Posts from November 2012

Sorry for the delay in getting the fun friday post out. I thought we'd discuss some current events today. Specifically who the next Secretary Of State should be. Obama apparently wants Susan Rice and the GOP apparently wants John Kerry. I would nominate our very own JLM. Who do you like?

comScore is announcing something today that I am quite excited about. It is called Media Metrix Multi Platform and comScore describes it this way in their announcement:

Media Metrix Multi Platform offers unduplicated accounting of audience size and demographics that reflects today’s multi-platform digital media environment, which includes websites, apps and video content accessed from multiple devices.

This "multi platform" environment is the reality of most online properties today. We access them on the desktop/web, the mobile web, and on iOS and Android apps (and some other ways as well). But it has been impossible to get an aggregated and, importantly, an unduplicated view of the audience across all of these devices.

Currently, comScore is only releasing US audience data in the Multi Platform report. They are working on getting their global data into the Multi Platform format and I am even more excited to see those global numbers once they get the data cleaned up and QA'd.

This chart, from comScore's release on the Multi Platform service, tells the story well:

There's a bunch of interesting stuff in there. Take Google. They have 189mm users in the US on desktop/web. They also have 109mm users in the US on iOS and Android. But the unduplicated total audience is 211mm, meaning only 22mm of Google's users are mobile only in the US.

Pandora and Twitter stand out as highly mobile user bases. Pandora's mobile user base is >2x their desktop/web user base. Twitter's mobile user base is almost equal to their desktop/web user base.

If you are a Media Metrix user, you will see the option to get Multi Platform data on your key measures reports. I have been using this service in beta this past week and it is very useful in many ways.

comScore uses a combination of panel data and self reporting by websites and mobile apps to produce its data. The panel data is quite good for large mainstream properties. It is not as great for small websites and apps or services whose audiences are less mainstream and more niche. For those services, self reporting is a good idea and comScore allows you to self report for free by including their tags in your websites and apps.

I hope the entire analytics industry (first party and third party) follows comScore's lead and offers a multi-platform view as the standard view. That's the reality of how users access services today and the analytics industry needs to reflect it in their products.

Disclosure: I was a venture investor in comScore from the late 90s to the mid 00s and was on their board for almost a decade. I still own a few shares personally which I have no intention of selling.

I've been really impressed by the quality and especially the diversity of news I am getting from the #Discover Tab on Twitter lately.

This exchange between Hunter Walk and me from last week is a good example of how I feel about it (sorry that I could not figure out how to embed a Twitter conversation):

I actually don't love the visual treatment of the #Discover tab, particularly on mobile, but also on web. I wish it was just like the timeline. I don't need all those "blobs" of images that pop up sort of randomly and jarringly.

But the data I am getting is super relevant to my interests and incredibly diverse (sports, entertainment, friends, tech, NYC, etc, etc).

I am curious how all of you are finding the #Discover tab these days.

So I messed up bigtime yesterday.  I created a "final version" of the revenue model hackpad and locked it down so hard that nobody could even see it. 

What happened is I am using a product, hackpad, that I don't really know how to use correctly. I am learning how to use it in real-time. Which is how I learn to use everything. Screw the manual. Just turn it on and get going. That can work, but it results in fails like we had yesterday. The truth is I still don't know exactly what I am doing with this product, but I am figuring it out.

The "final version" is now fully public but locked down for moderation. Whatever that means. I think it means is we can continue to edit this "final version" but I get to approve all edits.

Anyway, here's a link to the final version. There were some edits to the initial version yesterday that I like a lot. The transaction processing section was re-organized in a nice way. And a few more revenue models were listed. I will work to merge the two but don't have time to do that this morning.

Again, I want to thank everyone who has been working on this list. Crowdsourcing information is messy but together we have built something that is way better than I could do on my own.

The idea of peer producing a comprehensive web/mobile revenue model list was a success. The hackpad I created and linked to last week got a ton of contributions. I took the time this morning to clean it up a good deal. I will outline the high level changes I made in a bit. But since that hackpad is still wide open, I also made a final version and I have made it invitation only so I can control the edits this one gets. There may be a way in hackpad for the initial author to lock down a hackpad but I couldn't find it, so I did it this way.

So what edits did I make to the wide open hackpad? Well first, I tried to clean up the examples and make them as definitive as I could. The more well known a company/service is, the better example it is. I also took out many of the multiple examples. I think one is generally sufficient. I also took out the revenue models I thought were duplicative or slight variants of other revenue models. And there were a number of sections at the end that I would call "business models" as opposed to revenue models. So I took them out. Finally, there were a few entrepreneurs who were using this hackpad as a way to promote their companies. In effect, they were spamming the hackpad. I took out everything that felt like spam to me.

We are left with nine categories:

I think six of them are truly definitive revenue model categories (advertising, commerce, subscription, transactions, licensing, and data). The other three (peer to peer, mobile, and gaming) could be folded into the first six since they mostly map to existing models (mobile ads are ads). But these three categoris are unique in many ways and so I felt like leaving them in even though it's not as clean this way.

The "final" hackpad still needs work. There are some entries that are missing examples. I noted them with (??). There also may still be important or emerging business models we are missing. If you would like an invite to help fix the final version, please leave a comment to this post and I will invite you if I think your edit is useful.

My hope is by next week, we will have a truly definitive list of mobile and web revenue models and then I can use the list as a template for the MBA Mondays series on Revenue Models. Thanks for everyone's help on this.

As I read this post in the WSJ about the changing nature of VC funding of consumer web companies, I thought that we may be looking at the symptoms and not the disease. As the WSJ notes, VC funding of consumer web and mobile companies is down 42% in this first nine months of 2012 (vs the first nine months of 2011). And the big falloff is not in seed rounds, which are still getting done, but in follow-on rounds, which are not.

So what has changed in the past couple years? A lot, actually.

1) the consumer web has matured. we are almost 20 years into the consumer web and we have large platforms that are starting to suck up a lot of the oxygen. google, facebook/instagram, amazon, microsoft, apple, twitter, ebay, yahoo, AOL, craigslist, wordpress, linkedin together make up a huge amount of the time spent online, particularly in the english speaking world. there are still occasional new entrants into this list and departures too. tumblr and pinterest have risen a lot in the past couple years while myspace has declined. but consumer behaviors are starting to ossify on the web and it is harder than ever to build a large audience from a standing start.

2) the consumer is moving from desktop/web to mobile/app. we've talked about this transition ad nauseam on this blog. it is the single biggest megatrend in the consumer internet space right now. most new consumer internet startups need to build for iOS, Android, and web at the same time. it is making the startup more expensive and time consuming. distribution is much harder on mobile than web and we see a lot of mobile first startups getting stuck in the transition from successful product to large user base. strong product market fit is no longer enough to get to a large user base. you need to master the "download app, use app, keep using app, put it on your home screen" flow and that is a hard one to master.

3) the momentum/late stage investors have moved from consumer to enterprise. there is a large pool of money in the venture capital asset class that is opportunistic, momentum driven, and thesis agnostic. this pool is driven largely by the public markets. this pool of capital was "all in" on consumer web/social web in the 2009-2011 time frame. it drove a lot of activity throughout the venture capital markets because each layer of the VC stack (angel, seed, Srs A, Srs B, Srs C, etc) needs to be aware of what the next layer up wants to fund. when the momentum/late stage wanted web/social, the layers below gave them web/social. now that the momentum/late stage wants enterprise, we should expect the layers below to give them enterprise.

The combination of these three factors is making it harder for consumer internet companies (web and mobile) to get funding. But the first two factors are also making it harder for consumer internet companies (web and mobile) to breakout which is more and more a prerequisite for funding. As venture portfolios fill up with promising companies with solid products that are struggling to breakout, the VCs will naturally be drawn ever more to the companies that are in fact breaking out. It is a pernicious cycle and we see it playing out very clearly in the consumer internet space these days.

What does that mean for USV? Well not that much actually. We are thesis driven to the core. We believe in what we believe in, for good or bad. And that is large networks of engaged users that have the power to disrupt big markets. We are investing at the fastest rate right now in the history of our firm. We are doing a lot of Srs A and Srs B rounds right now because that is where we see the biggest vaccum in the market. We have not done a real seed or angel round in quite a while. But that doesn't mean we wouldn't and our next investment could well be a seed or angel round.

But we are a small firm. We put out maybe $40mm to $50mm per year across all of our core funds, across initial investments and follow-ons. That is a tiny fraction of the venture capital market. We are small on purpose. We don't want to be the market. We want to invest in a tiny slice of the early stage ecosystem where our thesis collides with great teams and unique and differentiated products.

All that said, these three trends are impacting our portfolio. We have fifty portfolio companies, with the vast majority in the consumer internet space. We encouraged our portfolio companies to raise a lot of capital in 2011 and many did. But even so, we are seeing fundraising challenges everywhere, even in our very best portfolio companies. We are also seeing many of the youngest companies in the portoflio, those started after the summer of 2010, struggling with the breakout challeneges I mentioned earlier in this post. We are patient investors and believe in our portfolio companies and the teams we have funded. We are seeing patience being rewarded, particularly in the mobile market. But it is a tougher time for early stage consumer internet companies than I have seen since the 2001-2004 time frame. And I think we are still in the early innings of this more challenging environment.

So things have changed. As they always do in tech. Those who adapt to the changing dynamics, who see the openings that were not there before and slice through them, will succeed. But the wind that has been at our back for 7-8 years in consumer internet is no longer there. It's tougher sledding and will likely continue so for some time to come.

No this is not a post about yoga, although I am really looking forward to my yoga class this morning. It's about the two concepts in finance that I think are most important for folks to understand.

The Gotham Gal and I went out to dinner with our oldest child Jessica last night. We got into a deep discussion of personal finance and how to manage it. I was talking about the difference between how much you make and spend and how much you have in the bank. I wanted to talk about the P&L and the Balance Sheet but I did not want to use those business concepts. So I called them the flow and the balance.

The flow is how much you make and how much you spend. It is the flow of money in and out of your bank account each day, week, month, year, etc. The balance is how much money you have in the bank (or any other form of account where you can have money on deposit).

We talked about how you could have a balance of $10,000 and because your flow is negative (you spend more than you make), that balance could go to zero over time. And we talked about how you could start with a balance of zero and because your flow is positive (you save money each month), your balance could grow to $10,000 over time.

As we were talking, I was reminded that unless you major in economics or finance, high school and college doesn't prepare you for the world of personal finance. Jessica has most of the tools she needs to manage her finances and she has been doing it for a while because we make our children responsible for their spending as they become young adults. And yet, she found this distinction between flow and balance helpful to understand as she prepares to get out of college and take even more control of her personal finances.

The generation that my kids belong to will have some incredible tools as they start to take control of their own finances. Online banking and web and mobile based personal finance tools that take advantage of the portability of your personal finance data are evolving at a fast and furious rate. But to use these tools, you need to understand and make sense of the data. I think simplifying and demystifying these concepts and this data is key. And I wish that there were more educational resources available to young adults as they enter the working world to help them with this stuff. It's important.

Due to the fact that we are homeless in NYC on account of Sandy, the Gotham Gal decided to take her Thanksgiving on the road this year, out to our beach house on the east end of long island. It was a great idea and starting on wednesday afternoon, our entire family and some friends made the pilgrimage out east to celebrate Thanksgiving at the beach.

But when we arrived wednesday evening we found at that Sandy had an impact on our beach house too, specifically the DirecTV satellite dish was out of whack. I guess I should have thought about that but I didn't. Of course, getting a DirecTV technician out to our beach house on Thanksgiving day was not going to happen. But Thanksgiving without football? That is downright unamerican!

So I went for plan B. Time to hack the NFL. Here's how I did it with the help of Boxee's new Boxee TV product.

I have a Boxee TV in my USV office which gets all the broadcast channels in NYC in HD. Via the Boxee TV's cloud service, I can get all of those channels on my laptop anywhere I am. So I was able to get the three football games yesterday on my laptop.

We also happen to have an AppleTV in our beach house. So with airplay mirroring from my laptop to the AppleTV, I was able to get the games from my laptop to the big screen in our family room at the beach.

Here's how it looked from the warmth and comfort of the family room couch yesterday afternoon as the Gotham Gal and her sister Susan were cooking up a storm in the kitchen:

This all worked out great until the Jets played the Patriots last night. That was awful to watch. I turned it off at halftime. I am embarassed to be a Jet fan this morning.

As is my tradition on this day every year, I just want to say thanks to everyone who makes my life what it is.

– My family led by the incredible Gotham Gal, who as JLM would say, "never met a to do list she couldn't master".

– My work. I get to work in a true partnership where everyone has a say and uses it regularly. Brad and I created the firm we wanted to work in and it is such a joy to be able to do that.

– Entrepreneurs are special people. I spend my days with them, they challenge me, they enrich me, and they entertain me.

– The AVC community. I write every day because you read every day. Thanks.

– My extracurricular activities – The list grows longer by the day but that is because there is so much I want to do and not so much time to do it in.

I live an incredibly rewarding, exciting, and enriching life. And I am very thankful for it.