Posts from February 2004

Chicken Little Redux

Last year Nicholas Carr wrote a controversial article in the Harvard Business Review titled “IT Doesn’t Matter”. David Kirkpatrick fired back an empassioned defense of IT in his Fast Forward column. And the debate raged on about IT and whether it was a good business anymore. A year later, I thought we had put and end to that debate.

But it appears that the naysayers just won’t quit. The latest “Chicken Little” is Columbia University Economist Eli Noam who wrote a piece in the February 16th issue of the Financial Times titled “Market Failure In The Media Sector”. Eli argues that the technology, telecom, and media sectors are in the middle of a “market failure” brought on by collapsing prices and commoditization.

As Jeff Jarvis and Om Malik point out on their blogs, this is nonsense. I don’t know what world Eli is living in, but its not in the trenches. There is opportunity every where I look in the information economy right now. Maybe I should go up to Columbia and offer Eli a tour of it.

What is happening, as so brilliantly described by another economist, Carlota Perez, in her book “Technological Revolutions and Financial Capital” is that we are at the end of the “installation” period where building infrastructure was the recipe for making money and at the start of the “golden age of IT” where using it in innovative ways will be the key to making money.

Apple isn’t making a lot of money on iMacs anymore, but they are making a ton of money right now selling iPods and Airport Extremes. Soon, those cash cows will pave the way for new Apple businesses built around Garage Band and iTunes. As Jeff Jarvis said in his post, “There’s somebody using Apple’s Garageband in a garage right now creating a future hit that will surely be sold at Apple’s iTunes store.”

Eli should come down from his ivory tower and hit the streets and see what crafty entrepreneurs are doing with commoditized infrastructure. They are building the “golden age” of IT before our very eyes.

#VC & Technology

Behavior versus Context

I think the Internet is slowly becoming the medium of choice for almost all marketers.


Because it has the reach, the frequency, the measurability, and the ability to target like no other medium. And its incredibly easy to buy. More reach. More frequency. More accountability. More efficiency. Easier to buy. How can you beat that? You can’t.

Someday advertisers and their agencies (i have some doubts about the latter) will wake up to this fact. The ones who have woken up already are doing great. The ones who haven’t are continuing to waste the proverbial half of their advertising dollars they know don’t work.

There is a lot of noise these days about paid search. And for good reason. Google is a wonderful story. It’s headed to a much anticipated IPO. Yesterday, Yahoo introduced its own proprietary search service and is going after Google hard. So is Microsoft. And they should. Because paid search works. It has reach, frequency, is incredibly measurable, its efficient, and its easy to buy. In less than two years, paid search has become a $2 billion business and has captured 25% of the Internet ad market. Some say that paid search is going to be a third of the Internet ad market this year. And I don’t doubt it.

But paid search will start leveling off and as it does, the leading providers are offering contextual advertising networks as the next big thing. If you buy the keyword “mortgage” on Google, why not buy an ad on every Internet page that has the word “mortgage” on it. That’s the idea behind Google’s AdSense and other contextual networks that are popping up to service this market.

But contextual targetting may not be the best the Internet has to offer. If someone types in “mortgage” you do know that they are interested in a mortgage. But running an ad for a low rate mortgage on a news story about mortgage foreclosures in low income neighborhoods doesn’t make any sense.

Contextual advertising doesn’t tell you much about a person’s behavior. Do they really want to take out a new mortage because they are on a page that is talking about mortgage? Who knows.

But what if a person has been getting mortgage quotes every day for the past month? That’s behavior. And I think behavior is a better indicator of purchase intent than context will ever be.

So I think the next big thing in Internet advertising will be behavioral targetting. And I think it could be as big or even bigger than paid search. I’ve made a bet on this market with my investment in Tacoda Systems and I am excited to watch the market for behavioral targetting develop.

#VC & Technology

LinkedIn Becomes Plaxo

I like Reid Hoffman and think he’s working on a very interesting project with LinkedIn. But I have reached the pain point and am headed toward shutting down my LinkedIn account.

Why? Because it’s generating more spam than Plaxo.

It reminds me of a great comment by Clay Shirky at a social software panel i was on last fall. Clay said something similar to the following about social networks, “they are like parties – when they are small, they are great, but when they get big, you have to leave”.

Reid has done a good job. LinkedIn has gotten big. So I have to leave.

#VC & Technology

What Makes America Great?

Jeff Jarvis has a good post up this morning talking about what makes America great.

His nine reasons are on the mark and I agree with all of them.

But the two reasons that really hit home for me, being the venture capitalist that I am, are #3 and #5. To quote from Jeff:

3. An economy that powers the world with courage and capital and ingenuity and imagination.

5. An entrepreneurial class that has created, in just recent memory, Amazon, Google, eBay, Starbucks, Microsoft, Cisco, Apple, CNN…

What we have got going here in the US is an economic system that attracts the best and brightest entrepreneurs, engineers, and scientists from all over the world. And we’ve got a capital markets system that takes risk, funds innovation, and rewards the incredible ingenuity and work ethic of these “best and brightest”.

There is a ton of hand wringing in Washington about off-shoring. My Senator, Chuck Schumer, who I like and admire, co-authored an op-ed piece in the NY Times in early January titled Second Thoughts on Free Trade.

I think free trade is not something we need to rethink. In fact, free trade is a big part of why America is so great. I really like what David Kirkpatrick has to say on this subject in his most recent Fast Forward column.

You can’t have closed borders to trade and capital flows and continue to attract the best and brightest to this country. A by-product of our ability to attract brilliant Indian, Chinese, Russian, and Israeli entrepreneurs, engineers, and scientists to our country is their ability to learn from us and go back home at some point and emulate us.

And we’d better be prepared to let our capital flow back with them so we can continue to invest in and benefit from the innovation and ingenuity of these brilliant people, wherever they are.

My point is this – That which makes America great today is what will make the World great over the next century. Globalization is upon us. Let’s embrace it.

#VC & Technology

Digital Radio (Continued)

I was at dinner last night with a friend who works in the radio business. He was telling me about the efforts going on to integrate cellphones and radios in the same way that cellphones and digital cameras have been integrated.

That’s exciting to me. Radio is a cheap, ubiquitous one-way pipe. Cellphones are becoming the digital devices of choice for most people (and I include PDA/cellphone combos like the Treo in the definition of cellphones).

Think about the possibilities of a Tivo-like system to record and store the radio shows and stations you like. Then when you are on the plane, train, car, etc, you can just plug into your phone and listen. With the back-channel on the phone, you’ll be able to buy things you hear about (songs, books, and most anything else you might hear about on the radio).

Radio has a great future in the digital age and cellphone integration is likely to be a big part of it.

#VC & Technology

The Way Back Machine

Last week we needed to find the logo of a company we were involved in that was sold in 1999 and hasn’t existed in over four years. We emailed the former CEO, we emailed a bunch of other people. No luck.

Then I remembered that Brewster Kahle’s Alexa Internet had created this huge Internet archive back in 1996. I wondered what had happened to it. So I went to which took me to Amazon, which had bought Alexa. That was a bummer, but I kept going, clicking and searching the Alexa/Amazon site.

And I found it. It’s called The Internet Archive Way Back Machine.

I typed in the URL of the old company. Sure enough, this service had captured about 10 different instances of that company’s website listed by date. I clicked on one of them and surfed the whole site like it was still up on the web today. It was eerie and cool and fantastic.

I’ve been thinking about this service ever since. There is so much that can be learned from the evolution of information, people, commerce, links and content – all the good stuff that makes up the Internet today.

I am not sure what business opportunities can come out of this archive, but I’m sure glad it exists and I hope some smart entrepreneurs figure out how to make a business out of it so it survives and thrives.

Oh, and if you are wondering, I found the logo. It’s on my hard disk now.

#VC & Technology

Social Networking (Cont)

I attended a panel discussion on Social Networking last night moderated by my friend Lee Greenhouse.

The panelists included Mark Pincus of Tribe and Antony Brydon of Visible Path. I am an investor of both of these companies.

The other panelists were Andrew Weinrich founder of Six Degrees, who is arguably the pioneer of this whole social networking thing, and Adrian Scott of Ryze, and Reid Hoffman of LinkedIn.

To be honest, I thought the discussion was boring and way too rambling and unfocused. But there were a few highlights.

In particular, I just loved Andrew Weinrich’s initial vision for Six Degrees. He wanted to build a “social network operating system” for the Internet. Six Degrees was to be a huge relationship map that would get plugged into everything on the Internet; eBay, Amazon, Monster, Match, etc. When you used any of these and other Internet services, you would see what your relationships knew about, said about, or did with any of these services. That was, and is, a big idea, and I wish it existed.

I also liked a concept of network interoperability that came out in some of the comments, but was never really drilled down on. None of us wants to join 10 or 20 social networks. The headache of filling out the profiles, interacting with the systems, etc is just too time consuming for most normal people. But we’d all like to be part of LinkedIn and Ryze for business networking, Tribe for classifieds, Friendster if we are dating, etc. Will there be a way that I can have one profile like I have one email address and each social network just takes that profile applies its own business logic and rules for its particular application and delivers value to me? I don’t know, but I’d like that to happen.

The other highlight was Antony Brydon’s announcement that Kleiner Perkins had invested in Visible Path and that Ray Lane was joining his board. That’s a big deal because Kleiner now has both a consumer-focused social networking investment, Friendster, and an enterprise-focused social networking investment, Visible Path.

I continue to think the enterprise model is easier to execute and should create lasting tangible value to its users more quickly. But I also have found LinkedIn to be useful and expect all of these services to be helpful to the users that have the time and energy to invest in them.

So my bet is that social networking is more than a fad that will come and go quickly. It’s a real business opportunity, but it will take time before these services become useful to more than technology enthusiasts and online daters.

#VC & Technology

Wes Clark - A Class Act

I could see it in his eyes last night when he thanked his supporters. Wes had recognized the obvious.

As readers of this blog know, Wes Clark was my favorite of the democratic candidates. I still think he would have made a great president, but he didn’t pass the required test of being a great candidate.

He was good, but not great. He was a rookie and understandably made some rookie mistakes. But none of that changed my opinion that he’d have made a great president. Because he is a great leader.

I look forward to supporting Wes in whatever he does next. He is truly a class act.