Don Dodge on The Next Big Thing

How to partner with Microsoft

Microsoft's Worldwide Partner Conference was held last week in Houston. If you didn't attend you can see videos of sessions here.

I get questions every day from startups wanting to know how to partner with Microsoft and how to get access to people and programs. This post is an attempt to answer a lot of those questions.

 How to start partnering with Microsoft

Become a partner. The first step is to sign up on-line as a partner. Microsoft partners are eligible for lots of free on-line training that covers technology, support and business.

Marketing help. Visit the Partner Marketing Center to learn about how you can participate in Microsoft marketing campaigns and resources to help you build your own campaign.

Build your sales channel. Microsoft has a Partner Community program that helps you find appropriate channel partners and build alliances.

Get free software and support. The Empower Program for ISVs helps new software companies get software, consulting, and MSDN subscriptions for the low price of just $375. The software alone is worth over $10,000.

Join the ISV community. Microsoft has a special ISV Zone for software companies. Find partners, get leads, get beta software, and get involved in the community.

Microsoft Startup Zone. If you are a startup you should visit the Microsoft StartupZone. The StartupZone is managed by the Emerging Business Team which is focused on helping startups build a relationship with Microsoft. There is a special Partner Section of the StartupZone with lots more information about specialized programs that might be right for you.

Emerging Business Team. How can the Emerging Business Team help you? It depends on the stage of your company and what type of help you need.

If you are in the development stage we can sometimes help you get access to beta software or get you access to our performance labs and testing labs. If you are launching your product we can sometimes hook you up with a relevant Microsoft marketing campaign. If you have a product that complements a Microsoft product or adds functionality we can introduce you to the product team for a possible closer partnership. If you are already actively selling to customers we can sometimes introduce you to the Microsoft Account Manager for those customers. We can also refer you to Systems Integrators who might be interested in picking up your product.

Who can help my startup? The Emerging Business Team is organized by product area. Visit Microsoft StartupZone to see who covers each area, and how you can contact them.

Microsoft is serious about partners. There are thousands of people at Microsoft dedicated to helping partners succeed. Take the first step and join the partner program.

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The 7 deadly sins and 10 lessons of a failed startup

Failure is part of the maturing process in the startup world. If you haven't failed...you aren't trying hard enough, or you aren't  "pushing the envelope" far enough. I have always said "Success is a terrible teacher. Success masks over flaws that may hurt you later."

Roger Ehrenberg - the co-founder of Monitor 110, wrote a story on the lessons he learned from this recently failed startup. [found via Fred Wilson] He lists "seven deadly sins" that lead to their demise.

• The lack of a single, "the buck stops here" leader until too late in the game
• No separation between the technology organization and the product organization
• Too much PR, too early
• Too much money
• Not close enough to the customer
• Slow to adapt to market reality
• Disagreement on strategy both within the Company and with the Board

In my opinion there are two key reasons Monitor 110 failed; first, no clear CEO leader, and second, too much money. Trying to run a startup as a group of friends or make decisions by committee will never work. Too much money allows you to waste time, ignore danger signals, and continue down a wrong path for too long.

More Lessons - But here is the story of GameClay, another startup failure at the other end of the spectrum. They didn't raise any VC money...and still failed. [Found via Jeremy Liew]

1. If your idea starts with “We’re building a platform to…” and you don’t have a billion dollars in capital, find a new idea. Now.
2. It’s a marathon, but it’s a marathon made of sprints
3. Initial conditions matter. A lot.
4. Developing in a vacuum never works.
5. Beware the chicken and the egg.
6. Prototype any 3rd-party libraries that you’ll be depending upon, before you base your product on them.
7. If you’re doing anything other than building your project and getting users, it’s premature.
8. The product will take longer than you expect. Design for the long-term.
9. People have an incentive not to crush your dreams. Take everything they say with a grain of salt.
10. Know your limitations.

Building a startup is the most difficult, and most rewarding, thing anyone can do. Sometimes you can even make some money at the end of it all. There are so many things that can go wrong it is a miracle when a startup actually makes it.

It is important to celebrate our successes, learn from our failures, and value them equally. Failure is important...because success is a terrible teacher.

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Microsoft Revenues Top $60 Billion - up $9B over last year

Microsoft (MSFT) announced revenues topped $60 Billion for the year ended June 30, 2008, an increase of 18% over last year. This was the largest annual revenue growth since 1999.  Profits were $17.6 billion, up more than 25 percent from a year ago.

Growing a Yahoo every year - Microsoft is strong and growing. Revenues were up $9 Billion over last year. Just to put that in context, Yahoo (YHOO) recorded total revenue of less than $7B for the whole year last year. Microsoft is growing more than a Yahoo a year. This is truly amazing.

All divisions reported strong increases. Here is the  breakdown of the 4th quarter numbers by group;

Windows Client: Revenue $4.37 billion, up 15 percent;
Profit 3.23 billion, up 16 percent.

Server & Tools: Revenue $3.74 billion, up 21 percent;
Profit 1.37 billion, up 39 percent.

Online Services: Revenue $838 million, up 24 percent.

Business Division (Office): Revenue $5.26 billion, up 14 percent; Profit $3.34 billion, up 12 percent.

Entertainment and Devices (Xbox, Zune): Revenue $1.58 billion, up 37 percent. Profitable for the full year.

 

Strong Growth - Management offered the following guidance for the full fiscal year ending June 30, 2009:

Revenue is expected to be in the range of $67.3 billion to $68.1 billion.

Operating income is expected to be in the range of $26.3 billion to $26.9 billion.

Diluted earnings per share are expected to be in the range of $2.12 to $2.18.

All divisions are doing well and forecasting strong growth next year. Microsoft's cash balance stands at nearly $24 Billion, and is growing at over $1B per month.

Microsoft has been repurchasing common stock on the open market, totaling $12.5 Billion last year, and $27.5 Billion the year before. These stock buy backs lower the number of outstanding shares, which in turn, increases the earnings per share.

PaidContent has some good analysis of the numbers.

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Newspapers take notice - blogs are the future

Blogs are going professional and replacing newspapers for insightful, fast breaking, news and analysis. The same thing happened to network TV news years ago. Chris Mathews, Tim Russert, Bill O'Reilly, and others replaced the "just report the facts" news casts with more personal, insightful, opinionated commentary.

TechMeme has several blog articles over the past week that made me think about the parallels between TV news vs. Meet the Press, and newspapers vs. blogs. The direction is the same. More personal and more opinionated. Chris Mathews, Tim Russert, and Bill O'Reilly are personalities that make the news personal, interesting, and sometimes controversial. Blogs do the same thing for text based news and commentary. Newspapers and magazines should pay attention. The smart ones already are.

The Industry Standard says the TechMeme Leaderboard of "A-List" bloggers is being replaced by professional publishers.

"the old-school A-listers aren't being displaced by the many talented B-to-Z listers out there. Rather, the Leaderboard is increasingly populated by mainstream publishers, tech blog networks, and corporate blogs and PR sites."

Fred Wilson, an A-list blogger and VC, thinks blogs are personal and that is what makes them unique. Fred says;

"This blog is me and I am this blog. It's mine and will always be mine. I understand why many of the individuals who made blogging what it is are either moving on or turning their blogs into businesses. That's the way it is."

Blogs vs Newspapers - Big Differences - We are starting to see professional publishers (newspapers and magazines) get into blogging and make it a business. This makes perfect sense to me. But there are big differences. Blogs are personal. The author is the star, not the newspaper brand name. Blogs are news and commentary, not just news. Blogs are fast breaking stories that can be edited and updated later, not highly polished newspaper articles that get printed tomorrow.

There will always be a place for network TV news, newspapers and magazines. Blogs provide another channel for the big media publishers to leverage their talented writers and brand, with several advantages. Blogs have the advantage of instant delivery over the Internet, and basically zero cost of distribution. It is generally accepted that blogs will be fast, unedited, frequently updated, and opinionated.

My good friend Dan Farber has done a great job at CNet News doing exactly this. Dan has led the way by blogging "Between the Lines" and now "Outside the Lines" showing now journalists can also be great bloggers.

Blogs are a conversation - Newspapers and print media are one way broadcasts. Blogs encourage conversation with comments and cross linking. The writers are accessible and responsive. This is why I get most of my news from online news sites and blogs.

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Web Innovators Boston

WebInno, founded by David Beisel of Venrock, is a Boston based Web Innovators Group where startups can demo their stuff to the tech community.

Last night there were three startups that presented on stage (Main Dish) and eight other startups that showed their stuff at tables (Side Dish) around the perimeter of the room. There were hundreds of people, my guess is 800, in attendance.

Main Dish

• Totspot - a place for parents to publish a page about their kids and share with family and friends.
• Webnotes - a tool that helps you create and manage online annotations. Very similar to Onfolio.
• Zeer - a grocery product community that helps people “believe in what they buy.” Connects people to product information, consumer communities, and buying advice.

Side Dish

• 211me - Personalized mobile mashups
• WordChamp - Free online language learning
• PaperG - Local online advertising
• Creaturepark / Ingeeni Studios - Games
• YouCastr - Interactive sports streaming
• LuckyCal - Mixes together information from your calendar with public events to find events that might interest you.
• Snipd - Stealth mode. No idea what they are doing. 
• Tikatok - Kids create their own stories – and publish those stories into books for friends and family.

The audience voted Zeer as the best presentation/idea. I liked WebNotes, but found myself comparing it to JJ Allaire's Onfolio, and asking what is different?

WebInno is a great Boston Web 2.0 networking event for upcoming startups and "all the usual suspects". I saw Dharmesh Shah (HubSpot), Ben Saren (CitySquares), Matt Douglas (Punchbowl Software), Shawn Broderick (TrustPlus), Karim Nurani (Trinet), Reed Sturtevant (Microsoft), Mike Tyrrell (Venrock), Mike Werner (Web Studio Project) and bloggers Chris Herot, and Pito Salas. I was surprised, and delighted, to see Kevin Marks from Google. Kevin is based in Mountain View and is the evangelist for Open Social. I am sure Scott Kirsner and David Cancel were there somewhere but I didn't see them in the masses of mayhem.

Thanks to David Beisel for organizing the WebInno event. In October I am organizing an event with David focused on web advertising networks - opportunities and challenges.

Upcoming Boston Events

Software Industry Conference 2008 - July 17-19 [Register] This is the Shareware Software conference hosted in Boston this year. Microsoft is a sponsor.

TECH Cocktail Boston 2, Boston - July 24th, 6:30PM
Tequila Rain by Fenway Park [ REGISTER ] I went to the Tech Cocktail last year and it was a huge success in terms of turnout. So many people it was hard to move around or carry on a conversation, but a great party, lots of technology people that you don't see on the conference circuit.

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Advertising rates dropping, Social Networks lowest CPM

PubMatic published its monthly AdPrice Index for July 2008 and it showed ad rates declining in most markets, especially Social Network sites. PubMatic draws its data from 4,000 Web sites that take ad network advertising, 85% of which are based in the U.S.

Surprisingly, small web sites can demand significantly higher CPM rates than larger web sites. This may be due to better targeting smaller niche markets that advertisers consider more valuable.   

Advertising rates vary in each market space too. News sites and gaming sites traditionally have the highest ad rates...Social Networks have the lowest rates.

The average CPM rates across all web sites and market segments is just $.36 per thousand page views.

How many page views are required to generate $1M in advertising revenue? Based on this average CPM of $.36 it would take 2,777,777,777 page views, or about 2.8 Billion.

Now you know why Steve Ballmer says the advertising business is all about scale. It takes billions of page views to make any money. The more page views and scale you have, the more advertisers want to advertise on your ad network. The more advertisers you have competing...the higher the ad rates.

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Bambi Francisco's VatorTV launches Newsroom

Bambi Francisco left CBS MarketWatch about a year ago to launch her own company, Vator.TV. Last week VatorTV announced a new design and new contributors to its Newsroom. I am one of the new contributors along with Mark Cuban, Fred Wilson, and several others.

The new design will make it easier for users to uncover the hundreds of video interviews, blog posts and community comments that have made the site a go-to resource for startup news and information. For instance, VatorNews has a couple hundred videos of lessons from entrepreneurs and investors, sharing advice about what it takes to be a successful entrepreneur and what investors look for in an entrepreneur.

The newsroom will also highlight video and text-based content generated by Vator's growing community of contributors. Recent contributors include venture capitalists Jeremy Liew and Fred Wilson, and technology executives like Microsoft's Don Dodge. Each contributor will now have their own channel that readers can subscribe to.

I wrote an article "Does Web 2.0 = Bubble 2.0?" that has generated a lot of interest and comments on VatorTV. You can find my "channel" on VatorTV here.

Why Powerset is important and different

Microsoft announced yesterday the acquisition of Powerset, a natural language search engine. Techmeme has lots of stories about the acquisition. Today the stories are all about Microsoft/Yahoo potential deals. But lets take a step back and look at how Powerset works and why it is an important development in search.

There are two key things to consider;

1. Powerset technology is more about indexing the content and understanding its meaning, than the query itself. This has enormous implications.
2. There are many lucrative markets for this technology...not just consumer web search.

How does natural language search work? There is a lot of linguistic rocket science to this but basically it breaks the search problem into two parts. First, understanding the intent of the user's query by using (NLP) natural language processing. Second, training their search index algorithm to parse the structure and context of individual web sites, and add meta data about the pages to the index.

Powerset is using linguistics and (NLP) to better understand the meaning and context of search queries. But the real power of Powerset is applied to the search index, not the query. The index of billions of web pages is indexed in the traditional way. The big difference is in the post processing of the index. They analyze the indexed pages for "semantics", context, meaning, similar words, and categories. They add all of this contextual meta data to the search index so that search queries can find better results.

Who is the best ballplayer of all time? Powerset breaks this query down very carefully using linguistic ontologies and all sorts of proprietary rules. For example, they know that "ballplayer" can mean Sports. Sports can be separated into categories that involve a "Ball". Things like baseball, basketball, soccer, and football. Note that soccer does not include the word ball, yet Powerset knows this is a sport that includes a ball.

Powerset knows that "ballplayer" can mean an individual player of a sport that includes a ball. They know that "best of all time" means history, not time in the clock sense.

Powerset understands the intent of the query, but more importantly, it understands the meaning and context of all the relevant web pages. Rather than just match keywords from the query, Powerset looks for "semantic" matches in its index of billions of web pages.

Why hasn't this been done before? Powerset uses all these rules and linguistic approaches to analyze billions of web pages, and adds "meta data" hooks into each word on each page. As you can imagine this is a huge scaling problem, that has been impossible to solve economically until now. With Moore's Law applied to constantly reducing the cost of computing, storage, and bandwidth, it is now possible to solve this problem, although it is still very expensive.

Where else could Powerset technology be used? Consumer web search is one obvious market, but there are many more.

• Enterprise search, companies searching their own internal documents and information, is a huge market that would benefit from Powerset technology. Enterprise search is a multi-billion dollar market.
• Advertising targeting. It is easy to target ads to search terms, but extremely difficult to target ads to general web content or User Generated Content. Today ad targeting technology does a poor job of understanding the context and meaning of a news article, a blog post, or magazine article. Powerset technology could be used to better understand this content and better target more relevant ads. This is a multi-billion dollar opportunity.
• Vertical Search - News search, medical search, people search, resume search, and basic knowledge search could be dramatically improved with Powerset's "semantic" search indexing.

I am sure you can think of many other places Powerset's semantic technology could be used. The technology will improve and expand over time. There is enormous potential here, more than a small startup with limited funding could hope to address. This is why Powerset joining forces with Microsoft makes so much sense.

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Microsoft acquires Powerset

Microsoft has agreed to acquire Powerset, a Natural Language search engine, founded by Barney Pell. Satya Nadella, Senior Vice President, Search, Portal, and Advertising said on his blog;

Powerset will join our core Search Relevance team, remaining intact in San Francisco. Powerset brings with it natural language technology that nicely complements other natural language processing technologies we have in Microsoft Research.

More importantly, Powerset brings to Live Search a set of talented engineers and computational linguists in downtown San Francisco.

Powerset said on their company  blog post;

"With any start-up, the challenge is to take the seeds of an idea and grow it into a viable company," he wrote. "At Powerset, we transformed our idea into a world-class semantic search platform, demonstrating the future of search with our Wikipedia search experience. But building a large-scale semantic search engine is expensive, requiring an engineering effort and computing resources beyond what most start-ups could ever imagine...We believe that this is the fastest way to bring our technology to market at a large scale."

Barney Pell is an old friend...and a super guy. I look forward to working with Barney and the Powerset team in the future. Here is a picture of Barney and I at last year's TechCrunch Conference. Also in the picture is Jeanine LeFlore (CEO of LiveHit),and the now famous Sarah Lacy of BusinessWeek.

Information security weakest link? Stolen laptops and cell phones

Over 600,000 laptops are reported lost or stolen every year at US airports according to a ComputerWorld story. The story, based on a survey by the Ponemon Institute says that 65% of them are never recovered. Laptops are most often lost at security checkpoints. Hotels and taxi cabs are also prime locations for losing laptops and cell phones.

Close to 10,278 laptops are reported lost every week at 36 of the largest U.S. airports, and 65% of those laptops are not reclaimed, the survey said. Around 2,000 laptops are recorded lost at the medium-size airports, and 69% are not reclaimed. The institute conducted field surveys at 106 airports in 46 states and surveyed 864 business travelers.

Millions of dollars are spent each year on sophisticated information security products. Simple things like stolen laptops and lost memory sticks  / thumb drives are a major security vulnerability.

The Washington Post reports that data breaches are up 69% this year.

The Identity Theft Resource Center in San Diego tracked 342 data breach reports from Jan. 1 to June 27. More than one-third of the reports came from businesses, a 27 percent increase over business breaches for all of 2007.

The center found that data breaches among health-care providers and banks also increased. They now account for 15 percent and 10 percent of the breaches, respectively. Breaches from educational institutions, government entities and the military declined for the third year in a row, the center found.

Hacking was the least-cited cause of data breaches in the first six months of this year. Instead, lost or stolen laptops and other digital storage media remain the most frequently cited cause of data breaches, accounting for more than 20 percent of all reported cases, the center found. The inadvertent posting of personal and financial data online prompted roughly 15 percent.

The Industry Standard reports that losing cell phones is even more common. And, the newer Smart Phones contain contact lists, pictures, documents, confidential emails, links to sensitive information, etc.

I didn't mean for this to be an alarming post about information security breaches. I just did a simple web search and these were the top three links in the search results. It looks like there is a lot of work yet to be done in the Information Security area.

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