Don Dodge on The Next Big Thing

A look inside Google Developer Relations - we are hiring!

About a year ago I joined Google as a Developer Advocate in the Google Developer Relations group led by Michael Winton. It is an amazing group of people from around the world. Most are former software engineers. Thirteen of them have authored books, at least four of them have software patents to their name, and most of them have made significant contributions to Open Source projects. Several others have contributed to industry standards, and sit on standards boards. You can meet many members of the DevRel team on this site. I am truly honored to work with these tech rock stars.

So, what does Google Developer Relations do? We help developers build great applications. We advocate for developers by bringing their needs and requests back to product engineering teams. We answer technical questions, write code samples, build code libraries, create sample applications.

Code.Google.com is the home for all of these plus much more. If you want to learn more about a Google product or API this is the place to go.   We also build demos, give technical talks, speak at conferences, help developers get into beta programs, and do whatever else developers need.

Check out some of the cool web sites our group has built. HTML5Rocks.com has everything you want to know about HTML5. Things like technical presentations, tutorials, a Code Playground where you can try out things and test your ideas, and lots of reusable code and samples.

Developer.Android.com is another great site for Android developers. Here you can download the Android SDK, contribute to the Android Open Source Project, find technical information about Android devices, publish your app to Android Market, access the Dev Guide, and many other resources.

How to find the right person? - Google is a big company with lots of people, products, and services. How do you find the right person when you need help? We hope the new Google Developer Advocate site will help. You can search by product or location. Most Developer Advocates are listed and include a picture, bio, and links to their Google Profile, Blog, Buzz, and Twitter accounts. The Google Profile usually includes an email address, but we will also respond on Buzz or Twitter.

What else does Google Developer Relations do? We provide many of the technical speakers for Google IO,   Google Developer Days and DevFests . These are developer events and workshops with deep technical content. Members of the Developer Relations team give technical talks and live interactive demos on most Google products. Many members of the team present at several events each year. This year I had the opportunity to speak at events in Mexico City, Sydney, Sao Paulo, Buenos Aires, Munich, Moscow, and Prague. I look forward to meeting more developers in other countries in the coming year.

Google I/O is the biggest event of the year for Developer Relations. It is a two day event held around the middle of May in San Francisco. Over 4,000 developers and hundreds of Googlers attend. Google I/O always sells out early. General registration will open on February 7th.

Developer Relations people host events and speak at other events around the world every month. Check out this event calendar for events happening near you.

Google Developer Forums - You can get your technical questions answered in the Google Developer Forums. They are organized by product area and cover just about everything. Developer Relations people hang out in the discussion forums and frequently answer questions. It is a great place to meet other developers, engage with Google Developer Relations, and get answers to your specific technical questions.

We are hiring! - Google Developer Relations is hiring all over the world.  We are currently looking for people in Mountain View, New York, San Francisco, Beijing, Seoul, Tokyo, London, Tel Aviv, Africa, Buenos Aires, Sao Paulo, and Zurich. See this site for details. We aready have people in all of those cities, but also have people in  Sydney, Moscow, Prague, Munich, Hyderabad, Seattle, Vancouver, and probably a few other places I am forgetting.

For more background on what it is like working at Google read these posts; "Google Hiring Process", "How Google Sets Goals and Measures Success", and "My First Year at Google". We plan to hire thousands of people this year. If you have what it takes, and would love to work at Google, check out the open job opportunities . Also check out the open Developer Relations jobs around the world.

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How does Facebook decide which 10 friends to display on your profile?

Have you ever wondered why 10 friends appear on your Facebook profile page, and how they are chosen? The list of 10 friends displayed changes slightly every time you visit your Facebook page. It appears random, but it isn't. Facebook says they use an algorithm that takes into account the people who interact most with you publicly. Things like posts they make on your wall, photos where both of you are tagged, events you both attend, comments on each others posts or photos, etc. Facebook does a remarkable job selecting 10 friends from your hundreds or thousands of friends...while keeping it fresh and interesting.

But, there must be more to this. Every time I check my Facebook profile page I scan down the left side bar where 10 friends are displayed. At left is a screen shot from my Facebook page this morning. Every one of those people are friends that I have recently interacted with on some level. I refreshed the page a couple times and another set of people are displayed. I try to think of any "interactions" I recently had with them. Some are obvious, some are not. Serendipity and randomness must play a part.  Is it scary that Facebook seems to know who we care about, and who cares about us...but we don't know how they know this? For me it is more thought provoking than scary. Hmmm...how do they really do this?

People You May Know - How does Facebook decide which people to put in the "People You May Know" list on the right side bar? That one seems more obvious. It is based on friends of friends, mutual friends, employers or schools you have in common, your home town, current city, and probably a few other things. But again, the algorithm introduces some randomness. The people are not listed in rank order by the number of friends you have in common. Many times I know who the people are, but have never actually met them. Other times I have no clue who the "suggested friends" are. There is certainly an algorithm that suggests people, but exactly how it works is a mystery.

Promiscuous Friending - You would think that if "someone you may know" has 100 mutual friends with me that I would at least know of them. Hmmm...there must be a lot of promiscuous friending going on out there. Not me. I have principles :-). No, really, I do. Perhaps I use Facebook differently than most, but I only accept friend requests from people I actually know, people I have actually met, or have exchanged meaningful email or phone calls. Call me crazy, but that is my loose definition of "friends" for Facebook.

Social Layer - Social elements are popping up in just about everything. Zynga is making a fortune with casual social games. Social is being added to search, shopping, mobile, content, and even business. Nimble, a Santa Monica based start-up, is bringing social to CRM, Customer Relationship Management. Gist, a Seattle based company, is bringing social elements to email and contact management. The trend of social moving from the consumer realm to business software will be the topic of an upcoming post.

Facebook is writing the book on how to make social interactions online fun, useful...and profitable. Very profitable.

Disclaimer: The views and opinions expressed here are my own, and do not reflect those of my employer.

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Microsoft exodus - Muglia joins Elop, Bach, Ozzie

The high level exodus from Microsoft (MSFT) continues with 23 year veteran Bob Muglia the latest casualty. In the past 9 months three division presidents and Chief Software Architect Ray Ozzie have resigned. CFO Chris Liddell also left the company a while ago. There have been other high level division head resignations over the past few years including Kevin Johnson and Jeff Raikes. Is there a pattern here?

Thousands of employees have been laid off or fired over the past two years. But these guys are the highest level execs at Microsoft, all of whom reported to CEO Steve Ballmer. Is it possible that the presidents of all these divisions messed up so badly in the past 9 months that they were asked to leave? Given the reported financial results this seems inconceivable. There is something else going on here.

Who will run the business? - Microsoft has always been loaded with talented people and has a deep bench. Finding capable people to run these divisions will not be difficult. In fact, these juggernaut businesses are so powerful that they will generate billions of dollars no matter who is running them. There are already plans in place for the next version of every product, and thousands of people working on them as we speak. However, whenever a company loses top management talent like this...there are serious impacts.

Vision - The bigger questions are who will lead the vision for the future, and who will be ready to succeed Steve Ballmer when the time comes? Ray Ozzie was a talented visionary and architect of the future. Bill Gates selected Ray Ozzie as his successor as Chief Software Architect. But they are both gone. Who else at Microsoft has the gravitas and vision to lead the product direction for entire company? This is probably the single most important job in the company over the long term. Yet, Ballmer has already stated he will not replace Ozzie or fill the position. Hmmm....

Succession Plans - CEO succession plans are important for a company with nearly 100,000 employees and over $60 Billion in revenues. Steve Ballmer has been CEO of Microsoft for 10 years and can continue as long as he wants. Steve is just 54 years old. He has the support of Bill Gates and the Board of Directors, and is one of the largest individual shareholders. Steve also has a net worth of more than $13 Billion...so its not like he is working for the salary, or would leave for a better job. OK, but what happens if Ballmer gets in a plane crash or is struck with with cancer? It is these unpleasant and unexpected events that make succession planning a requirement at large companies. Wall Street cares about these things, even if we don't.

Steve Sinofsky is one of the few experienced Microsoft execs left standing. Sinofsky was promoted to president of the Windows division, the largest division at Microsoft. Is he the heir apparent?

Billion dollar questions - Losing a seasoned exec like Bob Muglia is a big, but recoverable loss. Losing Muglia, Robbie Bach, Steve Elop, Ray Ozzie, Chris Liddell, Kevin Johnson, Jeff Raikes, and other senior execs is devastating. The effects aren't visible yet. It takes years to unfold. Each individual business division will get a new leader, and revenues will continue to chug along.

But, who will be the visionary for the future? And, who will be ready to step in as CEO when Ballmer leaves? Those are billion dollar questions.

Disclaimer: This is my personal blog. The views expressed here are my own and do not reflect those of my employer. I was an employee of Microsoft for 5 years. I no longer have any connection to the company and do not own any MSFT shares.

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Facebook, Google, Microsoft - comparable?

When something is unlike anything we have seen before we look for analogies or comparables to try to put it in context. Investors didn't know what to think the first time they saw Microsoft (MSFT), later Google (GOOG), and now Facebook. Today Techmeme has stories from The New York Times "The Facebook - Microsoft Parallels" and Wall Street Journal "Facebook Versus Google Circa 2004" which try to compare Facebook and put things in context. CNN also jumps in with "Facebook Hype Will Fade" and compares Facebook to Myspace, Friendster, and AOL. Comparing is the logical thing to do when we don't understand something. But, how do you compare "one of a kind" incomparables?

Last week I wrote "The Best Properties Always Look Too Expensive" which attempted to explain Facebook's valuation psychology and why market leaders/innovators always command the highest prices. I used a real estate analogy that my father-in-law taught me many years ago. He bought many prime commercial real estate properties to build his business and told me he overpaid every single time. It was only a few years later he looked like a genius and the property looked like a bargain. He didn't overpay at all...he just saw the future value before most other people did.

Real estate is easier to value than technology because there are so many alternatives and comparables, or "comps" as they call them in the real estate business. Yes, there are "one of a kind" properties in real estate. But, there are always workable alternatives, and price comps that have been established by the marketplace. So, in real estate you might overpay by 10%, maybe even 20%, but time and a rising market covers up all mistakes.

Technology companies often don't have comps to assist in valuation. Investors or corporate acquirers are left to develop their own scenarios and synergies...and often miscalculate. And, they don't just miss by 10% or 20%, they miss by 100% or 1000%. When Time Warner acquired AOL, or vice versa, it was a $350 Billion dollar miscalculation. There have been many others. See my earlier post "The Ten Worst Billion Dollar Acquisitions".

So, which is it? Are the best properties always worth their high prices? Or, does hype, and lack of comps, often push valuations beyond all logic and reason? I think you know the answer...there are examples of both.

Should investors view Facebook like Google or Microsoft? No, not in my opinion. There are curious parallels, but not comparable. They are three very different companies, in very different businesses, led by different people, at different points in time. 

Is Facebook overvalued at $50B? Many people thought Zuck should have sold when Yahoo reportedly offered $1B. Then they thought Microsoft was nuts when they invested $240M in Facebook at a $15B valuation. Are the smartest deal makers on Wall Street crazy when they invest at a $50B valuation? The pundits have been wrong every time. However, pundits are like fortune tellers...they make lots of predictions in hopes of being right once...and being forever known as "The one who called it".

Is Facebook at its peak, as the CNN article says? No, I don't think so. Ahead of itself perhaps, but not at its peak by a long shot. Facebook doubled revenues last year, and is just starting to try different revenue models like Facebook credits and revenue shares from casual games.

BTW, have you ever clicked on a Facebook ad? I have been using Facebook for years and have never clicked on an ad. But, a whole lot of people must be clicking on ads for Facebook to generate over $1 Billion in revenue.

We naturally view the world through our own eyes and experiences. But, when evaluating investments this can create lots of blind spots. Surprisingly, stock market valuations and acquisition prices involve a lot more gut feel and emotion than you might expect. People arrive at their own conclusions and then look for comparables or synergies to justify their decisions. Investors should be careful doing this when looking at "one of a kind" assets.

Disclaimer: The views and opinions expressed here are my own, and do not reflect those of my employer. I am not a professional investor and you should not rely on anything written here. Consult your investment advisor for investment advice.

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Facebook, Twitter, & startup valuations - The best properties always look too expensive

The best properties always look too expensive. Market leaders command the highest prices. It is only a year or two later that they look like great deals. The experts thought Microsoft was crazy when they invested $240M in Facebook at a $15B valuation. Crazy like a fox. Digital Sky Technologies invested $200M in Facebook in May of 2010 at a $10B valuation. The "experts" thought the Russians had gone crazy. What do they think now? Just 7 months later Goldman Sachs is investing $500M at a $50B valuation. No one ever called Goldman Sachs crazy.

I learned this lesson from my father-in-law who built a 40 store chain of tire and auto part stores. In the process he bought a lot of real estate for store locations. He told me "great properties always look too expensive." "It is only five years later that you look like a genius and the purchase price looks cheap." Technology moves much faster than real estate.

Kleiner Perkins is reported to be placing a market cap of $4B on Twitter for a new round of funding. Techcrunch reported that Facebook has been valued at $50B based on sales on Second Market. Techmeme has stories every day of startups with rich valuations, or later round financings with multi-billion dollar valuations.

Paying premium prices for the best property usually pays off. However, extrapolating the valuation of the market leader down to a much smaller player or clone company almost never works. Market valuations are asymmetric. Many investors forget this simple truth. Market leaders demand much higher valuations than smaller players or clones. The reasoning goes if Groupon is worth $6B, then my Copypon.com is worth at least 1% or $60M. Sorry, but that is not the way it works. The market leader has huge market share, higher margins, and much higher vaulation than the 2nd, 3rd, or 4th place player. Typically the top four companies in any market own 95% of the market. Everyone else fights for the remaining 5% of the market and loses boat loads of money.

Critics point to Twitter raising $200M at a $3.7B valuation, and Facebook being valued at $35 Billion, or Groupon at $6B valuation just 6 months after raising a $135M round at a $1.35B valuation as evidence of  a bubble. Bubbles don't typically start with the market leaders. Bubbles happen when investors extrapolate market leader valuations onto 3rd tier players. Sound the bubble alarm when you see this happening. 

Here are some things to consider when valuing private companies;

1. Market leaders always get premium valuations.
2. Most markets have a gorilla #1, a chimp #2, and a monkey #3. No one else matters.
3. There must be a growth plan to move the business far beyond its current state to support the valuation.
4. Valuing a business on how much it would cost to build it (replicate) is foolish. The value is about the customers, revenues, and growth prospects, not how much it cost to build it.
5. Never underestimate what competitors will do in response to astronomical growth.
6. Pay up for the leaders during the rocket fuel growth stage. Momentum matters.

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Ideas matter, great execution of a bad idea = failure

Nathaniel Whittemore wrote an excellent post demolishing the Silicon Valley mantra that "execution" is all that matters. Ideas do matter... a lot. Great execution of bad ideas still result in failure. Pivots and execution are the buzz words in Silicon Valley. But, if a startup pivots from one bad idea to another dubious idea...they just prolonged the failure. Bill Warner, founder of Avid Technologies, said recently “Some of you guys are so smart you turn what should have been a one year failure into a five year death march.”  

Mark Zuckerberg of Facebook was used as an example of the "execution is all that matters" meme played out in the movie The Social Network, although I don't think Mark subscribes to this belief. The Winklevoss twins had an idea for a web site to allow college students to connect, called ConnectU. But, they didn't have the technical skills to execute on the idea, and didn't recruit a team that could do it. Mark Zuckerberg developed Facebook around the same time. The difference? Conventional wisdom is "it was all about execution", but the reality is Mark had much better ideas...and the ability to execute.

Silicon Valley jumped on the "ideas are worthless" meme for several reasons. First, everyone has ideas...lots of them. Good ideas are available everywhere. Startups have great ideas, big successful companies have more good ideas than they can handle, and people who read Techcrunch and Techmeme have hundreds of good ideas. But ideas alone are worthless. Investors get pitched ten ideas a week, hundreds per year. Unless there is a skilled team to execute them...they truly are worthless.

Investors place a very high value on founders and teams. The belief is that the initial idea will change or "pivot" several times anyway, so don't get too excited about the idea. The key, they believe, is the ability of the team to adapt and pivot. I do agree that you invest in teams, and teams rank very high in terms of importance...but not to the exclusion of ideas.

Silicon Valley, and especially the tech press, can be very binary. Things are either good or bad, winners or losers, smart or stupid. No middle ground. The "ideas are worthless" meme is an example of this extreme, single minded, jump on the band wagon type of thinking.

The reality is that startups need a great idea, a great team, great timing, a market that can grow significantly, and a lot of luck. You need all of these elements to succeed...especially luck. The notion that execution and the ability to pivot is the single most important contributor to success is nonsense. Ideas matter, and so do all the other elements.

Yosi Vardi always says "We don't know what will succeed. We just make guesses, and hope to be right once in a while." He is right. I have seen startups fail that I thought were a lock for success. And, I have seen startups that I had absolutely no interest in...go on to succeed. In the Venture Capital business if you can be right half the time you will make a lot of money. You just don't know which half will succeed. They all look good when you write the check.

Nathaniel, thanks for reminding us that ideas do matter. They matter a lot!

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