Posts from Web/Tech

Monetizing A Free App

A number of our portfolio companies that have free web/mobile apps that are monetized by advertising have offered a low-priced subscription offering that removes the ads and, often, offers offline sync on the mobile apps.

Here are some examples:

I am sure there are other examples in our portfolio but those are the ones I am most familiar with.

I like this model a lot. As Duolingo said in their Duolingo Plus launch communications, it allows a free service to remain free for those who can’t pay for it.

It also allows those who don’t want the ads to remove them. And other value added features, like offline sync, make the subscription offering compelling for power users.

Pandora’s Plus offering is a good example of this approach and, because it is a public company, we can take a look at the numbers.

In Q4 2016, Pandora had roughly 4.4mm paying subscribers out of roughly 80mm total users, only about 5% of its user base.

But if all of those 4.4mm subscribers are to the low priced ($5) plan, then they would generate $265mm on an annualized basis. I assume that the subs revenue number is a bit larger because there is also a $10/month plan. So let’s say subs revenue is $300mm.

Pandora’s total revenue is about $1.4bn a year so subs represents over 20% of the revenue even though only 5% of the users take the subs offering.

So if you have a free ad supported service with a lot of regular power users, you should really consider adding a low priced subscription offering.

It will diversify your revenue mix and gives your users the ability to opt out of the ads if they want to.

The Hashtag

Ten years ago yesterday, August 23, 2007, Chris Messina suggested that using the # sign in a tweet could be used to group tweets about a thing (his example was barcamp).

Here is the tweet in which he made that suggestion.

There is so much I like about this story.

  1. A user suggestion became a feature simply by other users adopting it.
  2. Twitter took it a step further by recognizing the hashtag as a “thing” and making it hyperlinked in the service.
  3. The hashtag feature took off as Twitter users thought it was cool and started using it actively.
  4. Users showed that hashtags could be used for many more things than groups.
  5. The hashtag moved beyond Twitter into most popular social media applications (ie Instagram) and now has become the standard way for users to “tag” something.
  6. The hashtag has moved beyond software into our language and media.

I was an investor and board member in Twitter at the time and the Company was tiny, not more than twenty employees and probably a fair bit less. The engineering team was maybe half of that, led by Blaine Cook. They were struggling to keep up with all of the growth of the service and yet they had the foresight that the # and @ symbols that users had adopted organically were important. They prioritized recognizing them in their software. That was a big deal.

Biz Stone, now back at Twitter, blogged about how this happened yesterday and it is a short and good read.

The Twitter story is a complicated one, with lots of ups and downs, but I believe it has been and remains one of the most important services ever built on the Internet and hashtags is one of the many reasons that is so.

Toxic Comments

We are fortunate here at AVC. We have mostly civil and respectful conversations. People behave themselves here. That is sadly not the case everywhere.

I don’t know what the people who post comments like this are feeling and thinking. It is horrible. Awful. Hateful. Hurtful. Painful. Disgusting. Disturbing. And a lot more.

If you operate a large social media service like Twitter, Facebook, or Disqus, you get to see stuff like this every day, hundreds of times a day. It is a view of humanity that is deeply upsetting.

Disqus, which is a USV portfolio company, where I serve on the Board, and which operates the comment service here at AVC and at millions of other websites around the globe, has been working on scaleable solutions to this problem.

They posted an update yesterday on what they are doing to combat this problem.

Here are some excerpts from that post:

The Disqus Platform supports a diversity of websites and discussions; with such a large network of publishers and commenters, having a policy against hateful, toxic content is critical. While we do periodically remove toxic communities that consistently violate our Terms and Policies, we know that this alone is not a solution to toxicity. Oftentimes these communities simply shift to another platform. Ultimately, this does not result in higher quality discussions, and it does not stop the hate. In order to have a real, lasting impact, we need to make improvements to our product. Which is why, if at all possible, we work with publishers to encourage discourse (even unpopular or controversial discourse!) while helping to eliminate toxic language, harassment, and hate.

Over the past several months, many passionate folks have reached out to us about severe violations of our Terms of Service. With the help of our community, we’ve been able to review and enforce our policy on dozens of sites.

We appreciate all of the help and feedback we’ve received and we are excited to continue to partner productively with users and organizations that are passionate about fighting toxic content and hate speech. To improve our efforts, we’ve built a Terms of Service Violations Submissions form. This form is a way for users to explicitly share with us when they’ve found a community to be in violation of our terms. In addition to reporting individual users (which helps moderators know who in their community is perhaps exhibiting toxic behavior), you can now report directly to us when you think there’s a publisher/site we should take a look at. When we are made aware of potential violations, we review them internally and make a decision about whether or not to allow the site to remain on our platform.

This isn’t a small scale matter; we know that to have a meaningful impact across our network, we need to build solutions into the product. With that in mind, we’re committed to building tools to make the moderation experience easier and better for publishers (and commenters, too).

Here are some things that we’re working on:

  • More powerful moderation features. We’re working on two features right now, Shadow banning and Timeouts, that will give publishers more options for managing their communities. Shadow banning lets moderators ban users discreetly by making a troublesome user’s comments only visible to that user. Timeouts give moderators the ability to warn and temporarily ban a user who is exhibiting toxic behavior.

  • Toxic content detection through machine learning. We are working on a feature to help publishers identify hate speech and other toxic content and then handle this more effectively.

  • Commenting policy recommendations. While we already provide suggestions for how to create community guidelines, we’ve realized that we can be more proactive and more assistive to our publishers. We’re working on helping our publishers expose their custom commenting and community guidelines by making them more visible to their readers and commenters.

  • Advertiser tools: Just like publishers do not want toxic content on their sites, we know that advertisers do not want their content to display next to toxic comments. Leveraging our moderation technology, we will provide more protection for advertisers, giving them more control over where they display their content.

If you think this is a simple problem to solve, you are sadly wrong. And if you think that Disqus and USV and I don’t care about solving this problem, you are wrong about that too.

Proxy Servers

In reaction to the Trump Administration selling us all out to the big telcos, I am dedicating this blog post to proxy services, which we should all start using.

A proxy server is a computer (in the cloud) that redirects your Internet browsing and other traffic away from your ISP to a specialized service that can do a lot of things for you.

Here is how you configure Chrome to proxy your traffic to something other than your ISP.

Here is how you configure OSX to proxy your traffic.

And you will need to select a proxy service. There are plenty of free ones out there. But you get what you pay for. If you want to have a proxy that is reliable and won’t sell your data, you should consider paying for a proxy service.

Here is a good roundup of some popular proxy services.

I am sure that many AVC regulars are using one or more proxy services and I encourage all of you to share with us your favorites.

Audio Of The Week: The Riff

My partner Andy and my friend David are doing an “interview cast” which is “a 24 minute conversation about one topic, with one expert.”

They call it The Riff and their first episode is about the evolving news media landscape with CNN journalist Laurie Segall.

Here it is:

Video Of The Week: Mark Cuban At Upfront Summit

I posted the discussion my partner Andy and I did at the Upfront Summit last week.

There were other great conversations at the Upfront Summit.

This discussion with Mark Cuban was great. I totally agree with Mark that we need more tech companies to go public and have been saying that publicly for several years.

Fun Friday: How To Align A Business Model With A Market Position?

This was a fun twitter exchange yesterday:

I can’t help but think that competing with Facebook and Google in the online advertising market is an uphill battle for Twitter. They have done a great job at building a $2bn annual advertising business that pays the bills and generates positive cash flow. I know the people who have built this ad business and they are world class.

But given that Twitter’s strength is influence and impact, not page views and clicks, is there a business model that compliments the ad business that Twitter should be leaning into?

As always on fun fridays, the action will be in the comments. So let’s get this discussion going.

The End Of The Level Playing Field

I am old enough to remember the gogo days of cable TV when entrepreneurs who wanted to launch a new cable channel would go, hat in hand and cap table in tow, to the big cable companies and beg to get distribution on their networks. 

When the Internet came along in the early 90s, we saw something completely different. Here was a level playing field where anyone could launch a business without permission from anyone. 

We had a great run over the last 25 years but I fear it’s coming to an end, brought on by the growing consolidation of market power in the big consumer facing tech companies like Google, Apple, Facebook, Amazon, etc, by the constricted distribution mechanisms on mobile devices, and by new leadership at the FCC that is going to tear down the notion that mobile carriers can’t play the same game cable companies played.

Here is a quote from the incoming FCC Chair:

“Today, the Wireless Telecommunications Bureau is closing its investigation into wireless carriers’ free-data offerings,” FCC Chairman Ajit Pai said in a statement. “These free-data plans have proven to be popular among consumers, particularly low-income Americans, and have enhanced competition in the wireless marketplace. Going forward, the Federal Communications Commission will not focus on denying Americans free data. Instead, we will concentrate on expanding broadband deployment and encouraging innovative service offerings.”

It is certainly true that consumers, particularly low-income consumers, like getting free or subsidized data plans. There is no doubt about that. But when the subsidies are coming from the big tech companies, who can easily pay them, to buy competitive advantage over that nimble startup that is scaring them, well we know how that movie ends.

It is sad to see this era ending. It was a lot of fun and quite profitable too. I am hopeful that some new competitive vector, like the Internet, will come along and make all of this moot and we are spending a lot of our time looking for it. Because backing startups on a field tilted in the favor of the incumbents is not fun and not particularly profitable either.

What If The Narrative Is Wrong?

I always like to look for where conventional thinking might be wrong. I think you can find interesting investments that way.

I was exchanging emails with a colleague yesterday about Twitter’s decision to get out of the developer tools business and I asked her if it was possible that the conventional wisdom about Twitter (it is in decline and needs to be turned around) is wrong.

I shared these two Google Trends charts with her.

Facebook “interest” over the past two years:

Twitter “interest” over the past two years:

What if Twitter is not actually in decline but has seen the bottom and is growing again?

What if Facebook is in decline but nobody has realized it yet?

I am not saying either of those things is true. I am just asking the questions.

Disclosure: My wife and I are long Twitter and have never owned Facebook stock.