Don Dodge on The Next Big Thing

Top 10 Tech Trends from Churchill Club

Some of the best minds in technology gathered for The Churchill Club's annual dinner. Eric Savitz of Barron's covered the event in detail. VentureBeat also has a nice summary including audience votes on the trends.

The highlights, excerpted from Eric Savitz article, were;

• The rise of the “implicit” Internet. Today your permanent record exists; you create a trail of data exhaust, digital bread crumbs. Implicit data that exists in silence. Movie rentals, restaurant reservations, books purchased, Web sites visited, etc. All of this data existed in silence. No easy way until now to benefit from the data; but the silos are coming down. Google, Yahoo, Facebook, Mozilla collecting data.

I have seen so many companies, literally hundreds, that are building social, fun, aggregators, filters, recommendations, communities, and services that all boil down to one thing...building profiles from implicit data and explicit actions to better target advertising. It is the biggest "head fake" in business history. All these widgets and services appear to be fun consumer toys, but underneath they are advertising driven data collectors. BTW, "head fake" is a basketball sports term for faking with a head movement that you are going one way and then quickly going the other way.

• Betting on smart phones: The mobile device migration to smart phones from features phones will produce even greater disruption than PC industry moving from character mode to graphical interface.

This prediction was made by Roger McNamee who has a major investment in Palm, so he is definitely putting his money where his mouth is. I totally agree with Roger, in fact I made the same prediction yesterday on a Massachusetts Technology Leadership Council’s talk show hosted by James Geshwiler. In January of 2007 I called it the Triple Play for The Next Big Thing; Local Search, Voice enabled, with Location Based Services, on a Mobile Phone. There are more cell phones than desktop computers in the world today. Cell phones have been called the 'Third Screen", but they are quickly becoming the first screen for the younger generation.

• Water tech will replace global warming as a global priority. The world is running our of usable water and will kill millions more in our lifetime than global warming.

I agree water already is a big priority in some parts of the world. At the NVCA conference last week one panel member said that 90% of the water we use in the USA is used for agriculture and irrigation. That is an astounding truth. We only drink something like 4% of all the water we produce. The rest is used for washing, flushing toilets, and irrigation. Dean Kamen has done some amazing work in the area of low cost water purification systems.

• Fossilizing fossil energy. Oil and coal will have trouble competing with biofuels. 99% of discussion on the topic is completely irrelevant to the topic. In 4-5 years will have production proof that can sell biofuel at well below $2 a gallon at today’s tax structure and no subsidy.

Vinod Khosla made this prediction. I hope he is right but I have a hard time believing this. There have been numerous stories written on this subject that suggest it takes more energy to produce a gallon of biofuel than it is worth. Perhaps these articles are part of the "99% of the discussion is irrelevent" that Vinod was talking about. Wind, Solar, and Mini-Hydro are proven sources of clean renewable energy where the technology and economics are viable at current energy prices. Green energy is certainly a hot area for investment and innovation. The question is can startups play a role here or will it be dominated by the big energy companies and utilities.

Read the complete list of top trends at Barron's Tech Trader Daily by Eric Savitz.

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Xobni social networking for Outlook users

Xobni - is an organizer for Microsoft Outlook email. The beta is now available to the public. I have been using Xobni for 6 months and love it. Xobni is inbox spelled backwards. Xobni compiles a summary for each email sender, extracts phone numbers, photos, organizes attachments in several different ways, and ranks each sender by how many emails they send to you, and how many you send to them. People connected to the email sender are listed, along with email threads from each of them. See all the attachments associated with these people. Search is an integral part of Xobni and can be done in several different ways.

Robert Scoble has a great video interview with Xobni founders Matt Brezina and Adam Smith. I knew the instant I first saw Xobni at the TechCrunch40 Conference that we should be partners. I talked to Adam Smith immediately after his presentation, and had dinner with Adam and his partner Matt Brezina that night. We sketched out how Microsoft could help Xobni, and started executing on the plan the very next day.

Xobni is now a Microsoft Startup Accelerator Program partner. There are lots of benefits to the program like free software, consulting help, press releases, introductions to Microsoft people, partners, and even VCs. But this is one benefit that we didn't anticipate...a demo by Bill Gates at the Microsoft Office Developers Conference. Check out this 2 minute video of Bill talking about Xobni.

Try out Xobni and let me know what you think. What additional features would you like to see? What other email productivity tools do you use?

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The Future Of Social Networking - Consolidation or Mass Customization?

The Future Of Social Networking was the topic of a panel at Microsoft's ReMIX Silicon Valley. Will social networks consolidate into a few big players like Facebook and MySpace, or will it splinter into thousands of special interest social networks? The opinion of the panel and audience was split.

What about the financial success of social networks? FastCompany published a timely article about Ning raising $60M at a $500M valuation. Beebo recently sold to AOL for $850M. Facebook recently raised more money at a $15 Billion valuation. Valuations are one thing...profits are another. Sometimes the correlation between the two requires creative math.

The future of social networks is an interesting, and potentially very lucrative, question to ponder. Will there be a few giant networks or thousands, even millions, of special interest social networks? It is interesting to note that Facebook started out as just a network for Harvard students and alumni. Mark Zuckerberg quickly discovered that other schools wanted a Facebook too. Schools were added slowly and you had to have an email address with the school domain name in order to join that Facebook network. It was a cozy social network for college students and alums to stay in contact...and express themselves. You know the rest of the story. Facebook allowed a few companies to have social networks, then opened the floodgates and let anybody in.

Ning, and others, believe there will be millions of smaller social networks based on special interests. Ning reportedly has 230,000 social networks on its service. Other social network players include Microsoft Spaces, Beebo, MySpace, iMeem, and even services like Flickr, Seesmic, Twitter, and various blog networks.

Do page views equal profits? It seems clear that both big social networks and small special interest networks will continue to grow. The distinction may be that only the big social networks will gain the "critical mass" and "audience demographics" to be financially successful. Not all page views have the same financial value for advertisers.

A penny for your thoughts? I talked to a Facebook App developer at the ReMix conference. 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. Pretty good for a couple of young hacker/coders with very low overhead, but not the kind of business that  commands million/billion dollar valuations.

Other industry insiders at the conference said they see CPM rates of between 10 cents and 50 cents per thousand for social networks, but it can go much higher ($2.00 to $5.00) for highly targeted demographics.

Is Web 2.0 financially viable? A small moderately successful software company can generate $12M in annual revenues by focusing on a narrow niche market. What would it take for an advertising based Web 2.0 company to generate the same revenues? Lets assume a $2.50 CPM rate. To generate $1M in monthly ad revenue you would need 400,000,000 monthly page views. Hmmm...how many web sites or services generate that kind of traffic?

So, what does the future hold? Social networks are clearly a hot area. We are in the early stages of evolution. Facebook is here to stay, but other approaches and models may emerge and be even more successful. The monetization of social networks is also in the early stages. Will the current valuations prove out? Remember a few years ago when some people thought paying $580M for MySpace was insane? It looks like a pretty good deal now. Friendster is an example of an early leader that went in the other direction.

What do you think? What are your favorite social networks and Web 2.0 services? Who do you think will be the winners? Leave a comment and join the discussion.

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MatchMine leaps ahead

I first saw MatchMine at DEMO Fall 2007, just over 6 months ago. MatchMine, based in Massachusetts, is a media discovery service that delivers personalized recommendations for movies, music and other online content on the Web. I saw the potential in the service then, but they had some kinks to work out.

Today MatchMine announced new media partners, and improvements in the service. More on that later. First let me summarize what I think are the major leaps forward for MatchMine;

1. No more client download required. You can start using MatchMine with just one click on a partner web site.
2. Content partner sites can easily integrate MatchMine with a plug-in widget or by using their APIs.
3. The business model is a win/win. Free to consumers, and a revenue share from partners based on incremental revenue.
4. MatchMine preferences follow you to any new partner site. No more need to start from scratch building up your preferences for each new site.

Why is that important? MatchMine has lowered the barriers to adoption for both users and partners, and instantly increased the effectiveness of recommendations.

Users can sign up for a MatchKey as part of the registration process at a content site. Or, if you were already a registered member of a content site, with just one click you can add a MatchKey and automatically import all your preferences and ratings.

Partners can integrate MatchMine into their site in minutes by adding a pre-built widget or adding APIs to their site. This allows their users to get better recommendations, and potentially increase ad revenues or product sales. MatchMine shares in the incremental revenue. This makes it a no pain, no risk, proposition for the partner content sites.

OK, so how does MatchMine help me? We are all deluged with information and media. We want just the good stuff. MatchMine matches your preferences, both explicit and implicit, and delivers relevant media content to you.

How does MatchMine do it? Once you have signed up for a MatchKey they keep track of all your explicit ratings, votes, favorites, and import your previous preferences from sites like Netflix, Amazon, YouTube, LastFM, and the new partners announced today. They also track your implicit preferences like what you save or delete, if you watch a video to the end, or quit, if you click away from content, etc. These actions build a constantly evolving profile of your likes and dislikes, allowing MatchMine to deliver just the content you want.

The new media partners are;

• FilmCrave - a movie review site
• Fuzz - a music community
• Odeo - a music and podcast site
• Blogged - a blog discovery site
• Blogdigger - a blog search engine
• MediaMelon - HD TV for the Internet

Go to any of these sites, get registered, and see MatchMine in action.

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Microsoft sponsoring TechCrunch50 Conference

TechCrunch is back again this year bigger than ever. It is now the TechCrunch50 and will be held September 8-10 in San Francisco. Microsoft is a sponsor of the conference this year. I was honored to be one of the expert panelists at last years conference. Fifty hot startups all launching at the same time.

Mike Arrington reports that last years TechCrunch40 raised $143 million in venture capital. This year the winning startup gets a $50,000 cash prize.

TechCrunch50 is unique in that the presenting companies pay nothing. It is free. The only rule is that the startup must launch at TechCrunch. The attendees pay $1,995 to attend.

Here are the important details for the conference;

Official Site: TechCrunch50
Dates: September 8 - 10, 2008
Tickets To Attend: TechCrunch50 Tickets
Application to Launch Startup/Product: Company Application Form
Applications Deadline: Friday, June 27, 2008 (early consideration deadline June 13)

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Warner Music's ISP tax and the NFL Network

Warner Music is proposing a plan to charge a $5 monthly fee on your Internet Service Provider (ISP) bill for unlimited access to music...whether you want it or not. Don't worry, it is very unlikely this plan will actually succeed. All the major recording labels would need to agree to participate...and they can't agree on anything.

Mike Arrington at TechCrunch calls it "The Music Industry's New Extortion Scheme". Portfolio calls it "Fee For All". The music industry has been in a steep decline since the advent of Napster. Most of you know I was a VP at the original Napster back in the early days. You can read this post about my experiences at Napster, and conclusions about the music industry.

Warner Music tax versus The NFL Network? All of us in the Napster generation can get angry and indignant about the proposed Warner Music monthly fee. But, isn't it the same concept as the NFL Network trying to force the cable TV providers to pay a fee for EVERY subscriber to carry the NFL Network? The crux of the issue is should it be a premium channel that subscribers choose to add, or should it be a mandatory channel that everyone pays for whether they want it or not. If the NFL Network was available as a premium channel I would subscribe in a minute, and I'm sure lots of football fans would. It is all about economics. Here is a hypothetical example. If you were the NFL which would you prefer? A premium channel at, say $30 a month for the NFL season, that 10 million people might buy, or a $3 per month surtax that 200 million subscribers would pay.

The cable TV networks have mostly resisted the NFL Network demands. I think the Dish Network carries it, but most do not. The ISPs will resist the Warner Music plan too, unless the fees are reduced significantly. Competition maintains a level playing field. The ISPs know that if one of them adds the music service and raises their monthly subscription fee, that their competitor may choose not to...and customers may flock to the lower priced ISP.

It is all about the money. Today consumers have lots of choices for their Internet service, ranging from free ad supported services, to low monthly fees, to all you can eat broadband for $50 a month. Cable TV subscribers have fewer choices; cable, satellite, or phone company. Competition creates choices. The marketplace determines the appropriate price and distribution despite what Warner Music or the NFL Network might like. That is what capitalism and free enterprise is all about.

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Does your startup solve a problem? Vitamin or pain killer?

I saw 20 new startups at Y Combinator earlier this week, and 32 more startups at the Under The Radar conference today. OK, so how do you sort through all of these companies and pick winners?

There are a list of questions I ask entrepreneurs when evaluating start-ups. One of them is "Is your product a Vitamin (nice to have) or a pain killer (got to have it)? Of course everyone wants to think their product is a "must have" painkiller, but very few are. Another question I ask is "Who will pay for this, and how much will they pay?" The last question I ask myself is "Is this a product or a feature?" Meaning, will this product/service stand on its own and generate revenue? Or is it really a feature that should be incorporated into an existing product?

Many products fall into the vitamin category. Things like productivity tools, content aggregators, mashups, utilities, collaboration applications, measurement and monitoring tools, in fact anything that is a tool, development or otherwise, is by definition a vitamin.

Pain killer products are products that solve for a specific pain point. Sometimes the pain is measurable in terms of ROI, winning sales that could not be won before, or satisfying a regulatory requirement.

There is another set of products that are "vitamins" (nice to have) until you feel the pain. Then they become "pain killers" (got to have it). There are actually lots of products that fall into this category.

In the past, corporate governance and compliance applications were "nice to have". Then Sarbannes-Oxley (SOX) legislation went into effect. Suddenly these applications that were "vitamins" became "painkillers". You had to have them to comply with the new law.

Back-up and restore products for small companies or individual users are vitamins until the first time you lose a disk or significant data. Then they become "must have" painkillers. I am sure you can think of lots of products that fall into this scenario.

So, the new questions I have added to my list are; "What catalyst or event causes your prospects to actively seek your product or solution?" "When you look at all the sales you have won versus all the sales you didn't win, what was the main reason?" "Did they buy a competitive product, or not buy anything and just continue business as usual?"

Understanding what makes your product a "must have" painkiller versus a "nice to have" vitamin is the key to successful marketing. Identifying the key pain points and how your product solves them in a simple value proposition is job one. There are sometimes "trigger events" that cause these pain points. These "trigger events" cause your product to convert from a "vitamin" to a "painkiller" for customers. Qualifying your sales leads by trigger events and pain points will help focus your sales and marketing efforts and result in much higher win ratios.

Think real hard, right now. Make a list of the pain points your product solves. Make a list of trigger events that cause the pain to happen. Now think about how to identify these "trigger events" as they happen among the hundreds or thousands of potential customers. Get this right and your sales productivity will sky rocket. Get it wrong and your sales people will end up "dialing for dollars" and wondering why they are not being successful.

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Y Combinator Demo Day - which one will be the next Google?

Paul Graham, Jessica Livingston, and the Y Combinator gang held their Demo Day yesterday for 21 hopeful startups. In most cases these "companies" are only 3 months old, have two or three founders, and are just launching a beta product/service.

Google was once a two person startup - So was Microsoft, Oracle, Sun, Apple, and every other successful company. They all started with a couple founders and an idea. It is truly amazing to see how much these Y Combinator companies have accomplished in just 3 months.

What is Y Combinator? - Y Combinator is a seed stage investor/incubator with a large network of entrepreneurs, VCs, and all the people you need to start a company. It is hard to explain but it is a cross between a startup boot camp and a traditional startup incubator. The best description of Y Combinator is on its application page. BTW, they are accepting applications for the next round of companies now. Deadline is April 2, 2008.

Y Combinator success stories? - There have been a surprising number of exits/acquisitions. They include; Reddit.com, Zenter.com, TextPayMe, Anywhere.FM, and Parakey. Several have also closed Series A or B financing rounds and have gained significant traction. Examples are; Loopt, Xobni, Scribd, Justin.tv, Weebly, Disqus, Wufoo, and Virtualmin.

Best of Show? - There were 21 companies presenting. TechCrunch did a short review of all of them. Here are my picks for most interesting or promising.

Omnisio - Video editing, sharing, tagging, and annotating made easy. Omnisio lets you take a YouTube video you like and create a clip, add tags, comments. You can easily embed your custom clip in a blog or web site. Omnisio creates a link to the source video and starts playing it where you want. There is an obvious advertising play here. Omnisio could insert a short video ad anywhere in your custom clip. It also collects lots of meta data (tags, comments, links) that help describe the video for better ad targeting.

BaseShield - Provides security and virus protection by running applications virtualized, isolated environments. BaseShield effectively quarantines viruses, spyware, and malware inside the virtual environment where they can do no harm. I have seen this idea before but it is hard to get the right balance between usability and protection.

TipJoy - Makes it easy to click a tip button to donate or pay a small amount. Visitors are not required to create an account. Just click the button and type in your email address. TipJoy separates the financial transaction steps from the act of tipping, so it only takes on click. Their demo showed that PayPal takes 8 clicks to complete a payment, while Amazon takes 7 clicks. So, how does it work? When you have accumulated $5.00 in tips or payments TipJoy sends you an email and asks you to "settle" your account by paying with a credit card or PayPal. No one will chase after you if you choose not to honor your tip. TipJoy makes money by charging a 3% fee for transactions...much the same way PayPal or credit cards work.

280 North - They have developed a new way to build web applications that has the "look and feel" and performance of desktop apps. Their first application is 280 Slides, an online presentation tool, that looks and feels something like Powerpoint...if you squint and imagine what it can eventually be.

Others companies have tried to implement a PowerPoint like application in the browser...and they all come up short. 280 North has many more features and feels more like a desktop app. Most importantly, once you are finished creating your presentation you can export it to PowerPoint and present in full screen mode. The founders pointed out that it is very distracting to watch a presentation from a browser with all the tool bars visible. Presenting in full screen PowerPoint is much more engaging and professional.

The 280 North people are building a "platform" for developing lots of online applications that "feel" like desktop apps.

Other notable ideas - Capturing user data, click streams, and attention data, for better ad targeting, was a common theme among many of the companies. Addmired, MightyQuiz, Mixwit, Deluux, Wundrbar, 8aWeek, and WebMynd are fun, engaging applications,with ad targeting as an underlying monetization scheme. Each one of these applications is interesting in its own way, and will evolve into much bigger ideas than what we see today. Which one will be a big hit? Nobody knows. But, we do know there is a profitable market for good attention data for ad targeting. Someone will figure this out and make a lot of money.

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Dan Farber new Editor In Chief at CNET

Congratulations to Dan Farber who was just named Editor In Chief at CNET. Dan was formerly Editor In Chief at ZDNet, which is owned by CNET. Dan is the consummate professional who leads by example. And, he is one of the nicest guys you will ever meet. Mike Arrington has more background on the situation at CNET.

I have gotten to known Dan very well over the last few years and consider him a friend. You can always find him in the front row of any tech conference. He is a diligent, thoughtful writer, and an outstanding photographer too.

I am a big Dan Farber fan. It is special to see a real writer/reporter rise to the top. He has been a tech writer for more than 25 years. He has a great blog at ZDNet called Between The Lines that he writes with Larry Dignan.

CNET is lucky to have Dan Farber as a leader. Congratulations Dan!

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Lunch with Walt Mossberg at DEMO

I had lunch with Walt Mossberg and Kate Boehret at DEMO today. Walt is the legendary Wall Street Journal technology writer. Kate works closely with Walt and also writes for All Things Digital. Megan McCarthy from Wired Digital also joined us.

There are almost 80 companies presenting at DEMO. It is overwhelming. So, at lunch we didn't talk about technology at all. Walt is a big fan of the Boston Red Sox and New England Patriots. Walt showed me his new Mac Air...note the Patriots logo is his wall paper and screen saver. As you know I live in the Boston area and am also a big fan of the Red Sox, Patriots, and Celtics. So, we had a great time at lunch.

Walt Mossberg can make or break a new product with his WSJ technology reviews. The technology world listens to him and trusts him. I have read his column for years but had never met him before today. Pretty cool.

Note to entrepreneurs: There is no way to influence Walt or change his views. He is his own man. But, if you want to loosen him up and see the lighter side of Walt...talk about the Red Sox and Patriots.

Note #2: If you are an entrepreneur with a cool company or a VC with a hot portfolio you should also talk to Megan McCarthy at Wired. Send me a note if you would like to get in touch with her.

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