Automating the Herd Mentality
Investing social network Roboinvest now allows users to copy one another’s trades with a single click. They’ve prudently limited this to small dollar values, but it’s still a dangerous plan: market swings already tend to happen when investors overestimate the information content of others’ trades; letting them do this by default seems even more dangerous.
Reed Hastings: Comcast Violates Net Neutrality
Netflix’s CEO argues that Comcast is violating net neutrality by not applying bandwidth from their Xfininty app to their bandwidth cap. This is hard to buy as a serious complaint. Netflix, for example, doesn’t let other streaming services piggyback on its own recommendation engine—it’s a valuable asset as long as it isn’t shared.
Meanwhile, Netflix announced that it didn’t use its million-dollar ranking algorithm improvement, though it did use some of the runners-up.
Could Ad Targeting Hurt the “Conference” Business Model?
Many online trade magazines (you might also call them “tech blogs”) make a significant fraction of their revenue from hosting conferences. The basic business model of a conference is to take the set of people who all care about the site’s topic and are willing to spend a couple thousand dollars to interact with one another—and then charge them a couple thousand dollars to interact with one another. Add some extra fees for vendors, while you’re at it, and the conference business starts to make sense.
But it only makes sense if it’s hard to target these audiences in other ways. As Scout Analytics argues, you can reverse-engineer the entire conversion funnel for conference attendance. As they don’t proceed to argue, you could then target prospective conference attendees at an order-of-magnitude lower CPM. While this doesn’t destroy the economic rationale for conferences, it does erode their pricing power. In the case of TechCrunch, they were bought based on their strategic value to AOL as a media property. But the “cover bidder” was that they could stay private and reap dividends from their conference. So this could negatively impact valuations for business-focused blog networks.
LinkedIn Launches Follower Targeting
LinkedIn’s ad product has added a few new options, including targeting people who follow a particular company. VMeanwhile, the number of people who use this tool is staggering: IBM, for example, has 6X as many LinkedIn followers as Facebook followers.
- Do searchers care about Google+ integration? Many angry nerds think so, but most searchers claim that they haven’t noticed, and those who have noticed are evenly divided, pro and con.
- N=1, but this Google+ user is amazed at how bad Google+ is at serving its intended purpose. For consumer tech, stories about how a user set up the product for his mom should be the kiss of death.
- Danny Sullivan demands real user data on Google+, arguing that Google’s statistics are largely meaningless. Which is true. Their explanation of their usage numbers is incredibly evasive.
- RKG has some always-interesting stats on click distribution and cost per click across different Google products. One major highlight is Google’s dominance in mobile clicks (and their consistent growth).
- Google has run the numbers on customer service for AdSense, and found that it doesn’t pay.
- Facebook ads have higher click-throughs on weekends. Facebook users are more boring on weekends (or rather, they’re doing the stuff they’ll upload pictures of on Monday), and some advertisers aren’t clever enough to cut bids when there’s low traffic. This anomaly should fade.
- Facebook is re-launching offers, which now look far more Facebooky than their previous iteration. No effect on revenue just yet.
Smartphone User Adoption
Asymco argues that smartphones have had faster adoption than any other consumer technology in history. This is, of course, fairly dependent on what you call a smartphone, and when you think they started becoming available. But it is striking how quickly smartphones became ubiquitous. In part, because most of what they did was a seamless replication of what other devices did—they handled calls and texts, just like a phone; they did websites and games, just like a desktop. So smartphones haven’t had to overcome anyone else’s network effects, the way e.g. radio and VCR (other rapidly adopted technologies) did.
Meanwhile, cell phone sales are not holding up well.
What is Amazon’s Actual eBook Strategy?
Charles Stross, a prescient science fiction writer who happens to be on the front lines of this sort of thing, argues that Amazon wants to create a monopoly with respect to selling ebooks to readers, and a monospony with respect to buying them from writers. Where his critique falls flat:
Monopolies suck for their customers because they don’t have to give a shit about product quality or price: they have you, the customer, over a barrel with nowhere else to go.
Monopolies exist on a continuum, since “products” are not discrete categories—if Amazon had complete control over the written word, they’d still have to compete with television and conversation. And Amazon is clearly willing to ratchet up quality as long as it increases purchases—their ideal customer is someone who gets in the habit of clicking the “buy” button, not someone who does so reluctantly after scouring the web for alternative options and finding that everyone but Amazon comes up short.
Amazon is in a position to create this monopoly because of their earlier monopoly on print books—not a monopoly in the sense of 100% market share, but a monopoly in the sense that the most useful strategic planning that anyone else could do in the industry was to figure out what Jeff Bezos was going to do to them, and then determine how to minimize the damage. It’s unclear that this monopoly hurt readers—of whom there are more than ever.
In other Amazon news, they’re now offering internal search. That’s a significant move: Google uses site-search as a data source; if Amazon can accumulate search data (from people who are already happy to pay them for cloud computing), that will make their internal search more effective, and mean that they can consider launching another consumer-facing search engine (like their ill-fated A9 project).
And More on Monopolies…
Peter Thiel is on a mission to rehabilitate monopolies. He’s currently teaching a Stanford class on startups (while, apparently, running a US VC fund, a New Zealand VC fund, and running a hedge fund that now makes VC investments).
One student in this class is taking what are apparently verbatim notes: here’s the most recent lecture. One key point: monopolies are the only way that startups become successful, and they’re more socially useful than people give them credit for. This echoes some startup advice that Paul Graham gives in one essay: that startups should address hard problems, not because they’re hard but because everyone else will give up in advance.
In legal terms, it might eventually make sense to view startups as a clever way to game anti-trust law: as long as your business is so new and confusing that nobody at the DoJ understands what you do, they can’t understand that you have a monopoly on it.
Fred Wilson: Leveraged Recaps as an Exit Strategy
Fred Wilson has a simply stunning post.
In a way, it’s inevitable: if companies a) achieve success faster than they used to, and b) don’t need to IPO so quickly, it follows that there will be plenty of startups that evolve into mature, predictable companies without ever needing to list their shares. Usually, VCs put pressure on them for an exit, whether that’s through an IPO or an acquisition.
Wilson proposes a third path: leveraged recaps. These are highly contingent on being able to effectively model future returns from starutp-y companies, but that’s an increasingly solvable problem, especially in verticals like digital media and lead generation. But it will substantially change the narrative. Firms that can stay private indefinitely can build a very different culture from firms that need to focus on an exit.
Strangely enough, one great example is HotOrNot, whose managers chose a compensation structure focused on huge bonuses rather than equity.
No Buy Ratings for Yelp
Yelp now has analyst coverage: four different analysts have three different terms for “Hold.”
Yelp, meanwhile, is launching more refined rankings for idiosyncratic searchers, like people of specific ages or dietary tendencies. This is more of a defensive move: none of these demographics are huge, and Yelp only has this kind of data because such people use the site already. But it does help them stay ahead of Google, which will eventually use search customization to deliver the same kinds of content (e.g. when vegetarians search for “pizza near Union Square,” Google will incorporate the vegetarian-friendly recommendations of their disproportionately vegetarian friends).
Patch’s Editor in Chief Quits
Embattled Patch has lost their editor in chief. His exit email is a long justification for a) how wrong the media are about how badly Patch is doing, b) how it’s now doing much better than it used to be, and c) why, despite that, he’s moving on.
TripAdvisor Highlights Friends-of-Friends
TripAdvisor’s new reviews use friends of friends to help users find trusted opinions. Since reviews from friends are the most trusted advertising messages, this could pay off. The immediate effect should show up in their conversion rate from visitor to hotel booker, rather than in a higher visitor count—so the success of this feature will depend on whether or not that is the bottleneck.
Microsoft to Charge for Bing API
Microsoft will now start charging for use of Bing’s search API. DuckDuckGo was, as of fairly recently, a major user. This could slow down their growth.
A former Groupon employee has a lengthy essay on Techcrunch detailing how unfair he feels their media coverage has been, and how impressive their employees are. One point he makes—which is worth emphasizing—is that the pure “offers” business is just a loss leader for Groupon; if they can become the default direct response marketing and yield-management solution for small businesses, they will earn a massive amount of money. The Yellow Pages still generate leverable cash flow even though they’re technologically backwards; combining that market position with modern technology could be incredibly lucrative.
9GAG Sets a Precedent
All Things D has a brief profile of humor site 9GAG, which makes one important point: “9GAG (the name sounds like “making fun” in Cantonese)…”—9GAG may be the first major Internet brand in the US to originate in China. But it clearly won’t be the last.
Digital Due Diligence Weekly