Don Dodge on The Next Big Thing

Brightcove update - AOL & IAC are on board

Cnet reported today that AOL, InterActiveCorp, investment bank Allen & Co., and The Hearst Corp. plan to invest $16.2 million in Brightcove. In addition, Barry Diller, CEO of InterActiveCorp, will join Brightcove's board of directors.

Brightcove was founded by Jeremy Allaire, who also co founded Allaire Corp, with his brother JJ Allaire. See this post about "The Brothers Allaire- Entrepreneurs Extraordinaire" to learn more about JJ and Jeremy, and the company they created, Allaire Corp.

Brightcove provides an environment for independent video producers to deliver their content directly to consumers, bypassing the traditional TV networks and channels. Video content owners are no longer beholden to the networks for distribution. Consumers can search and find the video content that interests them and build a relationship directly with the content producers. Brightcove is almost like eBay for video content, providing a market and infrastructure for producers and consumers.

Cnet reported "Program owners that upload videos to Brightcove's servers can simply opt to let Brightcove attach a 15- or 30-second commercial to their videos. Brightcove takes an estimated 30 percent cut of ad sales, according to Forrester Research estimates."

"Advertising-supported videos will cost program owners nothing to use the service. Advertisers are charged $25 per 1,000 viewers, a higher rate than the average $16 to $20 fee charged on broadcast television."

Brightcove is a BIG idea from a guy who has proven he can execute. Allaire Corp was a public company with a market cap of more than $2.5B at its peak. The company was later merged with Macromedia, where Jeremy was CTO.

The New York Times also has a story "AOL Joins Start-up Company to Offer Web Video Distribution" . Here is an excerpt from that story.

"Brightcove gives us access to content from small and medium-sized publishers and allows those publishers to get into the game with broader distribution," said Kevin Conroy, an executive vice president of AOL Media Networks. AOL, he said, will have the right to reject programs if they are inappropriate or duplicate content AOL already has."

To use the system, producers will upload their video through a Web site run by Brightcove, and specify the terms of its distribution. They can select which sites, like AOL, will have access. Eventually they will be able to select how they want to be paid. When the service starts early next year, Brightcove will offer only advertising-supported video. Later it will allow publishers to charge viewers to rent or buy videos."

Brightcove is in beta today and is expected to be generally available early next year. Keep an eye on Brightcove. My prediction is that Brightcove will be The Next Big Thing in video distribution.

Microsoft to standardize Office Open XML formats

Microsoft announced today the intention to submit the Office Open XML file formats for Word, Excel, and PowerPoint to the European standards body ECMA International. This follows an earlier announcement that the next version of Office will natively support PDF.

Robert Scoble interviewed Jean Paoli, co-inventor of XML, who now works for Microsoft. Here is an excerpt of that interview:

Q: Just what did we announce today?

Jean Paoli: Today is an incredible day that I have been waiting for over many years: we are offering the Office XML file format technology behind billions of documents to customers and the industry as an international standard. Together with Apple, Barclays Capital, BP, the British Library, Essilor, Intel, NextPage, StatOil and Toshiba, we are co-sponsoring the submission to Ecma, the international standards body, of the Microsoft Office Open XML document formats. We will work together to standardize the formats for approval as an Ecma standard. Our intention is also to submit the result of the Ecma work to ISO for approval as an international standard. This is our press release and a few other documents we published on the subject (http://www.microsoft.com/presspass/ — will be up soon )

Q: Are these formats really open?

Jean Paoli: Yes, and the Standardization process will make this even more clear as we work with the committee members. Ecma International is a very respected organization and is extremely serious about openness in the standards they create and support. The technical committee that will oversee it under Ecma International is open to anyone who is an Ecma member. By working with participating companies like Apple , Barclays Capital, BP, the British Library, Essilor, Intel, NextPage, StatOil and Toshiba and other Ecma members who would want to participate, we hope to create an open standard that will enable customers, technology providers and developers around the globe to work with the Office Open XML formats without barriers, with or without Microsoft products.

Brian Jones who works in the Office group provided details of the announcement in his blog. And ZDnet has a story on the announcement "Microsoft to standardize Office formats"

This is a major step for Microsoft. Opening Office documents to PDF and Open XML creates an open environment for competitors, partners, and users. This is a good thing. Moves like this usually stimulate innovation in new and existing products.

The Commonwealth of Massachusetts, and some European cities have put pressure on Microsoft to open up the file formats, or adopt "open" standard formats. Microsoft has now done both by adopting native support of PDF, and submitting Office Open XML to standards committees.

This coupled with today's announcement of SSE Simple Sharing Extensions to RSS, which will be open and available under the Creative Commons license, is a major leap forward for open standards. Great news!

SSE - Simple Sharing Extensions - A Microsoft innovation on RSS

Ray Ozzie and the team at Microsoft is working on an exciting new innovation  to RSS called SSE, Simple Sharing Extensions.  There is a draft specification in place, and sample code will be ready soon. Microsoft has released the Simple Sharing Extensions specification under the Creative Commons license, the same license that covers the RSS 2.0 specification. This license lets others remix, tweak, and build upon the specification even for commercial reasons, as long as they credit Microsoft and license changed specifications under the same terms. Microsoft has been a contributor to the Open Source community for a long time. This is another visible example of that participation. See Ray's complete post entitled "Really Simple Sharing"

Ray collaborated with Dave Winer to incorporate support for OPML. Dave blogged about this today on his site, Scripting News. Jack Ozzie and George Moromisato, my old friends from Groove, were also key players in getting this done. Jack and George are the leaders of Ray's concept development team. Awesome guys.

The idea behind Simple Sharing Extensions is to allow multi-directional synchronization of data and objects across multiple applications. Ray used the example of trying to synchronize his private/shared/public calendars with those of his wife. They used different tools and wanted to share pieces of each calendar, and contacts, with each other, and associates. It was not possible, so Ray decided to get a team together to innovate a solution.

Ray said "As an industry, we have simply not designed our calendaring and directory software and services for this “mesh” model. The websites, services and servers we build seem to all want to be the “owner” and “publisher”; it’s really inconsistent with the model that made email so successful, and the loosely-coupled nature of the web.

Using RSS itself as-is for synchronization wasn't really an option.  That is, RSS is primarily about syndication - unidirectional publishing - while in order to accomplish the “mesh” sharing scenarios, we'd need bi-directional (actually, multi-directional) synchronization of items.  But RSS is compelling because of the power inherent in its simplicity."

I think SSE will be a really big deal. It will enable all kinds of multi-directional syndication and synchronization across many different applications. Who says Microsoft doesn't innovate? Who says Microsoft doesn't participate in the open source community? This is big!

Will Snocap make music sampling work?

The New York Times has another interesting article today "Putting the Napster Genie Back in the Bottle". The story is about Shawn Fanning's new company Snocap. You might remember that Shawn was the creative genius behind Napster. Snocap is almost the antithesis of Napster.

Snocap technology creates a "digital fingerprint" of every song file it finds on the Internet. It does this by analyzing the song file as a binary file of ones and zeros and comparing them to other known files. It doesn't matter how the file name is changed, or if the file was shortened, the Snocap technology can uncover copyrighted material and either block it from download, or charge the user a fee agreed to by the copyright owners. Music owners can go to Snocap to "claim" their music and decide if they want to block it, or establish terms for sale. But for this to work, the P2P networks must also agree to employ the Snocap technology, and so far only one file sharing service has signed up.

The technology works but making it a business success will be very difficult. Jonathan Spalter, former CEO of Snocap says "They have a shot, but it's a nine-bank billiard shot and they have only one stroke of the cue to get it right," Mr. Spalter said. "You need to get consensus from a firmament of major labels, independent labels, the publishers, courts, legislature, the peer-to-peer to companies, retailers and other actors. This is the ultimate, purest form of herding cats."

The article quotes Wayne Rosso,  CEO of Mashboxx. "Mr. Rosso says that this tests the theory that people use peer-to-peer, or P2P, file-sharing networks to try out songs, and that they will pay for music they like. "It is the great hypocrisy leveler," he said. "We will see if people use P2P to sample music or not."

When I was at Napster I proposed the idea of a free sampling service and a paid subscription service. The idea was that the free file sharing service would share low bit rate and therefore lower sound quality songs for sampling. We would block the transfer of high quality, high bit rate files. If the user liked the "free sample" song and wanted to own a high quality version, complete with liner notes, lyrics, and cover art, they could purchase it from Napster. The Snocap technology will allow the concept to be tested, and see if consumers will make it commercially viable.

I wrote an earlier post "Napster - the inside story". It is sad to remember this all could have been avoided. "We made one last effort to convince the labels that they should do a deal with us. A little known underground product called Gnutella had just surfaced. It was a P2P file sharing program that required no central server and no company to operate it. Gnutella was an open source program and we were already seeing new variants of it emerge. We told the record labels that we (Napster) had a loyal audience of over 50M users. We had servers that could control distribution. If they didn’t do a deal with us and put us out of business then Gnutella and its derivatives would become unstoppable. There would be no company to sue and no server to shut down. If we worked together now we could convert the market to a paying subscription or per download model. If we didn’t do a deal chaos would ensue. They didn’t believe us and didn’t really understand what this Gnutella threat was. "

We are still in the very early stages of the digital music era. There will be new technology and new business models in the future that will effective capitalize on the enormous market for music.

Google's gift - text ads

One of Google's gifts to the Internet is text ads. Randall Stross of the New York times has an interesting column today, "How Google Tamed Ads on the Wild, Wild Web".  I remember 6 years ago when I was at AltaVista banner ads and flashing animated gifs were the standard for web advertising. Later pop-up ads and interstitial, ads that preceded the download of a content page, were all the rage. It seemed like every week AOL was winning $50M advances from advertisers who wanted to sponsor certain pages.

Google held the line and only allowed short text ads that were relevant to search results. This was a huge risk for Google. There were no other web sites or portals doing this, and it was not clear advertisers would agree to pay money for such low tech, brand free ads.

The New York Times article says "Without intending to do so, the company set in motion multilateral disarmament by telling its first advertisers in 2000: text only, please. No banner ads, no images, no animation. Just simple words, which would go either at the very top of the page, above the search results or, alternatively, as the experiment evolved, at the far right. These "sponsored links" had to conform to strict limits on length and aggressiveness in punctuation and phrasing. If you wanted to claim in your ad that you were the "best," you had to display the third-party authority that authenticated the claim.

Knowing that an entirely free service was not likely to last, some Google users offered to subscribe for $10 or $20 a year, if spared exposure to commercial messages. Google executives seriously investigated an ad-free subscription model. In the meantime, the major online ad networks were knocking on its door, offering a turn-key advertising service. They would supply the paying sponsors and the banner ads; Google had only to sign on the dotted line.

Sergei Brin and Larry Page, the Google co-founders, were more receptive to internal suggestions that could not be found in a marketing textbook - like text-only ads. These could be created by a business of any size; the format would permit a business to try out hundreds, even thousands, of variations, statistically measure the results and see which ones drew clicks and which did not. This would please advertisers."

It must have been tempting to sign big deals with the advertising networks like all the other portals were doing. But Google stuck to their principles, and it paid off big time. Thank you Google!

As I mentioned in an earlier post,  "The Search" an insiders response" ,  "Google deserves a lot of credit. They did four major things right. First, the PageRank algorithm was far superior to any other ranking/relevance method, and still is. Second, their use of cheap, scalable PCs and storage put them at a serious cost advantage over everyone else. Third, their implementation of paid search (AdWords) was simple, elegant, and very effective. Fourth, and maybe most importantly, they stayed the course on focused on search, while everyone else was trying to copy AOL and become a consumer portal. Great decisions."

Each one of these four major decisions went against conventional wisdom. AOL, Yahoo, Excite, Lycos, MSN, and AltaVista were the big players and they all did exactly the opposite of what Google did. It is hard today, five years later, to understand how critical and unconventional, these decisions were. These were not technical decisions, theses were business decisions. Larry Page and Sergei Brin are known as technical wizards, but they are very sharp business guys too.

Look for Google to continue to do things in an unconventional way. They will not copy the big players, and will innovate with both technology and business models.

Google data centers and dark fiber connections

Robert X. Cringely wrote a fascinating story today "Google Mart" about Google's plans for all their data centers and dark fiber they have been buying. Google has tens of thousands of servers, and over 50 data centers, scattered all over the world. This infrastructure, coupled with the Java script and code they already download to your PC in the background, is what will allow them to deliver Web based software services (SaaS) in a new and interesting way. Google has been quietly buying up huge amounts of dark fiber to connect all of their distributed data centers.  This plan will take years to unfold, but all the pieces are falling into place.

Dark fiber is a term used to describe unused fiber optic cable in the communications infrastructure. It is "dark" because it is "unlit" by usage. Back in the 90's telecom boom those companies built out a communications infrastructure with 10 times the necessary capacity. The theory was that the fiber was cheap. All the cost was in the labor and installation process of burying the cable. It was much cheaper to do it all once rather than add capacity every few years. Years later these telecom companies fell on hard times and Google quietly bought the unused fiber capacity for pennies on the dollar. Very shrewd move.

So, why has Google been buying up lots of dark fiber? 

"The probable answer lies in one of Google's underground parking garages in Mountain View. There, in a secret area off-limits even to regular GoogleFolk, is a shipping container. But it isn't just any shipping container. This shipping container is a prototype data center.

Google hired a pair of very bright industrial designers to figure out how to cram the greatest number of CPUs, the most storage, memory and power support ind power support into a 20- or 40-foot box. We're talking about 5000 Opteron processors and 3.5 petabytes of disk storage that can be dropped-off overnight by a tractor-trailer rig. The idea is to plant one of these puppies anywhere Google owns access to fiber, basically turning the entire Internet into a giant processing and storage grid.

While Google could put these containers anywhere, it makes the most sense to place them at Internet peering points, of which there are about 300 worldwide.

Two years ago Google had one data center. Today they are reported to have 64. Two years from now, they will have 300-plus. The advantage to having so many data centers goes beyond simple redundancy and fault tolerance. They get Google closer to users, reducing latency. They offer inter-datacenter communication and load-balancing using that no-longer-dark fiber Google owns. But most especially, they offer super-high bandwidth connections at all peering ISPs at little or no incremental cost to Google.

Where some other outfit might put a router, Google is putting an entire data center, and the results are profound."

Cringely goes on to say that  Google will place their "cargo container data centers" near network access points, thereby improving performance for end users, and creating its own reliable, redundant super computing grid.

My guess is that Google will not compete head to head with Microsoft. That would be foolish, and is entirely unnecessary. Remember my favorite cliche': "In a fight between a grizzly bear and an alligator, the terrain determines the victor".  I think Google and Microsoft will, for the most part, stay with the terrain where they are strong, and only occasionally venture off into the others turf.

GYMA (Google, Yahoo, Microsoft, AOL) will be important players in the next generation of the web, sometimes referred to as Web2.0. It really is a whole new thing. The idea of SaaS (Software as a Service) is to move computing resources off individual PCs  and onto the network. To do this you need high bandwidth connections. Nearly everyone has that. But, if you can get data storage near the network access points and a computing infrastructure there as well...Wow! This changes the dynamics significantly.

We could be on the verge of another web innovation cycle reminiscent of 1995. Some entrepreneurs have spent the last two years building products and services in anticipation of this wave. The fun is about to begin.

Ray Ozzie, Microsoft CTO, has a new blog

Ray Ozzie, CTO of Microsoft, has a new blog. It can be found at http://spaces.msn.com/members/rayozzie/

I worked for Ray for several years at Groove Networks. He is the smartest guy I have ever worked with, a true visionary, and a great guy. He writes his blog in a conversational style. The way he writes is exactly the way he is in real life.

One thing most people don't know about Ray is how funny he is. When I worked with Ray at Groove we met every Thursday morning for about four hours to deep dive on a technical subject. Ken Moore, Eric Patey, Jack Ozzie, and George Moromisato were all part of the Thursday morning gang.

Every meeting invariably started with either a debugging session of some problem Ray found the night before, or a hilarious rendition of funny movie lines or video clips that Ray had found on the web. Ray has a collection of sound clips and video clips for all occasions. He probably has no time for frivolity now, but back at Groove the humor breaks were priceless. No one would ever guess that Ray, Ken, and Eric were so funny. The first time you meet these guys you think they are the most intense, serious guys you have ever met. They are...but they have another side to them. Eric does a Ross Perot imitation that will have you falling on the floor laughing. Ken is famous for "Dave Letterman style" top 10 reasons why lists. Those were the days!

On a serious note, if you want a view into the Microsoft corporate thought process you should read Ray's blog. http://spaces.msn.com/members/rayozzie/

Invention or Innovation?

Invention is the creation of a feature or technology that is totally new. Innovation takes a collection of inventions, combines them with existing products or technologies, and produces a commercially viable product. Both invention and innovation are vitally important to our industry.

Napster changed the world 6 years ago, but we didn't invent anything. We did innovate by combining FTP (File Transfer Protocol), search, instant messaging, and P2P (Peer to Peer) networking, into a simple elegant user interface that made it easy to use.

Naspter would not have been possible without the invention of FTP, Search, IM, P2P, and several other technical inventions. These inventions were the basis for hundreds of innovative products by many different companies.

Dan'l Lewin, Corporate Vice President, .NET Business Development at Microsoft wrote an editorial today in "Always On" entitled "Microsoft, Innovation: the Democratization of Technology". Dan'l explains "The essence of Microsoft’s innovation machine is commercialization: the commoditization of technology, partner empowerment and the delivery of new products and capabilities to the global mass market. This occurs through our partner ecosystem that continually innovates or invents new ways to solve customer problems. That means there’s always something in it for others in a very big way."

Microsoft invests billions of dollars in both invention and innovation. The Microsoft Research Labs produce amazing inventions every year. Many of them are incorporated seamlessly into existing Microsoft products. Many others are extraordinary inventions, but don't fit with any Microsoft product. These inventions are now available for license through Microsoft IP Ventures.

Microsoft innovations happen every day in hundreds of different products. It happens seamlessly and without fanfare, and goes largely unnoticed. Microsoft innovates by making it easier to get work done.  This means

·       integrating new technical features into existing products

·       making existing products interface seamlessly with new technologies

·       making multiple products work together

o      Like search on the desktop, or in the browser

o      Like RSS in Outlook, the operating system, etc.

o      Like creating Sharepoint spaces directly from Office

o      Like including IM presence in Outlook email

Microsoft is sometimes criticized for not inventing anything and instead being an imitator or "fast follower". I prefer to classify Microsoft as an innovator, as defined above. I wrote another post several months ago on this subject "Innovate or Imitate...Fame or Fortune". In retrospect I should have titled it "Invent or Innovate...Fame or Fortune".

Inventions bring fame, while innovations bring fortunes. Inventions don't solve a customer problem. Innovations take inventions to the next level by adding commercially viable technologies, elegant user interfaces, and focusing them on solving a customer problem. That is what innovation is all about, creating value by solving customer problems.

Zink - The next big thing in printing technology

Zink is a "zero ink" technology for high quality digital image printing. The technology was developed by Polaroid Research Labs. Zink is a newly formed start-up that acquired the technology and engineers from Polaroid. The initial target market for Zink is consumers with digital cameras who want to print their photos at home. There are many other commercial applications of the technology as well.

Zink "zero ink" means that the printer doesn't have a an ink jet print head. Instead, colorless dye forming crystals are embedded in the photo paper itself. They are "developed" by passing the paper through a Zink printer, which is basically a stationary thermal transfer print head. The print head selectively heats each pixel at a different temperature to create different colors.  Think of Polaroid instant film technology applied to photo printing on paper. It is amazing!

The picture quality is extraordinary. The Zink printer is 4 to 10 times faster than a traditional ink jet printer. And, the total print cost is lower than ink jets. Zink will be a disruptive technology in the photo printing industry.

The Zink photo paper isn't actually paper. It is a plastic substrate impregnated with several layers of color crystals. The substrate comes in a clear and a white version.  The clear version looks like a clear plastic film similar to overhead transparency film. When it is passed under the thermal print head the color crystals are activated and a high quality photo image comes out the other end of the printer.

The printer has no moving parts, no ink reservoir, and no heaters, other than the thermal transfer print head itself. So it is a very small, low profile, print device. It can fit in the palm of your hand, or perhaps in the future even become part of the camera form factor. The holy grail of reliable printers has been to reduce the number of moving parts. Zink has done it by moving the "ink" to the paper itself.

Zink has technology to manufacture the "Zink paper" for less than the cost of traditional paper and ink. Zink will manufacture the "paper" media and be an OEM supplier to printer partners who will bring Zink printers and solutions to market.

Zink just closed their first round of financing and hopes to have a product on the market next year. You heard it here first. Zink will be The Next Big Thing in photo printing.

VCs can be your most important partner

VCs can be your most important partner in building a successful technology business. Rick Segal at JLA Ventures is a rising star in the VC world and someone you should know. He recently wrote a post "The New VC Handbook" explaining his philosophy on the VC - entrepreneur partnership. Fred Wilson also wrote a post today on the same subject entitled "The VCs Customer". Fred's post explains that they see about 1,500 company proposals per year and invest in four or five. That is going to leave lots of potentially unhappy customers. I strongly encourage you to read both articles to learn the VC side of the process.

Here is a teaser from Rick's post "So, I’ve been working on a bit of a VC playbook. In my view, it’s the way VCs today are going to have to think and act if they want to play with the really smart kids.  I’m sharing because I think you, as a start up, need to evaluate us with the same rigor we are supposed to be evaluating you and these ‘rules’ from the playbook might give you some points to think about."

I work with VCs everyday. In my opinion they are the strongest advocate for your business you will find. They use their network of contacts to promote your company, find great people to join your company, uncover potential strategic partnerships, and find potential big customers for you. They have money in your company and have a vested interest in making you successful.

In an earlier post "Should I Take Venture Capital Money?" I covered some of questions you should ask before taking VC money. Another post covered "Angel Investors for Seed Stage Capital"  How you finance your company can have a direct effect on your success. Investors are your partners, and they can each bring something different to the table. Take as much care choosing your investor partners as you do hiring key people or making technology decisions.

Start looking for capital long before you need it. It takes much longer than you think it will to find the right investment partner, perform the "due diligence" and close the deal. The VCs are very busy people. They are working to make their current companies successful and have limited time to investigate new companies. The process takes much longer than you think it should.

However, as an entrepreneur, you should take ample time to evaluate potential investors as well. Don't necessarily take the first one that comes along, or the one that offers the best pre-money valuation. Think about what they bring to the table and how you will be able to work together in the future.

I work with some outstanding VCs and Angels in the Boston area. If you are a software company building on the Microsoft platform, and you need help finding a VC or Angel partner, send me an email (my address is in the ABOUT section) or leave a comment below.