Load – in this scenario PAYG could lead to more applications being downloaded by sideloading on the PC or by WiFi. If so, developers could be affected in ways that are hard to predict. But it may affect apps being advertised on the device.
  5. Doom loop – in this scenario the operator changes the pricing and this in turn creates all the dis-benefits for the advertisers, device guys, applications developers and users.  Mobile slows and mobile operator valuations dive.
  6. Intelligence – in this scenario the middleware and platform companies work with the operators and seek out methods and processes to compress, reduce, focus, profile and select data and services that should use the limited wireless network, that is expensive.  Can data/ ads be cashed locally on the device and selected as needed or side load them using wifi or other alternative networks, or put on hold until bandwidth cost is not an issue.
  7. Advertising pays for the bandwidth – a somewhat difficult scenario to comprehend, but in this scenario the advertiser takes on the cost of the bandwidth.  However this is full of complex conflicts such as – I want to deliver the best ad, but it costs to much.
  8. No change – in reality – this is not a scenario.

Reality check

Those reading this know that ‘most’ mobile advertising is very bandwidth lean, as it a blend of:-

i)  an invitation with the consumer to interact, normally in the form of a banner. The reality being that for most consumers most of the time, this is likely to be negligible in terms of cost across a month.

ii)  a landing page, which they land on if they click on a banner – again negligible.

iii)  call to action at the landing page, which unless it involves rich media (eg video), is also likely to be small in terms of bandwidth

We know that users respond differently to ads and services on a mobile to the web but it is possible that the Apple OS4 interruption of advertising will be heavier on bandwidth, however, over 50% of iPhone ads are viewed over WiFi (2010) probably driven by speed as opposed to cost reasons. One could postulate that this trend would therefore be accelerated with the re-introduction of pay-as-you-go pricing!

All that said, users are users and their perception is how we need to live our business life – from their view point not ours.  Reflecting on the original question; “could consumer ignorance hurt mobile advertising?”, one could say this is the wrong question and it should be “is the mobile eco-system strong enough to defend itself against selfish desires of certain key players?”

If you would like to chat about the opportunities that digital footprint data brings, especially from the perspective of mobile and real time feedback, please contact me at tony.fish@amfventures.com. The book is free on line at http://www.mydigitalfootprint.com/ or you can buy it direct from the publisher at the web site. There is also a summary and a eReader/ Kindle version.

We hope that our Viewpoint improves awareness, raises questions and promotes deliberation over coffee. We will respond to e-mail, text, twitter or blog comments. http://blog.mydigitalfootprint.com

Kind regards,

Tony Fish

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Andreessen Horowitz To Win The Foursquare Investor Badge

Posted in Board Of Intellectual Capital, boic, Business models, Economy, FaceBook, google, Investments, Market research, Microsoft, mobile 2.0, Social Networks, Strategy, Technology, Venture Capital, Web 2.0, Wireless 2.0, tagged , , , , , , , , , , , , , , , , on June 27, 2010| Leave a Comment »

Here is a good Techcrunch article about Foursquare.

“A months long fundraising process for Foursquare is in its last stages, we’ve heard from multiple sources, and Andreessen Horowitz looks to be preparing to check-in to Foursquare to take an investor badge.

The company has delayed committing to new venture capital as they considered buyout offers – negotiations went deep with both Yahoo and Facebook, and possibly Microsoft. The Yahoo discussions ended weeks ago, and Facebook passed on an acquisition earlier this week, we’ve heard.

That means the company is raising that big new round of financing. And a slew of venture capitalists, including Accel Partners, Andreessen Horowitz, Khosla Ventures, Redpoint Ventures, Spark Capital and First Round Capital were all rumored to competing heavily for inclusion despite the $80 million or so valuation, say our sources.

Andreessen Horowitz, despite rumors that they were pulling out of discussions with the company weeks ago over concerns that too much information was leaking to the press, is the last venture capitalist standing. The fact that founding partner Marc Andreessen is on the board of directors of Facebook, a key partner or competitor of Foursquare, may be the factor that put them over the top.

Existing investors OATV and Union Square Ventures will also participate heavily in the new round, we’ve heard. In the meantime they’ve likely already loaned additional capital to the company.”

Click here to read the original post.

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Viacom copyright suit against YouTube dismissed

Posted in Board Of Intellectual Capital, internet, Market research, Marketing, mobile 2.0, Strategy, Technology, Web 2.0, tagged , , , , , , , , , on June 24, 2010| Leave a Comment »

Here is an article from SF Gate.

“A federal judge dismissed Viacom Inc.’s landmark copyright lawsuit against YouTube on Wednesday, a major victory that potentially reinforces legal protections for a wide array of online companies.

The decision doesn’t necessarily spell the end of a legal drama that’s already played out for more than three years, because the New York media giant promptly promised to appeal the decision. If ultimately upheld, it may also make it more difficult for content creators to protect their work in the digital era.

The $1 billion suit was widely viewed as a test case for the safe harbor provisions of the Digital Millennium Copyright Act of 1998. The law states that Internet sites, hosts and providers generally aren’t legally liable for the behavior of their users, as long as they remove infringing or illegal content when properly notified.

In this case, YouTube users allegedly uploaded tens of thousands of unauthorized copyrighted clips from Viacom-owned television shows like “The Colbert Report” and “South Park.” The owner of MTV and Comedy Central sued YouTube in March 2007, arguing that the San Bruno company knew the clips were posted without permission and failed to take them down.

In court filings, Viacom argued that YouTube fueled its meteoric rise by fostering piracy, and cited a series of e-mails that suggested its co-founders were well aware of copyrighted material on the site. Largely because of YouTube’s rapid growth, Google Inc. bought the company less than a year after it was formed for $1.65 billion.

Obligations met

In the 30-page summary judgment issued Wednesday, however, Judge Louis Stanton of the U.S. District Court for the Southern District of New York rejected Viacom’s argument that YouTube had an obligation to remove material because of a “general awareness” that unauthorized content was posted on its site. He said the protections of the digital copyright act aren’t dependent on a publisher monitoring its service, as long as it responds appropriately when notified of copyrighted content by rights holders.

He added that YouTube had met these obligations, noting that when Viacom asked that it take down about 100,000 videos in early 2007, virtually all of them were removed by the next business day.

In granting YouTube’s motion for summary judgment, Stanton essentially said Viacom’s legal arguments were too weak for a trial to proceed.

“In the main, it’s a victory for innovation,” said Jennifer Urban, director of the Samuelson Law, Technology & Public Policy Clinic at UC Berkeley. “It’s a victory for the companies that are creating new kinds of technologies … that allow people to speak and create on the Internet.”

She added that it clearly places the onus on content owners to track and request the removal of unauthorized uses of their works, which is precisely what worries many media companies. Monitoring the Internet for infringing uses of large catalogs of movies, television shows and music is an enormous and never-ending challenge.

“We believe that this ruling by the lower court is fundamentally flawed and contrary to the language of the Digital Millennium Copyright Act, the intent of Congress, and the views of the Supreme Court as expressed in its most recent decisions,” Viacom said. “We intend to seek to have these issues before the U.S. Court of Appeals for the Second Circuit as soon as possible.”

Content partnerships

Since the case was filed, YouTube has entered a series of partnerships with major content companies. It appeased them largely by building a sophisticated tool that detects and identifies copyrighted media.

The Viacom suit covered content on the site only before the Content ID tool was put in place in late 2007. The media company participated in tests of the system, providing thousands of content files, according to documents that were unsealed in the course of the lawsuit.”

Read more here.

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Tech firms making S.F. new home

Posted in Board Of Intellectual Capital, Community, Economy, internet, Investments, Market research, mobile 2.0, Social Networks, Technology, Web 2.0, Wireless 2.0, tagged , , , , , , , , , , , , , , , on June 21, 2010| Leave a Comment »

Here is a SF gate story that talks about high-tech growth.

“The technology industry is playing the white knight of San Francisco’s struggling office market, as startups and growing companies ink deals and scour the market for space emptied out by the financial meltdown.

Many of the tenants are swelling homegrown businesses like Twitter, while others are relocating from Silicon Valley or outside the Bay Area. As of June 15, 83 technology companies were in the market, seeking 1.5 million square feet of space, up 51 percent since the financial crash in fall 2008, according to brokerage firm Jones Lang LaSalle, which regularly tracks the market.

To be sure, that demand alone won’t turn around a market facing more than 13 million square feet of total vacancy, according to a first-quarter research report from Cassidy Turley BT Commercial. But it’s a big step in the right direction for San Francisco’s office market and employment.

“The greatest areas of job growth in San Francisco and the drivers for economic activity across a whole host of related sectors will come from those innovative industries,” said Michael Cohen, director of the mayor’s office of economic development.

One of the largest potential deals in the market is Zynga, the maker of popular social-networking games like FarmVille and Mafia Wars. The company is looking for anywhere from 150,000 square feet to 300,000 square feet of space, according to various industry sources, who asked to remain anonymous because disclosure of such information could affect their business.

Zynga was on the verge of signing a lease for approximately 140,000 square feet last fall, but that deal fell apart.

“Zynga doesn’t have an update on our expansion plans right now,” a spokeswoman said in an e-mail response to a Chronicle inquiry.

Expansion

Twitter, the popular microblogging service, expanded its San Francisco space by nearly six times in the past year. It had been looking for still more space, as much as an additional 100,000 square feet, but that effort seems to have gone quiet, sources say.

An especially encouraging trend for San Francisco business boosters, who have long lamented the exodus of companies to surrounding regions, is the relocation of a handful of Silicon Valley firms to the city in recent months.

Industry blog TechCrunch and video-streaming site MetaCafe moved up from Palo Alto, while Webcasting service Ustream and tech-consulting firm Encover Inc. arrived from Mountain View. Mobile application company Booyah Inc., also of Palo Alto, recently signed a lease to shift its headquarters to San Francisco.

In addition, gaming companies like Playdom Inc. and Playfish opened satellite offices in San Francisco, and Yammer Inc. moved to the city from Los Angeles. Meanwhile, there are a handful of out-of-state, and even out-of-country, companies touring space in the market right now, sources say.

Real estate and technology observers believe San Francisco is becoming a more attractive place to start a company or move to for a variety of reasons, including: South of Market rents that are about half of Palo Alto’s right now, the desire to cluster near success stories like Zynga and Twitter and the broader shift to the Web 2.0 world.

As Internet companies become as focused on social media and entertainment as they are on underlying technology, they want to locate near a different set of partners, customers and talent pools, several executives said.

It’s all about layering

“Tech is still the core of what we do, but you’ve got to add layers on top of this,” said David Rice, chief operating officer of MetaCafe Inc.

The company’s new address, at 128 King St., with exposed brick and a view of AT&T Park that puts their previous business-park space to shame, made it easier to tap into marketing, media and advertising expertise in the city, he said.

Other companies’ leaders say they opted for San Francisco because that’s where today’s engineering talent wants to be as well.

When David Sacks, chief executive of Yammer, asked his developers whether they should relocate the microblogging service for businesses to Palo Alto or San Francisco, the latter won hands down. This represents a distinct shift from a decade earlier when he was chief operating officer of PayPal in Palo Alto.

“There’s a lot more engineering talent living in San Francisco now,” he said. “The balance of power may have shifted.”

Web 2.0 firms also don’t need the massive research and development facilities required by the computer manufacturers and chipmakers that gave rise to Silicon Valley.

“Companies like Twitter can have incredible reach with a relatively small workforce,” said Kelly Pretzer, director of new media for the mayor’s office of economic development. “San Francisco has been able to complement that development in the industry nicely.”

Read more here.

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The New Blueprint for Successful VC Funding

Posted in Board Of Intellectual Capital, Economy, Gerbsman Partners, internet, Investments, Market research, Strategy, Technology, Venture Capital, tagged , , , , , , , , , , , , , , , , on June 11, 2010| Leave a Comment »

Here is a good read from Yahoo.

“Jeffrey Bussgang likes crazy entrepreneurs. Twitter’s Jack Dorsey, LinkedIn’s Reid Hoffman and Sitrris Pharmaceuticals’ Dr. Christoph Westphal all share what Bussgang, a partner with Boston-based Flybridge Capital Partners, calls paranoid optimism. He defines it as an almost-arrogant belief in a world-changing idea mixed with a healthy fear of competitors. “You rarely see those two words together, which is why I like them,” Bussgang says. “They really distill the essence of the great entrepreneurs.”

He should know. Before he was a venture capitalist, Bussgang co-founded Upromise, now part of Sallie Mae and the nation’s largest private source of college funding contributions. In his new book, Mastering the VC Game, Bussgang offers a blueprint for entrepreneurs hoping to get funded: Be a paranoid optimist.

But even that may not be enough, given the state of today’s venture capital market. Total VC dollars invested fell 39 percent between the first quarter of 2008, before the recession began, and the first three months of 2010, according to data supplied by PricewaterhouseCoopers and the National Venture Capital Association.

VC firms have gone tight-fisted, and limited partners–the investors who supply capital to private equity funds–are skittish, afraid of being burned again after suffering a decade of negative returns. Mix in a contentious debate over the taxability of profits derived from successful venture capital investments, otherwise known as carried interest, and entrepreneurs are being forced to clear hurdles not seen since the 1980s, says Roger Novak, a partner with Novak Biddle Venture Partners in Bethesda, Md. “I think we’re going back to the old days, and better companies are going to be born.”

In other words, venture capitalists are being more discerning about where and with whom they invest. Here are three ways to make sure your business passes the sniff test.

  1. Create the Market
    Much of that time was spent planning and talking with prospects; the founders didn’t want to build a solution before defining the problem, which they believed was big. Advertising affiliate networks were losing revenue each time a customer clicked on a digital ad but completed the transaction by phone. RingRevenue would fill the gap with technology, but only if affiliates could agree on the concept they had in mind.

    “Before we were going to commit all of our time, career, dollars and resources to it, it was important to [know] enough about the customers and their needs that we could feel good that we were getting it right the first time,” Spievak says.

    Each meeting brought changes to the design. But by asking prospective customers for feedback and then building to spec, RingRevenue created its own market. “We wanted to make sure that we understood the formula for growth, that we had satisfied customers and a scalable model,” Spievak says. Investors were impressed. RingRevenue closed a $3.5 million initial round of venture capital funding in June of 2009.

  2. Get a Big Idea
    If there’s a model for the sort of crazy entrepreneurs Bussgang admires, it might be the team at PhoneHalo. The company’s wireless technology plugs into a smartphone, making it a hub for preventing computers, iPads and other networked equipment from getting lost or left behind. But the vision for what it could be is much bigger.

    “Imagine that everything that’s valuable to you in your life is always connected to the network. And imagine down the road if every item in your refrigerator was somehow talking to the network so when you were low on milk, if it goes through PhoneHalo’s infrastructure, it can update a to-do list right as you’re in the grocery store, all on the fly,” says CEO Jacques Habra. Crazy? Sure, but according to Bussgang, the ability to press forth in the face of naysayers is what makes a great entrepreneur.

    PhoneHalo was still shopping for venture capital funding as of this writing. And yet Habra and co-founders Christian Smith and Chris Herbert are confident they’ll eventually find the right VC partner.

    “Since this is our baby, it’s easy to feel rejected and bruised by a no,” Habra says. “In reality, that time with an investor is hugely valuable: If you ask the right questions and apply the feedback to your business unemotionally, you make the company that much more investable and likely to succeed.”

  3. Work Your Network
    Finally, the venture capitalist who doesn’t know you isn’t likely to partner with you. “They see so many referred-in deals that it just doesn’t make sense for them to spend much time on the ones that come in over the transom,” says Spievak.

    He and his team were approached by potential venture capital investors in late 2008, during the height of a global financial meltdown, in part because backers of his earlier venture, publicly traded CallWave, earned back 30 times their investment following a 2004 public offering.”

Read more here.

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