Don Dodge on The Next Big Thing

Microsoft tide turning Bing, Xbox, Windows 7

The Wall Street Journal says the Tide is Turning for Microsoft with Bing, Xbox, Windows 7, and the announcement of the Yahoo search deal. The stock market agrees. MSFT stock price is up about 20% since the beginning of the year. 

Please read the full WSJ article, but here are a few juicy quotes;

“Reviewers are praising the test version of its Windows 7, which will go on sale in final form Oct. 22. Microsoft's Xbox business is getting buzz for innovation. Its new search engine, called Bing, has earned plaudits and market share since it launched last month.”

“And now Mr. Ballmer, Microsoft's CEO, has reached a deal with Yahoo that, if successful, could give him a big boost in his company's rivalry with Google. Under their 10-year agreement, Microsoft's Bing will become the Internet search service on Yahoo, while Yahoo will sell advertisements that run next to the search results to large companies on behalf of both Microsoft and Yahoo. The agreement could catapult Microsoft's share of online searches conducted by U.S. consumers to nearly 30% from just over 8.4%, compared to Google's 65% of the market, based on market estimates by Comscore Inc.”

“Robert Murray, CEO of search marketing firm iProspect.com, say his clients are seeing significant improvements in results from ads on Microsoft's search engine since Bing launched; they are beginning to invest more money with Microsoft, he says.”

Apple cofounder Steve Wozniak is a big fan of Bing. Woz saw Bing demo and said “"That was the most astounding software demo I've every seen," “I thought it was going to be all marketing and sales pitch…I was really impressed.” “I have been begging for this stuff for years” Take a minute and watch this interview with the Woz. He is not easily impressed, and certainly no fan of Microsoft, so this is a huge vote of confidence.

Yes, the tide is turning for Microsoft. Over next 12 months Microsoft will release the biggest slate of products ever including new versions of Windows, Office, development tools, and much more.

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Twiistup 6 Hollywood innovation in tech & media

TwiistUp is a two day technology conference and party based in Hollywood that brings together innovators in media and technology. It starts tomorrow July 30th (register here) and features speakers like Jason Calacanis (Mahalo) Mike Jones (MySpace), Brad Feld (Foundry Group), Quincy Jones (Music), Brook Burke (TV host), Dave McClure (Founders Fund), Dmitry Shapiro (Veoh), and many more.

Bubblicious wrote a blog post 101 People You will Meet at Twiistup. It is an impressive list of startup CEOs and Hollywood media people. In addition to those 101 people, Robert Scoble, Sarah Lacey, and many others will be there. I will be there too. Tough duty I know, but someone has to do it. :-) Stop by and say hello.

Twiistup is a bargain at just $297. Register here. You can follow TwiistUp on Twitter.

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Windows 7 Incubation Week August 24th

With several successful Microsoft BizSpark Incubation Weeks (CRM Reston, CRM Boston, Win 7 Irvine, Mobility Mountain View), we are pleased to announce Microsoft BizSpark Incubation Week for Windows 7 (Reston, VA, week of 24^th Aug’09).

The current economic downturn is putting many entrepreneurs under increasing pressure, making it critical to find new resources and ways to reduce costs and inefficiencies. Microsoft BizSpark Incubation Week for Windows 7 is designed to offer following assistance to entrepreneurs.

· Learning and building next generation application utilizing new and unique Windows 7 capabilities with help of on-site advisors and off-shore development team

· Getting entrepreneurs coaching from guest speakers and a panel of industry experts

· Generating marketing buzz for your brand

· Creating opportunity to be highlighted at upcoming Windows 7 launch

We are inviting nominations from BizSpark Startups interested in developing Windows 7 applications that target one or more of the following scenarios:

• Windows Touch, ink, gesture support, plus handwriting recognition enabling new input capabilities
• Rich Animation Framework
• Sensor and Location Framework (GPS, light, motion)
• New taskbar, destinations, and shell integration enhancing discoverability and usability
• New extensible Ribbon adding Office 2007-style controls, menus, and galleries to your application

The Microsoft BizSpark Incubation Week for Windows 7 will be held at Microsoft Technology Center, Reston, VA from Mon 8/24/2009 to Fri 8/28/2009. This event consists of ½ day of training, 3 ½ days of active prototype/development time, and a final day for packaging/finishing and reporting out to a panel of judges for various prizes.

This event is a no-fee event (plan your own travel expenses) and each team can bring 3 participants (1 business and 1-2 technical).

To nominate your team please contact Sanjay.Jain@Microsoft.com or Ashish.Jaiman@Microsoft.com  Nominations will be judged according to the strength of the founding team, originality and creativity of the idea, and ability to leverage new and unique Windows 7 features.

Microsoft outreach helps ignite startups worldwide

Microsoft BizSpark, is a global program designed to help accelerate the success of early stage software Startups. BizSpark, announced in November of 2008, has signed up over 15,000 startups in just 8 months. BizSpark is world wide, and now includes over 1,300 Network Partners in 82 countries who can offer the program directly to startups.

The San Jose Mercury News says “Nearly 10 years after opening its Mountain View campus, Microsoft has built a Silicon Valley presence that includes 1,900 employees, a cutting-edge research lab and key business units. But one of its most important strategic efforts here is a campaign to build ties with startup companies, including a recently launched program (BizSpark) that distributes Microsoft products for free.”

The SJ Merc story includes this great quote from legendary Angel Investor Ron Conway “"Anyone in the tech ecosystem wants to have a presence in the startup community, because the startup community is the future," said Ron Conway, a veteran Silicon Valley "angel investor." While many big tech companies have outreach efforts aimed at startups, Conway said, "Microsoft has probably done one of the best jobs of anybody."

This quote really captures the essence of Microsoft’s outreach to the tech startup community “In another outreach effort, Microsoft frequently allows tech community groups to use its 275-seat auditorium and other facilities on its 32-acre Mountain View campus, which opened in fall 1999. Recent events include a conference of independent developers interested in mobile phone applications, a forum where Web site operators compared strategies for turning visitor traffic into revenue, and a symposium on e-mail and spam. "I wouldn't even think to ask Google or Intel" for the use of a meeting room, said Adeo Ressi of TheFunded.com, a network of startup CEOs. "Microsoft came to us and offered theirs."

BizSpark includes active network partners such as Bob Walsh at 47 Hats, Seedcamp, Thefunded.com, 47hats, TiE, SoftLine, Senac Sao Paulo, Mashable, Startups.ro, China Business Angel Network, etc. These and other BizSpark Network Partners can offer the program directly to startups.

BizSpark hosting partners like RackSpace, Peer1, GoGrid or Navisite, are also significantly driving enrollments and helping startups to get hosting service with a significant discount.   The List of BizSpark hosting partners keep growing and we recently announced that GoDaddy just joined the program.

BizSpark provides Visual Studio, development tools, Windows Server, SQL Server, SharePoint, an MSDN subscription,  and lots more. A more complete list can be found on the BizSpark site.

BizSpark is a global program. The USA is obviously the largest source of startups, but Brazil, Russia, India, and China are also enrolling lots of startups.

BizSpark is for startups building software products or services. The startups must be a private company, less than 3 years old, and have less than $1M in annual revenues. Startups can stay in the program as long as they qualify, up to 3 years. After 3 years they pay a $100 lump sum fee.

See the BizSpark site to learn more, or find a Network Partner to sign you up. You can also contact me directly to get into the program.

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Bing partners with Twitter for Real Time search

Bing, Microsoft’s new search engine continues to innovate, now with Real Time Search from Twitter feeds. TechCrunch already has a story up in BingTweets. The real time results update continuously, scrolling down the left side of the page, and are displayed beside the regular web based Bing results. You can choose trending topics from; Popular Now, People, Places, Products. Click on a tab and Bing gives you a menu of the most current trending topics.

BingTweets.com just launched about an hour ago. The traffic to the site has been heavy so you may experience some delays, although it worked well for me with no delay.

Real Time Search is a hot topic that was discussed at the TechCrunch Real Time conference. You can see a video of the panel on Real Time Search here. The panel included Matt Cutts from Google, Danny Sullivan from SearchEngineLand, Kimbal Musk from OneRiot, and other pioneers in the search world.

We are still very early in the evolution of RT search. Much work is left to be done to better rank the results, apply relevance algorithms, filter out spam, and better identify authoritative results. We saw the same evolution in web based search more than 10 years ago.

CrimsonHexagon, a sentiment tracking service, says Bing is beating Google for the hearts and minds on Twitter. Bing has the Google people scrambling to respond. Competition is great for innovation.

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Seesmic desktop client for Twitter and Facebook

Loic Le Meur launched Seesmic Desktop at TechCrunch Real-Time Stream conference today. It is a desktop client front end and aggregator for Twitter and Facebook. Basically it aggregates all your Twitter posts, replies, private messages, and Facebook posts and friend streams, and presents them in separate columns on one window. You can also post to Twitter or Facebook directly from the desktop.

Seesmic also includes a search capability for Twitter so that you can monitor names, hash tags, products, or anything in near real time. Imagine you are a product manager or competitive analyst and want to follow activity and sentiment about your products or competitors. Seesmic makes it easy.

Here is a screenshot. Note that you can arrange the columns in any order, resize them, individually scroll each one, and have as many columns open as you like. Also note the first two columns in the screenshot are from Twitter, the third from Facebook, and the fourth column from Twitter.

Seesmic is probably more well known for its super simple video chat service that allows you to capture video from your laptop or phone and immediately post it to the web. It allows video chats between multiple people that can be near real time, and preserved for later viewing.

Loic Le Meur says they have a completely web based version in the works, in fact he demoed it at the conference. This means no client download required, and the ability to use it on any device that supports a browser…like your Smartphone.

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Ron Conway on Real Time monetization revenue

Mike Arrington at TechCrunch Real Stream conference started with a panel of Ron Conway (Angel Investor) and John Borthwick (BetaWorks). Ron invested in Google at a $75M valuation. Valuation today is over $130B. That was just one of several home runs by Ron Conway. John Borthwick has invested in lots of Twitter style companies including Twitter, StockTwits, Bitly, and others. BetaWorks is an operating company that also invests in other companies.

Ron invests in people first, idea second, and then how much IP innovation they have. Ron is looking at lots of “real Time” investments. That means content that is being created spontaneously by everyone. That content can be categorized, manipulated, searched, managed, etc.

Mike Arrington says the dumbest thing Twitter could do is add friction (subscriptions) to an open process. Ron Conway says innovation is happening in Silicon Valley, not Sun Valley. This was a jab at the old media execs (John Malone,  RupertMurdoch, Barry Diller) meeting at Sun Valley this week.

Ron says Real Time apps like Twitter have brought lots of new content to the web. This new content will create a whole new industry. Real Time search will be big. Ron Conway believes this new wave of the  Real Time Web could be as big as the original dot com boom.

Top 10 monetization opportunities in Real Time from Ron Conway (More than $5B of revenue opportunities)

10. Lead generation – Twitter and other apps are great lead generators. Followers broadcast to their followers, etc.

9. Coupons – printed coupons is a huge business, even bigger on the RT web.

8. Analytics of the data – tons of RT data that can be analyzed for trends

7. CRM – Customer relationship Management in real time, using social network apps

6. Payments - like PayPal on Twitter

5. Commerce – selling products, referring products

4. User authentication – verification of users and accounts

3. Syndication of new ad types – There will be innovation in advertising types

2. Context sensitive advertising (Display)

1. Real Time Search – Think Google in real time, filtered by your social graph

Lots of new opportunities. New tools and services will be created that take advantage of the social graph and real time activity. Think about all the products and services created for the original web boom. Now think about how they need to change to accommodate the Real Time web. The question is, how many of them will be stand alone companies that endure, and how many of them will be acquired by the existing big players. Facebook is here to stay. Twitter…the jury is still out.

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MTV on future of web video – beyond short clips

MTV has a vision for video, 8 minute scenes on the Internet, 3 of them stitched together for a half hour TV show, and a feature length movie based on the TV series. The New York Times has a story The Rise of Web Video, describing the move beyond 2 minute clips. David Gale, creator of MTV Films, and EVP of MTV Networks sat down with me to discuss his vision for the evolution of video on the Internet.

Web video is different - David Gale’s MTV division led the development of $5 Cover, a scripted reality show based on the music scene in Memphis, following upstart bands trying to make it in the city. The TV show airs Fridays on MTV. They have several other shows under development that will use the same formula; 8 minute web clips, half hour TV show, and potentially a feature length movie. This model requires a different approach to screen writing, story arcs, and character development. Gale said the format works well for comedy, horror, and other forms because the audience expects to laugh every few minutes in a comedy, or see horror every couple minutes. Building the story from the ground up with a couple scenes in an 8 minute sequence works well for the web, and easily transitions to the 30 minute TV format. However, trying to work backwards from a 30 minute show and break it into web length clips doesn’t work so well, for obvious reasons.

Soap Operas are a great example of short vignettes suitable for web viewing. The typical soap is made up of 8 to 10 vignettes of 2 to 4 minutes each. There are multiple story lines going on simultaneously. They all stand on their own, but they all flow together. The characters weave in and out of each story. And, there is always a cliff hanger at the end of each episode to keep the viewers coming back. Web video producers could learn a few things from the "soap opera" writers.

The New York Times story says web video viewing trends are changing slowly;

“While online video is not going to replace television anytime soon, it is now decidedly mainstream. About 150 million Internet users in the United States watch about 14.5 billion videos a month, according to the measurement firm comScore, or an average of 97 videos per viewer. Although the Web lacks a standard for video measurement, comScore says average video durations have risen slowly but surely in the past year, to an average of 3.4 minutes in March.”

Sponsorship for web video has been a problem for most producers. MTV has a major advantage here with their TV sponsors and other network assets. However, YouTube has been unsuccessful to date with traditional advertising applied to web video. There are major copyright and other “rights” issues with much of the User Generated Content (UGC) on YouTube. Quality of the video is another issue. Web viewers are not very keen on pre-roll or post-roll video ads. The jury is still out on what advertising model will work with short form web video.

Product Placement - Ashton Kutcher and Jason Goldberg of Katalyst Films are experimenting with new approaches to web video. Rather than use pre-roll or post-roll ads they are using product placement within the video and premium sponsorship for their professionally created web video shows. Check out KatalystHQ, their office based reality show. Cheetos is a sponsor of the show, and Cheetos are integrated into the storyline of each episode. Obviously, to do this you need a sponsor up front before writing and shooting the video. Easy for a film company like Katalyst Films, but usually not the case with garden variety web video. The one down side to product placement is that it can't be syndicated in the future and have multiple sponsors.

Jason Calacanis is also experimenting with web video with his show This Week In Startups, also known as TWiST. Jason built a professional studio at his Mahalo office in Santa Monica. This Week in Startups is an interview style show with viewer call in questions. Jason has three sponsors who have the startup community as their target audience. A perfect match between sponsor, content, and audience.

Sponsor, Content, Audience – The key to making video work on the internet is good alignment between sponsors, the content of the show, and the audience. To achieve this alignment the content must be very targeted and focused. This is the problem with UGC style content, while it may be funny or topical, it rarely lines up with a sponsor or audience demographic, making advertising sales nearly impossible.

In future posts I will dig deeper into each of these issues and provide other examples of successful web pioneers.

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Business plans, business models, who needs them?

For a long time I have wanted to write a post about the irrelevance of business plans. Twitter got VC funding with no business plan and no business model. Three years later they still have no revenue model, but their investors are very happy.

I confess it took me a while to figure out Twitter. I rarely use SMS or texting either. These mediums strike me as one way bursts of irrelevant chatter for the ADD (Attention Deficit Disorder) crowd. Twitter users have evolved from simple updates of what they had for breakfast to more insightful quotes, inspiration, and pointers to interesting pictures, videos, and web content. If you haven't seen or used Twitter check out this old (2007) screen shot (left) of a Twitter message from Dave Winer for an example of where it was, and one from yesterday (right) for where it is now.  

Now, back to business plans - In all my years in startups and all my work with VCs I don't ever recall seeing a written business plan. The fact is that investors do not read them. Here is the inside secret... investors invest in people not business plans. Early stage investors know that great people can make a mediocre idea work, but mediocre people can't make a great idea work.

PowerPoint rules - An earlier post "How to handle the first VC meeting" explains how to get a VC meeting and what to present. Ten PowerPoint slides is all you need. A short demo or screen shots takes care of the rest. But, in the back of their minds the VCs or Angels are really evaluating YOU...how you react to questions and criticisms, how quickly you think on your feet, your energy level, passion, and vision.

Early stage investors understand that they just don't know a lot of things. They are always dealing with incomplete information and unknowns. Competitors may emerge, business models will change or become apparent later on, a better application of the technology or idea may emerge, and the political/legal/business environment might change. In those early meetings the investors are evaluating how you respond to questions, challenges, and new ideas. They may focus a lot on your past as a guide to how you will react in the future. These things matter a whole lot more than a business plan that is surely overly optimistic and filled with unfounded assumptions.

Paul Kedrosky has another take on why business plans are actually not good for you. Two reasons. First, because VCs are professional nit-pickers. Give them something to find fault with, and they'll do it with abandon. I generally tell people to come to pitch meetings with less information rather than more. Sure, you'll get pressed for more, but finesse it. Presenting a full and detailed plan is, nine times out of ten, a path to a "No" -- or at least more time-consuming than having said less.
Profits are a different issue. Being profitable too soon gives investors, rightly or wrongly, an idea of what the margins are on the business, as opposed to what they could be in some perfect world. As a result, it takes a mighty force for them to not start wading in with discounted present value worksheets, and the like, thus hammering your valuation and generally making funding much more complicated (and equity consuming) than if you were wildly unprofitable.

Big corporations like business plans. The one place I have seen them used is inside big corporations. Big companies require all kinds of plans and justifications for making an investment in a new product or new piece of equipment. Big companies have teams of MBA's skilled at poking holes in financial projections and shooting down projects. Big companies have a lot more at stake, their business is more predictable, their revenues and costs can be reasonably forecast. So, business plans make sense for them.

Business plans are used to examine cost and risk. PowerPoint's are used to create a vision of opportunity. This is why entrepreneurs should stick to short PowerPoint presentations and avoid detailed business plans.

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Page views required to generate $1M in ad revenue?

Facebook, MySpace, LinkedIn, Beebo, Plaxo, Orkut, and MSN Spaces are the biggest well known social network spaces. But what about the 800 other sites scrambling for audiences in the social network space? Can they generate $1M in advertising revenue per month, or even per year? Will they ever be profitable?

USA Today says "Social Network Sites Work To Turn Users Into Profits" and summarizes the problem with this quote;

"Short of striking it rich with online ads or creating a new revenue stream, how can so many sites leverage their vast audiences? In many respects, it is the same query that dogged portal companies in the mid-1990s and search engines in the early '90s. Some were sold. Some went public. Some went belly up.

The ongoing challenge is to concoct a potion — be it through banner ads, premium subscriptions or licensing agreements — that no one has perfected. Facebook, crown jewel of the field, is valued at $15 billion but barely turns a profit."

CPM versus CPC - Big audiences are great but how you monetize them is the key to financial success. Google and the search companies are able to sell Cost Per Click (CPC) ads and command very high rates. Content sites and social networks don't have a search term to key off so they charge Cost Per Thousand (Mil) or CPM rates. In some cases it can take 1,000 page views to generate the same revenue as one click on an ad.

A penny for your thoughts? I talked to a Facebook App developer at the ReMix conference a few weeks ago. He told me his app is generating 300 million page views per month. Wow! Then I asked what kind of CPM (Cost Per Thousand) ad rates he was getting. He shrugged and said somewhere between $0.02 and $0.05 per thousand. That pencils out to between $6K and $15K of advertising revenue per month for those 300 million page views.

How much traffic is needed to generate $1M in ad revenue? It all depends on how well you can target your audience and how much you can charge for CPM rates. But, based on a survey of social network sites let's assume an average CPM of $0.40. You would need 2.5 Billion page views per month to earn $1M in ad revenues. That is 2,500,000,000 page views...and how many sites can sell out all their page view inventory?

A New Revenue Model? - Google revolutionized the search business by banning display ads sold on a CPM basis, and instead offering text based ads where you only pay when someone clicks on the ad, what we now refer to as CPC.

It will probably take a new revenue approach to make many Social Networks profitable. From the USA Today story;

"Facebook's ambitious plan to reshape advertising — via a new approach to social marketing, called Beacon — was a bust. The idea was to inform friends whenever a Facebook member purchased something from online retailers. When consumers protested its invasion of privacy, Facebook CEO Mark Zuckerberg acknowledged the miscue and promptly apologized.

Even Google, as close to a money mint as anything online, has struggled. Google has a deal with Rupert Murdoch's News Corp. to place ads on MySpace, and owns Orkut, which flopped in the USA. Co-founder Sergey Brin recently admitted the "monetization work we were doing there didn't pan out as well as we had hoped."

Which new model will work? No one knows at this point, but there will be billions of dollars for whoever figures it out.

Beacon was innovative, but privacy concerns killed it. We are often influenced by what our friends buy, maybe just a slightly different approach will work.

Social recommendations are very powerful. Back in the early days of the web there were several attempts to consolidate buyers into groups to get better prices. Could social networks do something similar?

Businesses and advertisers are anxious to tap into the power of social networks. The social networks are building huge audiences but can't figure out how to monetize them. When they learn how to connect effectively the benefits will be amazing for everyone involved.

This is a business problem, not a technology problem. The answer will be simple and obvious. In fact, it has probably already been considered and rejected several times. Someone will come along and put a slightly different twist on it and...Eureka!!!  Don't you just love business? How do you think this will play out?

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