Archive for the ‘Web/Tech’ Category

The Best of Times

by Eleanor Haas

What’s great?  The opportunity.  What’s not so great?  The uncertainty.  But then, that’s what makes it great!  So concluded five wise, wise VCs and one very
wise entrepreneur at today’s Digital Breakfast: Venture Capital Forecast 2010.

What does today’s
environment feel like? 

·        
In terms of
technology disruption, 1987.  In terms of
the economy, it’s uncharted territory.

·         
Q2 of 03.  A flattish movement up.  A great time for financial technology.

·         
Late 02/early
03 in terms of the opportunity, with the full contraction of VC yet to come.  Dramatic changes in the cost to launch an
Internet business and how you build the company.  The use of real-time media and social media
to build traffic is much less expensive than search.

 1994-1995 in
terms of the opportunity and the low cost of entry.

Some highlights:

VCs

·         
VCs have
started intersecting with angels and finding they can get further with a
company for less money and then take a smaller exit.  They are also co-investing with other VC
funds.  Some VCs are doing investments as
small as $100K and $250K. This enables them to do smaller exits, which in turn
has implications for the funding model. 
If new investors come in for later rounds, they pay a higher price and
cannot make money with the smaller exits. 
As a result, their interest is no longer aligned with that of the
entrepreneur and early investors.  So, it’s
best for the investor group to remain constant.

·         
The VC
dilemma:  the line between the seed round
and A round Is blurred because of the speed with which things can be done.  Some VCs have moved their fund size down in
order to make efficient use of capital..

Trends of the Moment

·         
Entrepreneurs
are building low-cost web-enabled businesses as vertical layers on top of
Facebook.   The network effect of
Facebook makes it essential that Facebook or a Facebook widget be a component.  Business-to-business sites all have Facebook Connect
today.  You can build businesses like
GolfTripGenius for a few thousand dollars.

·         
Entrepreneurs
have the opportunity to build good technology-enabled businesses – inexpensive
to launch and profitable for the entrepreneur – but they may not necessarily be
investable.

·         
LAMP-plus
infrastructure for hardware with Facebook has brought web site start-up costs
dramatically down.

·         
What’s
important at this moment is “clever” technology as opposed to “proprietary”
technology – technology that’s not necessarily costly and represents something
done in an interesting way with a value proposition.  The package that creates value consists of traction
plus the technology plus the skills of the entrepreneur.

·          
Marketing is as
important as technology – the ability to get customers. 

·         
The value of
patents is lower because they’re too hard to value and take too long to become
effective.

 
Mobile is a
channel, not an investable vertical.  It
will be part of everything, not just apps that are location-based.

The Digital Breakfast was organized
by Gotham Media Ventures. The moderator was Gene DeRose, House Party.  The VCs were Charlie Federman Crossbar
Capital; Howard Morgan, First Round Capital; Lawrence Lenihan Jr., FirstMark
Capital; David Pakman, Venrock and Daniel Schults, DFJ Gotham Ventures.

High-End Computing for General Purposes Becomes an Eco-Friendly Possibility

By Eleanor Haas

How quickly both information
technology and social values are advancing! Bringing supercomputing capabilities down to a general-purpose level where
they can serve consumers, not just advanced scientists – as a new IBM product
does – is a giant leap forward in our ability to access, analyze and manage massive
amounts of information efficiently and cost-effectively. But that alone is no longer sufficient. Today
our society requires that this be done in ways that minimize climate change
effects. Greentech is not just a
fad. It’s here to stay.

The new IBM iDataPlex
line of server products does both. It
seems to me to represent an historic break-through: It enables cloud computing that supports Web
2.0 applications as well as the high performance computing (HPC) requirements
of life science researchers, engineers, petroleum exploration, financial
services, and government and academic research. But perhaps the most important attribute of the new hardware design is
that it requires 40 percent less electrical power to run than alternatives with
comparable computing power and can eliminate air conditioning when outfitted
with a water-cooled wall.

As Web sites evolve, they
add features that impose new demands on the infrastructure and challenge
performance standards critical to the user experience. Web 2.0 applications empower users to do a
great deal more than just retrieve information. Now users can activate interactive features inherent in Web 1.0 at a
higher level and exercise new degrees of control over data, even add value to
applications as they use them. These new
capabilities drive enterprises to scale capacity in a secure, reliable and
cost-effective way in order to deliver a satisfactory user experience. Cloud computing is one of the most important
new concepts that is emerging to make this possible.

Cloud computing is
computing done at a remote location, which is to say, out in the clouds. It is computing on a massive scale in terms
of both computing power and the range of computing tasks.

Supercomputers were mainframes
invented to enable advanced scientists to handle enormously complex
calculations. Then Google and others
started locating the data storage and processing power of supercomputers on
vast banks of computer servers in remote data centers – Google called these
distant servers “the cloud” – instead
of on mainframe computers or a network of multiple processors on the Google
campus. And Amazon and others started providing
cloud computing services – remote
computing services, also called web services – delivered over the Internet. And so cloud computing was born.

Cloud computing is hugely important but still nascent. A recent report
by Forrester Research said in
its executive summary that: "Cloud computing is a new IT outsourcing model
that doesn’t yet meet the criteria of enterprise IT and isn’t supported by most
of the key corporate vendors.  It’s wildly popular with startups, exactly
fits the way small businesses like to buy things, and has the potential to
completely upend IT as we know it.”

Cloud computing represents a fundamental shift in how we
handle information, according to BusinessWeek, because it enables companies to
write their own programs to run on a cloud provider’s servers. Irving Wladawsky-Berger, Chairman Emeritus,
IBM Academy of Technology and Visiting Professor of Engineering Systems, MIT,
sees two major factors that make cloud computing qualitatively different from
all IT concepts to date: One is massive
scalability. The other is the much
higher quality of experience it can provide for users. “As with the Web in the
mid-‘90s, every enterprise will have to develop its own cloud-like
capabilities, or work closely with partners that do.” he writes on his blog.

But cloud computing can be no more than a vision until
something is done about the data centers on which it relies. In general, today’s data centers can be
described as massive, sprawling and pushing the limits of power and space
available to them. Many have grown
through mergers and acquisitions, with different departments having their own
servers and a proliferation of small and mid-size servers. As a result, they are inefficient, expensive
to operate and have high energy requirements. Worse, they cannot be scaled effectively.

The new IBM iDataPlex system represents a solution, a basis
for the data center of the future. It
reduces the cost per server by approximately 20 percent to 25 per cent by using
off-the-shelf components and open source software, fits 138 percent more
servers in the same floor space and, best of all, as we said, requires 40 percent
less power to run. It is intended both
for enterprise cloud computing initiatives and clouds designed to host Web 2.0
applications.

Not a lot of iDataPlex systems will be sold. The target universe contains only 1,000
prospects, each valued at upwards of $20 million, and each system will be
custom-built. But it’s already clear that cloud computing builds on itself, as
large companies become suppliers for smaller ones. And IBM has the pieces in place to help
customers acquire new data centers conveniently. IBM Global Financing will
offer them lending and leasing opportunities, IBM Global Asset Recovery
Services can manage the disposal of equipment in accordance with environmental
regulations, and IBM will team with third party technology companies to drive a
product ecosystem around iDataPlex..

That’s smart of IBM
because iDataPlex has the markings of a hot product. According to Forrester, “Cloud computing . .
. has all the earmarks of a disruptive innovation: It is enterprise technology packaged to best
fit the needs of small businesses and start-ups – not the enterprise.”
 An eco-friendly cloud computing system.  What a thought!

What do you think about all this?  Where do you see it going?

Some Resources:

http://www-03.ibm.com/press/us/en/pressrelease/23991.wss

http://www-03.ibm.com/systems/x/hardware/idataplex/index.html

             

               
             
 

   

 

 

   

   

   

 

 

   

 

      
               
               
             
 

   

 

 

   

   

PDF documents
Pund-IT Research Report: IBM System x iDataPlex – Enabling Web 2.0 with Internet-Scale Solutions (133 KB)
      
 
Cabot
Partners White Paper: IBM System x iDataPlex: The Newest Economical
Workhorse in the Computing Cloud for Next Generation HPC Data Centers
(1 MB)

Whither Wikis?

By Eleanor
Haas

Wikis, those indispensable
reference resources – Web sites where anyone can add or update content – are
still “cutting edge social media” after nearly 13 years, “with best practices
an evolving target,” says John Blossom, president,
Shore Communications, who organized and moderated a panel on the subject at a
recent SIIA Brown Bag Lunch.

Wikipedia has proven
user-generated content can be very high quality and can be accepted as authoritative and reliable when done
right.  As proof of this, social media sites increasingly come out at top of a Google search. What’s next?  Video and photos are bound to play a greater role as equipment quality
continues to go up and prices to come down.

What the wiki delivers that’s
different from a search engine is “a well-packaged story,” said Michael Sha, co-founder
and co-CEO of Wikinvest, a new wiki, still in beta. That speaks clearly to
their market appeal. Their diversity is an equally clear indicator. The key to their quality control, the primary
topic, varies:

  • Wikipedia, the granddaddy of them all, was founded in 1995. It achieves quality, said Mark Pelligrini, senior editor/contributor, by enabling quality to evolve in real time through policies requiring verifiable information, a neutral point of view, accuracy on a par with the encyclopedia Britannica and peer review. All the filtering is manual.
  • Newsvine, a new kind of news site, does it with an algorithm that causes content to fall away to an archive after 24 hours unless it gets enough votes, said Chris Thomas, top contributor. “Filters catch advertisers and astroturfers – corporations and other vested interests who try to create the appearance of a grassroots net movement,” he continued.            

Content is provided by both professional journalists as well as everyone else to create a comprehensive ecosystem of both subject areas and contributors that
mirrors the real world. New user content
lives in the “greenhouse,” a purgatory with no live links for search engines to
follow. After users prove themselves,
their content gains full access.       

  • Wikinvest, an investment information site, has “a broad population of people who are knowledgeable about certain areas” of finance – people “passionate on the topic who desire to interact,” Mr. Sha stated. “Filtering tools bring out the best,” he added.  The tools identify the most valuable contributors, those requiring the least review. This wiki can be a great platform for asset managers, positioning them as authorities on investment strategies.

The site consists of objective summaries of companies and of
investment areas, or industries, subjective bull or bear commentary on each,
and descriptions of the contributors creating the content – already more than
100,000 of them.

Transparency is Wikinvest’s secret of quality control. Every edit can be tracked.

  • WikiAnswers, a Q&A community acquired by Answers.com last year, consists of questions and answers, each entered by the same or different contributors, each open to edits by anyone, reported Bruce Smith, Chief Strategic Officer. Over100 supervisors – all with day jobs – control quality in their specific subject areas.

What motivates
contributors? Fun – pure enjoyment – is
the No. 1 reason, according to a recent MIT study, with which panelists agreed.
Contributors are enthusiastic about their subjects and enjoy sharing their
knowledge and interacting with like-minded individuals. In addition, they can
improve themselves and advance their careers by building a reputation and even
driving clients. Newsvine adds one further dimension: it shares advertising revenue with contributors
whose content attracts the ads.

But how does free content generate
revenue?

  • Wikipedia solicits individual and corporate contributions.  It also sells feeds to subscribers, big search engines and cell phone providers. Some people license the database and post a mirror site with advertising. On-site advertising is not feasible because the community reacts “very negatively.”
  • Wikinvest will test syndication. If it moves to charging for premium services, these charges would never involve content access. Advertising is a distinct possibility for the future.
  • WikiAnswers will monetize with AdSense and with ads when answers can add user value by being on an iPod but, like Wikinvest, will not charge for Web access to content.
  • Newsvine carries ads and pays 90 percent of ad revenue to contributors.

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Advertising is dead! Long live advertising!

By Eleanor Haas

As everybody knows, paid media
advertising is declining in effectiveness. Why? Because audiences have too
many options. They have more and more
media to choose among. They are deluged
with messages – to the point of information overload. They have found ways to skip TV ads.  And they are captivated by new kinds of
media, such as You Tube and Facebook.

Three technology-enabled alternatives
to the status quo were discussed this morning by a panel sponsored by the law
firm Frankfurt Kurnit Klein & Selz. The
focus was on who owns creative content and how these ideas are paid for. What the new accepted practices will be will
have to evolve over time. But clearly,
advertising is undergoing a metamorphosis.

The challenge is what it has
always been: how to come up with a
compelling creative concept that will make the cash register ring for a product. Technology has added a new twist. Aren’t ads simply a form of content? Can’t they be interactive games or
songs? How does user-generated content
figure in this as opposed to ads created by professionals?

But once ads become content, the
creative brains behind them take on an importance greater than that of a hired
hand, something comparable to that of a star screen writer or songwriter. That’s when you get into serious questions of intellectual property ownership and compensation.

One new direction comes from
OpenAd.net, which calls itself “the world’s first online marketplace for buying
and selling advertising, marketing and design ideas.” OpenAd wants to democratize the ad businesses
by enabling students, professional free-lancers and ad agencies to compete side
by side. In addition, it wants to give
creatives a chance to benefit financially from really great ideas that work.

Creatives all over the world who
have registered with OpenAd create ads in response to briefs from ad agencies
or advertisers. Buyers who have enrolled
as OpenAd members get access to diverse creative approaches and can license these
ideas as they use them. Creatives are
compensated proportionate to the value the buyer perceives in their ideas – as
expressed in frequency of use – as opposed to the traditional one-time fee
based on time and materials.

Grey Worldwide has been
pioneering another new direction for at least five years: creating ad content as branded
entertainment. It’s also helping brands
get ownership of songs they use as well as using songs as key branding
tools. The agency becomes the brand’s
A&R consultant, proposing artists and songs as well as their interaction
with the brand. In one ad, for example,
Rihanna plugs both her own album and Cover Girl products in a format
reminiscent of MTV. In another the Black
Eyed Peas chant hip hop lyrics owned by Dr. Pepper to promote sales of Dr.
Pepper soft drinks.

GO Film, a production company,
collaborated with McCann Erickson to produce two music videos by Christopher
Guest that pitch Intel processors through original songs that incorporate
technical terms specified by Intel. The
videos, which were posted on various techie and non-techie Web sites, are
designed to deliver pure entertainment value as a basis for an enhanced brand
image. One video tells a story about a
soft-rock singer – representing Intel software – and a hard-rock singer –
representing Intel hardware – and the pleasure they bring their audience of
office workers.

Advertising is still a message
controlled by a sponsor who is identified and who pays for distribution. But the nature of the message is taking on
radical new dimensions, dimensions that at times seem to erase the line between
entertainment and advertising.  The times they are a’changing!