Posts from July 2009

Double Down, But Only On The Right Hand

Last weekend, we watched Casino Royale on the beach in Slovenia, just up the Adriatic coast from Montenegro, where the story takes place. I love the scenes at the poker table, particularly the one where Bond goes all in and loses all his money.

And that scene was in my mind when I was reading my friend Jason Calacanis' wonderful post, Yahoo committed seppuku today. Jason can be an amazing writer and this is one of the best things he's written in a while. I particularly loved this part:

The proper move when someone wants something you own badly is to 
invest more in it. “Oh, you like my house and you’re willing to pay
double what I paid for it? Did I mention I just redid the kitchen,
bought the lot next door and put in a newHVAC system?” How much is it
worth to you now? That’s gangster CEO-level poker playing. You raise
and raise while you develop your hand and increase its value.

Jason is a great poker player and he is right that you need to double down on your best bets. But I think he's wrong about Yahoo! and search.

You need to double down on the right hands and the way Yahoo! was playing the search hand wasn't going to end in a win for them. I believe that Google has won the "web search version 1.0" game and the only thing that is left is second place. Yahoo! and Microsoft essentially agreed to share second place instead of fighting each other for the spoils.

We lost a search engine last week but we also gained one. And that's a promising sign. There are new veins to mine in search and that's where you want to make your bets these days. You don't want to compete with Google head on. You want to find a new angle of attack.

Jason goes on to talk about the videogame market. He says:

Nintendo didn’t give up when Microsoft came into the video game 
space–they innovated. Now the Wii outsells the mighty XBOX 50 million
to 30 million. That is how you fight Microsoft: you innovate. Steve
Jobs knows this, Nintendo knows this, and Oracle knows this. Yahoo,
apparently, did not get the 40-year-old memo.

But Nintendo announced a terrible quarter this week. Sales of the Wii dropped to 2.2mm from 5.2mm in the second quarter last year.

The vector of competition in the videogame market has moved from consoles to mobile and social nets. Bing Gordon spent 26 years at Electronic Arts and joined Kleiner Perkins as a General Partner in 2008. Bing knows a thing or two about videogames. His first two investments at KP were Zynga, the leader in social gaming, and ngmoco, the leader in iPhone games. Those are going to be two great investments. Bing picked new vectors of competition and bet on them. That's how you double down on videogames.

So I agree with Jason. Throwing in the towel is not how great companies are built. But competing with an entrenched market leader without a differentiated strategy is also not a winning hand.

Of course, Jason knows that and his Mahalo Answers is yet another vector in the search game, a vector that Yahoo! has a winning hand in. And so that's where Jason's poker game is being played. It's going to be fun to watch it.

Disclosure: The Gotham Gal and I have a small personal investment in Mahalo and the Gotham Gal and Jason were partners in Silicon Alley Reporter back in the 90s.

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New Zemanta Release

This must seem like Zemanta week here at AVC.

I spent the weekend visiting the company in Slovenia and blogged about it. Then yesterday, I blogged about my thinking on making the web smarter and focused a bit on Zemanta in that post.

And now today, Zemanta announced that they have pushed out a new release. This an important release because it introduced s bunch of "reader side" features. The most noticeable of these new reader side features are "balloons" which provide the reader the opportunity to launch a "balloon" instead of clicking thru to the linked web page.

If you are using Zemanta on your blog, you can turn on balloons by selecting Preferences in your Zemanta widget and check the box that says "More Info".

I've turned on balloons for this blog and used Zemanta to insert the the link to Slovenia above. That should offer a balloon to all of you. Please let me know what you think of this feature.

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Making The Web Smarter

Our “six words to live by on the Internet” are open, global, mobile, social, playful, and intelligent. It has been suggested that we add instant and I think that we may want to do that. But since we put this list together as a firm, I don’t want to be adding to it unilaterally without input from my colleagues. So I’ll stick for the first six for now.

Of those six words, only one of them is not a "done deal". And that is intelligent.

You could argue that too many services aren’t global and you’d be right. You could argue that too many services aren’t open and you’d be right. You could argue that too many services aren’t playful (like and you’d be right. But I feel that we are on a path to get there with all of those words. I’m less sure about intelligent.

It’s not for lack of trying.

The dream of the semantic web has been upon us for quite a while now. There have been hundreds of academic research projects, hundreds of approaches, and hundreds of startups working in this space. We have several in our portfolio like Adaptive Blue, Zemanta, Outside.in, Infongen, and one more we have not yet announced.

But this is a hard problem to solve and I don’t see a single clear path to getting it solved.  And what’s interesting to note is that the most ambitious approaches have largely been failures. If anything, the more pedestrian approaches are showing more promise.

I spent Monday morning talking to the engineers at Zemanta. It was a great discussion and I learned a lot about how their system works. I learned some interesting facts, like how reliant the “semantic web community” has become on Wikipedia. Zemanta and many others use Wikipedia as a kind of expert system. For example, if a page is linked to from a Wikipedia page, you can be pretty sure that page is relevant to the topic of the Wikipedia page. That kind of approach can be used for many different tasks, all with the goal of making the web and web services smarter.

Tagging up pages, posts, videos, images, and other objects on the web is a critically important part of making the web smarter. Thanks to google and the SEO industry many web services have gotten religion about tagging. But tagging is not a simple problem either. It reminds me of speech recognition in some ways. If you are working in a specific domain, auto tagging is easier to do. Infongen does it well in the financial and pharma verticals today and will be adding more. Outside.in does it well in the geo domain with help from Zemanta and Calais.

But my experience suggests that humans are still better at tagging than machines. One important development is the idea of "recommended tags". Zemanta provides this to users of its blogging add-on tool. I never used to tag my blog posts. Then I started using Zemanta. It does not auto tag my blog posts, but it does give me about fifteen recommended tags and it’s simple for me to select four to six of them that are the most relevant. That’s an example of a hybrid man/machine approach that works really well.

I would encourage all content oriented web services, whether it’s a blog platform, a video sharing platform, a photo sharing platform, slide shows, music, or whatever else to add recommended tags to their service, via Zemanta’s API or someone else’s. It will vastly increase the amount and quality of tags that user will submit because it removes the biggest hurdle to user tagging which is the initial exercise of thinking about what words are best.

Another huge problem is figuring out how web pages relate to each other. Links do provide a basic connection mechanism from page to page. But that’s pretty rudimentary. I really like what our portfolio company Adaptive Blue is doing to collect all the pages on the web about a particular item, object, or topic. If you find a musician you like, Adaptive Blue can quickly connect you to the various web pages about that musician. They do this in a large and growing number of content and commerce categories.

And these are just some of the efforts I am most familiar with. There are so many more. One thing that I would like to see more of is collaboration between the various semantic web companies. If we are going build a more intelligent web from the bottom up, slogging it out with mostly pedestrian approaches, then the biggest breakthroughs may come from standards and collaborations.

Just last month, several of our companies, Zemanta and Adaptive Blue, were part of a small group of companies working in this space that put forth the “common tag” proposal. Instead of describing it and getting something wrong, I’ll just link to the common tag initiative and you all can go check it out.

That’s one example of what can happen when companies working to make the web more intelligent start working together. I believe we can and will make the web more intelligent, but it is going to be a slog, it is going to take every single one of us doing our part. When we come upon something or create something we will need to describe it well in a language that machines can understand.

I am pretty sure we'll get there. But there’s no silver bullet and the solution will be a combination of many approaches working in tandem, hopefully in some semi-coordinated way.

I’m pleased that our firm has made this sector an important part of our portfolio. I can’t say that we’ve had any breakaway successes in it yet, but I think this is one area where patience, tenacity, and perseverance are going to be required for success

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Comments – A Follow Up

William Mougayar is a regular reader and commenter here at AVC. He sent me this today via email:

Krugman

Paul Krugman gets 1200 or more comments to his opinion pieces. First of all, that's great to see. That is a celebration of free speech, political discourse, and the power of the Internet to be the modern day coffee house. Second of all, I'll be the first one to acknowledge that no author, no matter who they are, can really do justice to 1200 comments on each piece they write.

In my post the other day, I said that authors need to tend to their comment threads. I still feel that way, but at scale, Krugman scale, they need help. Some of that help can come from interns and entry level employees who can wade through all of the comments using a moderation tool like the one Disqus will be rolling out shortly for publishers. The comment system itself should leverage community interaction to surface the best comments. Then the author can get delivered to them the best comments, via email, the web, or some other method, to respond, if they so desire.

There were several comments to my post the other day on this topic that said something like "you have no idea what newspapers and journalists have to deal with every day in their jobs". That's true. And this 1200 comments thing drives that point home. But even so, I stand by my assertion that tending to a comment thread can be done, even at Krugman scale. It takes technology, community, some internal support resources, and a committment to make it part of the experience.

It looks like the NY Times and Paul Krugman are working on it. That's great to see.

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Slovenia

Ever since we made our investment in Zemanta last summer, I've wanted to visit Slovenia, the country where Zemanta was founded and where most of the team is still located.

I got that opportunity this week when most of our family and I flew to Ljubljana, the capital and home of Zemanta. In addition to attending my first board meeting at the company's offices, we spent a day seeing the sights and scenes of Ljubljana and a day and a half on the Adriatic coast in the towns of Portoroz and Piran.

There are some great pics at my wife's blog, my tumblog and my flickr.

Slovenia is a small european country that sits between Italy, Austria, Hungary, and Croatia. It was part of the old Yugoslavia (its most northern part) and was the first country to secede (mostly peacefully).

It reminds me most of Italy but also a bit of Austria. The food we ate tended to lean Italian and it was all very good. The wines also reminded me of northern Italy and they were terrific. An added benefit is everything costs a lot less in Slovenia. And like most of europe these days, english is spoken well most everywhere.

The population is small, about 2mm in total, of which about 300k live in and around Ljubljana. But it is a well educated, commerce minded, and democratic country that has modernized significantly in the past decade. The roads from Ljubljana to the coast are among the best I've been on anywhere.

We did not visit the alpine part of Slovenia but you can see some very high peaks from Ljubljana and we flew over the alps there and back. There's serious skiing, hiking, and other mountain sport to be had in Slovenia.

My favorite part of the trip, other than a morning with the entire Zemanta team, was the Adriatic coastline. It is stunning and I am told if you drive south into Croatia, its even more beautiful.

We'll have to return for a longer stay and visit the mountains and the croatian coastline and other spots. It's on the ever expanding list of places we have to get back to.

If you have not ventured to that part of the world, I'd strongly consider it. You can have a lovely time with less crowds at half the price of the traditional hot spots of europe.

And there's some hot startups to invest in too!

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Why Comments Matter

I was sitting at the pool in Portoroz Slovenia this afternoon and had an interesting experience. I grabbed the weekend edition of the International Herald Tribune after the Gotham Gal had finished off the crossword and started reading the opinion section. At the top of the page was an opinion piece by a guy named Douglas Bailey, President of DBMediaStrategies, titled "Do Not Comment On This Article". It was a reprint of an opinion piece in the Boston Globe from last week. You should click through and read his opinion, but I'll summarize it here:

I’ve concluded there’s one outlet that should be abandoned: those comment forums at the end of articles on newspaper websites.

and


these forums are insidiously contributing to the devaluation of
journalism, blurring the truth, confusing the issues, and diminishing
serious discourse beyond even talk radio’s worst examples.

and


The level of commentary demeans and devalues the very product newspapers should be promoting

Around the same time, I saw a tweet by Mathew Ingram, who blogs reguarly about the news industry. His tweet said:

every blogger — or journalist for that matter — should take lessons from @fredwilson in how to engage with readers: http://bit.ly/15Tto0

And then I saw another tweet from Jonathan Landman, deputy managing editor at the New York Times, retweeting his colleague Tim O'Brien, who edits the sunday business section of the NY Times. It said:

RT @TimOBrienNYT: @fredwilson post worth reading. In comments, a rare intelligent discussion of pay-for-news. http://bit.ly/PTZHR

It's odd that all this hit me in the span of an hour or so this afternoon. But it did.

All four of these people, Doug Bailey, Mathew Ingram, Jonathan Landman, and Tim O'Brien are journalists or former journalists. And they are talking about comments, whether they are intelligent discourse, and whether they belong in journalism. This is a discussion worth having. So lets have it.

I agree that simply adding a comment thread at the end of a news story is a recipe for trouble. But it is only a recipe for trouble if that is as far as you go. An unattended comment thread will be full of garbage and many are.

But if the author of the news story, or opinion piece, or blog post, tends to the comments, replies to the good ones, signals the bad ones, chastises the loudmouth bullies, and generally runs the comment threads like a serious discussion group, a serious discussion will result.

It's an issue for the news industry because tending to comment threads is not part of a journalist's traditional job. But I would argue that it is now and they ought to get busy doing it. For one, the journalists that do it and do it well will be better read. And they'll be better informed. They'll get tips in the comment threads. They'll get constructive criticism that will help them do their job better. And they'll get leads on new stories before others will.

All you have to do to understand this is hang out in the comment threads on this blog. They are the very best thing about this blog and I have worked hard to make them great. I've had help. The disqus comment system, provided by our portfolio company Disqus, is the best comment system on the market by a long shot. It allows me to engage in the comments wherever and whenever I want to or need to. And it allows the community to easily log in with various social profiles, authenticate themselves (which is key), and weigh in.

I've also been helped by commenters like my brother Jackson, Kid Mercury, and others who have acted as "bouncers". They help me police the comment threads and make sure the conversation stays civil and high minded. Most of all, I've been helped by the commenters themselves who understand the rules, even through they are not written anywhere, and follow them.

So my advice to the world of journalism is to ignore Douglas Bailey's advice and keep the comment threads at the end of news stories. But doing that is not enough. You need to use the best comment systems out there and they are usually from third parties like Disqus, not from your CMS vendor. And you need to have your journalists participate actively in the discussions. If you do all of that, you can host great discussions at the end of your news stories and who wouldn't want that?

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Monetize The Audience, Not The Content

There's a lot of discussion out there about how online content should be monetized.

In particular, the newspaper industry is doing a lot of soul searching for the right revenue model. For many publications, particularly legacy publications with higher cost models, advertising alone isn't covering the nut.

Let's leave out the discussion of the print side of these businesses for this discussion. I think most papers would be better off without the print business but I also understand why many won't walk away from a print based product just yet.

For those content owners with a cost model that can't be covered with advertising alone, subscriptions seem like the obvious choice. And yet, for most, subscriptions have not worked very well.

The worst examples of subscription services are those that break the content up into free and paid. It's as if some content is worth more than other content. I think that is the wrong idea most of the time, and especially in news and news related content.

I like the subscription model the FT has been using for some time now, created by Ien Cheng. I may get the exact details wrong but its the idea that's important anyway. You can visit the ft.com domain something like nine times per month for free. They cookie you and when you stop by the tenth time in a month, they ask you to pay. And many do.

This model recognizes a few fundamental facts about the internet. First, you need to make your content available for search engines and social media linking. That drives as much as half or more of the visits these days. And if you have an ad model at all, and most newspapers do, then you need those visits and that audience.

Its also true that the 'drive by' visits will bring new audiences, some of whom will become loyal and ultimately paid audience members.

The other thing I like about the FT's model is that its an elegant implementation of freemium. The best freemium models allow anyone to use the service for free and then convert the most serious/frequent/power users to paying customers.

Apparently the NY Times has been surveying its readers in an effort to find the right subscription model. I hope they'll ask them about the FT's model. Its simple to understand and my guess is most will like it.

If they roll it out, I'll gladly sign up because I visit the NY Times at least ten times a month and I would like to help pay the costs of the people who create it.

How Etsy Uses Twitter

As part of Twitter's new "How To Use Twitter For Business" service called Twitter 101, they've done a bunch of case studies.

I am very pleased to see that our portfolio company Etsy was one of the companies interviewed and was profiled in a case study.  

I've mentioned before on this blog that Etsy gets a significant amount of traffic from Twitter and has been since the start of this year.

A few months ago, @etsy became a suggested user on Twitter but that was not and has not been the real driving force in terms of inbound traffic.

I believe the real driving force is thousands of Etsy sellers using Twitter (and Facebook) to share their latest items for sale with friends and followers.

So it makes perfect sense for Etsy to use its Twitter account to highlight those sellers, retweet their posts, and cultivate and curate the Etsy community on Twitter.

If you are interested in how Etsy got hooked on Twitter, how they staff it, and what kinds of things they do with it, read the case. I think its got a bunch of 'best practices' in it that others can emulate.

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Stockholm

We spent two days in Stockholm. Enough to get a sense of the place but not enough to really explore it and soak it all in.

The city is wrapped in water, like Sydney Australia, but maybe more so. Everything seems to be an island. Its visually striking and beautiful.

The people are also beautiful, both to look at and to interact with. They are nice, easy to talk to, and show a warm welcome to people from other places. English seems to be a second language for most everyone and when my kids went to see Harry Potter, the movie was shown in english with swedish subtitles. That maybe partially explains why everyone's english is so good.

I met up with a few entrepreneurs and investors while I was in town but missed the opportunity to meet with a bunch more that I wanted to see. It's hard combining work and family vacations. I don't recommend it.

My takeaway is that Stockholm has a thriving tech startup community. It may be smaller than London or Berlin, but they've had real successes and the engineering culture is very strong in Sweden. Plus, as one entrepreneur said to me, the winters allow you to spend long hours in front of computer screens.

Stockholm's a bit out of the way. It's a two hour flight from Paris and maybe only a bit less from London. But I think it's a place that those of us in the tech startup community need to pay close attention to.

We managed to get a lot of sightseeing in over the two days. The Gotham Gal has a few posts with some nice photos.

I also posted some photos to my tumblog and my flickr.

We did not take a boat trip out to the archipelago. From everyone I talked to, that was something you really should when you come to Stockholm. So it's a reason to come back.

We did take a long walk in the royal park which is an island right near the center of town. In the park is the Vasa Museum which is entirely dedicated to the completely restored ruins of a 1600s era warship. It is enormous and is something special to see closeup. I highly recommend it.

I also highly recommend our hotel, the Lydmar. It's new, wonderfully appointed, and makes a comforting and classy home away from home.

But mostly we just loved walking around town, visiting the different neighborhoods, shopping, eating, and taking the wonderful sights, sounds, and smells of Stockholm.

It was a really great couple days. Now we are off to Slovenia by way of Paris.

CV.IM – A New Kind Of Investment Management Account

Our portfolio company Covestor launched a new kind of investment account today, called Covestor Investment Management (CV.IM).

I had written a longish blog post explaining why I think this is so interesting and explaining how I've been been a beta tester/investor for the past couple months and how I am doing. But investment management is a regulated business and the lawyers didn't like my post. So I am going to link out to others instead.

Covestor has a post on CV.IM. Here's how they describe CV.IM:

The world’s first retail Multi Managed
account or MMA. With an MMA you can invest directly alongside professional and retail
investors, managing their own money in their own account. It is a new category
of Investment product that gives you access to expert managers like a hedge
fund with the security and transparency of a managed account.

Techcrunch has a post on CV.IM. Here's what they say:

Each of the ten “portfolio managers” are trading for their own
accounts. They never hold any of your money. CVIM merely links their
trading data to a brokerage account you set up either with TD
Ameritrade or Interactive Brokers. You select which accounts you want
to follow, and CVIM automatically instructs the linked brokerage
account to mimic the trades in proportional amounts.

And my partner Albert, who sits on Covestor's board has a post on CV.IM. Here's what he says:

When we invested in Covestor it was in part because of the fit with our “Power to the People” thesis:

To us, this appears to be one of the great constants of the web. It
is taking power away from existing large institutions and pushing it
out to smaller entities and often all the way to individuals.

In the case of Covestor the institutions in question are large
investment management firms and the individuals are people who are
investing their own money.

This is a new and different approach to investment management. I am thrilled to be able to participate in it as both an investor in Covestor and an investor in CV.IM.

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