Andrew Chen Archives

I’m going to the GDC next week. I’m going primarily to look at a couple different areas:

– Serious games
– Massively multiplayer games
– Game design theory

It’ll be great to see what people are up to and attend the keynotes, which feature the President of Worldwide Studios for Sony and Shigeru Miyamoto of Nintendo, who invented Zelda, Mario, Donkey Kong, and Nintendogs.

From Paul Kedrosky: New data from Panama

As I wrote earlier, you need more data in the form of CPA and overall clicks to figure out if Panama is actually doing better. Now we have it!

* Search Impressions – Up an average of 5%
* Cost Per Click – Down an average of 6%
* Click Rate – Up an average of 10%
* Conversion Rates – Down an average of 5%
* Overall CPA – Up an average of 6%

This is from the original analysis from Avenue A.

You can see from this that overall conversion rates have gone down (which is bad), although more clicks are being delivered. It mostly looks positive, since the gains in volume are only minorly offset by the lowered conversion rates.

Link: VentureBeat » Vflyer releases classified ad widget.

If you were a blogging platform, would you allow something like this on your site? If you didn’t make any money, and they were essentially getting free ad space?

I attended the Future of Entertainment conference today at Stanford and enjoyed it immensely. Here were the keynote speakers and here were the panels. As I watched, the first keynote really resonated with me, and I elaborate below. In general, it was great to listen to this vastly different culture talk about intellectual property, distribution, and all the other things we nerds like to discuss.

Andrea Wong and new show creation
First up was Andrea Wong, an executive vice president at ABC in charge of all our favorite shows, like "The Bachelor" "Extreme Makeover Home Edition" "Dancing with the Stars" etc. She talked about a bunch of subjects, but the one that resonated with me was the process she used to create new shows. Ultimately, whenever I’m thinking about technology products for consumers, I often think how you’d approach it if you IGNORED technology, business model, etc., and just tried to build for mass appeal. I think film, music, and TV are good representations of what it’d be like to just cater to customer tastes, rather than building features for the sake of features.

Her group at ABC would do a couple different things to get ideas:

• Getting pitches from production groups (Mark Burnett of Survivor, for example)
• Looking at successful shows from other countries, or in the past
• Brainstorming based on peoples’ emotions and common themes

I’ll mostly focus on the last one because it’s the only one where you’re trying to create ideas from scratch.

Tapping emotional roots
She said that ultimately, getting inspired to create new shows is all about taking large-scale, emotionally resonant themes and developing shows on them. Andrea’s team would take an idea like "psychics" or "falling in love" or "judging how other people live" or "belief in God" and develop shows based on those deep emotions.

Interestingly, Andrea said that because of her background in engineering
(EE degree from MIT), she was trained to take a very complicated
problem and reduce it to simpler ones, which was quite opposite to how her brain needed to think. That sort of reductionist,
deductive logic is what defines an engineer. However, the act of
creating a new show is to take a very small nugget of emotion and building out complexity
from that.

Media as a "failure-driven" business
Another key point was that for all the success she’s had, she’s also had some really big failures. Andrea said that 95% of shows are failures, and that every year, they launch an entire season of new ideas and new shows, and maybe 1 or 2 ever become real properties.

Part of the key then, of course, is to try a lot of different things and realize that you’re facing difficult odds. The only way, then, to success is to throw a lot of stuff at the wall and not get discouraged when the majority of your ideas fail.

Looking at technology products as entertainment, not tools
There’s a huge bias in the tech industry to look at our products and services as tools for getting things done, rather than as entertainment. For example, one looks at eBay and sees a consumer-to-consumer marketplace, that helps you get rid of your junk.

But what if you look at your products as entertainment, something that drives fun based on characters and story? Is there a better way to look at eBay, beyond its functional uses? Perhaps the "story" of eBay is one of winning and losing auctions, of drama and tension created by the countdown timer, or one of surprise and discovery based on finding awesome one-of-a-kind things? Is that what makes eBay fun, rather than merely a tool?

I think this is a surprisingly fresh way to look at consumer products that hasn’t been explored much. And we should, as it would make our days more interesting :)

Fred Wilson writes on the new Yahoo system: A VC: Is Panama Working?.

… and includes this handy chart from comScore:

The question to pose is, are higher clickthrough rates better or worse for Yahoo?

The answer is, it’s really not clear. Let me explain: Total revenue for a text ad network is calculated by:

Ad revenue = CTR * PPC * Impressions

So if CTR goes up, the system is great, right? Wrong.

Why increasing CTRs aren’t necessarily a good thing
The reason is that CTR and PPC aren’t necessarily independent variables, and they can affect each other. If CTR goes up, but the number of sales stays the same, then each click is worth less. So then even though CTR is up, you decrease your PPC and you end up with the same number. (In the meantime, as an advertiser you complain about low conversion rates)

CTR could be a good thing, but it might not be. We need conversion rates to figure it out.

Is Panama going well or not?
The overall ad system is driven on a couple factors:

• What publishers are signed up
• What advertisers are signed up
• How good the targeting is

… and each one of these factors is related. So my guess is that by improving the targeting, they will have a different success profile with the types of publishers and advertisers that are involved. As this changes, only then will we understand the pure impact of Panama.

The fact is, the types of publishers you work with are as much of a driver for ad revenues as the other stuff. If you have a publisher that drives tons of untargeted traffic, through obtrusive ads and confusing UI, then no matter how good your ads are, you’ll just drive junk ads. You need to get off these sites and onto higher quality ones in order to get better performance.

Great original material from TechCrunch on widget companies: MySpace: Why We Block Widgets.

It’s been very interesting to watch widget companies and their relationships with the underlying blogging platforms. This is especially in the case of MySpace, which has more or less been hostile to big groups of companies.

Pro: Widgets provide customization and functionality the platforms don’t have
Con: Widgets are pieces of real estate that the platforms don’t control

How blogging platforms will act
Ultimately, the blogging platform has all the control in the relationship, and they are incented to act in two ways:

1) First, let any widget company start and flourish
2) Once it gets popular enough, either control it and charge it a toll, or block it and replicate in-house

Sound familiar? Well, Microsoft essentially did this to wrest control of Windows and the major cash cow products from other companies over time.

The tactics of control
The easiest way, in my opinion, to wrest control of widgets from the widget providers is to do it under the guise of safety and security.

So I’d provide two steps:
1) Create a "Certified Widget Program" that requires you to register widgets over X traffic
2) Then, for any widget that isn’t controlled, provide a popup or a notice to the user that their widget might be unsafe

As a third step, once widgets are registered:
3) Make the widgets agree to a bunch of legalese, including a non-commercial clause. And if it’s commercial, here’s your chance to broker a deal with our biz dev team

Thus, under the safety and spyware umbrella, they could enforce a lot of control over their ecosystem. I wouldn’t be surprised if a variation of this launches. It’d certainly be more subtle than just randomly turning off peoples’ stuff.

Link: First, the WSJ article, and then the actual text of the memo.

It’s really fascinating to see the push/pull that happens between the product and experience. As Schultz says in his memo, they had made a ton of changes to make getting coffee (“the product”) more convenient. In fact, many customers may have complained about slow coffee, or asked for drive-through windows, or whatever. But ultimately, it may be worth producing the product LESS efficiently if it adds to the experience.

Is this a topic that companies with web products ought to be thinking about more?

On a side note, the WSJ pointed out that the memo was originally leaked on Starbucks Gossip, a blog that I read every now and again.

… please, move west!!

I recently wrote on the difference between Eyeball companies versus revenue companies.

I’ve been thinking about the issue of "eyeball companies" AKA companies with lots of users without any revenue. First off, if you have one right now, good for you :) Right now those companies are worth a lot of money, as old media companies are still trying to figure out what to do with this whole Internet thing.

Ultimately, I’d evaluate the future success of eyeball companies according to the following criteria:

First, the basics..

• Have they proven users love it? (100k+ users is good)
• Will additional growth be cheap/viral or expensive? (>50% growth M/M is good)

Then, the interesting strategic questions:

• Are they doing something for free that someone else is doing for $$$?
• Are they taking "attention" from another big, ad-based platform?

The first two I won’t address in much detail, except to say that you’re not an eyeball company until you have eyeballs :) But the second two are interesting questions in the sense that the public markets aren’t open right now, so you need someone to step up and pay a LOT of money to take you out, if you’re VC-backed.

Because of this, you basically have the big Internet conglomerates (AOL, Google, Yahoo, Microsoft, IAC, and FIM) and old media companies to turn to, in terms of an exit. You ultimately have to look at their businesses and figure out if you’re doing something strategically interesting enough to them. So to reiterate, if you are doing something related to internet radio, video, calling, etc., you pose a disruptive innovation to big companies. Other people make a  lot of money from that, and they will get nervous if you get really big. They will probably think about buying you if you get really big, either for themselves or to keep you away from a competitor.

However, if you are an eyeball company that has a lot of users that no one cares about – and I don’t want to do any finger-pointing but I have my ideas – then even if you get big, no one will get too excited about what you are doing.

Just my quick theory looking back at Skype, MySpace, YouTube, and such.

I recently blogged on 10 ways to verify assumptions around your startup project, but left the details as an exercise to the reader. I wanted to add a couple notes to what I wrote…

Notes on customer-centric questions

1. Who is your product is for?
2. What is the context of your customers’ world?
3. What motivations and values do they have behind their actions?
4. When potential customers see your product, what happens?
5. Do you talk to your customers every day?

In general, I found that when I was busy failing left and right on my various projects, a big chunk had to do with misguided assumptions about who users were, and why they would be interested in my product. In general, if you’re not declaring a target customer for yourself, and thinking about how to approach them in the best way, both from a marketing and product standpoint, then you’re not thinking about your user enough.

Are you building tagging/social networking/whatever for no reason?
One thing I did was build BitTorrent into a couple projects when it probably didn’t need to be there. Another example is building "tagging" or some other Web 2.0 functionality. Why are you building it? Is it really better for the customer? Or is it just something "cool" you wanted to add in? When you let the product and the technology drive the experience over what the user wants, then you are really shooting yourself in the foot.

Are you forcing things that don’t go-with-the-flow for users?
Another common thing that happens is, you want to develop feature X because it’s cool, but maybe it makes your user experience less convenient. "Oh, what the hell," you say. This is bad. So if you are building a client that needs to be downloaded, rather than putting things in the browser, that’s bad. Or if you are doing something like tagging when simple categorization will suffice, that’s bad too. Remember that eBay got to many many billions of dollars on a stupid categorization scheme, and Yahoo did too.

Are you building a fashion website but you’re a poorly-dressed nerd?
I am, and personally know, lots of nerds building shopping sites for women. Even TechCrunch has an article about it. If you’re building a website for a completely different audience than you, then you need to understand you’re going into uncharted territory. Are you talking to your target market every day? Ideally one of your co-founders is a girl/old-guy/teenager/Mormon for your girl/old-guy/teenger/Mormon social-networking website? Because if not, you are forcing an entire world of assumptions into their world. This is very hard, and I’m glad I tried to do it, because it didn’t go so well and I learned a lot about how the world works :)

Notes on product and business model questions

6. What is the "core mechanic" (or minimum feature set) of your product?
7. What factors can kill your business model?
8. How do you acquire users? Can you make an existence proof?
9. How do you make money? Can you make an existence proof?
10. What technology do you depend on? Can you prove it can work?

These questions really kill me, because even if you get the user stuff vaguely right, you can still fumble things by getting too structured when developing your product. I think these questions are all about being "lazy" to the extent that you build whatever is the simplest thing that could possible work, and you try it out. Then rinse and repeat.

What’s the stupidest, smallest incarnation of your product?

Everyone knows eBay, which is a big complicated beast with lots of auction models, specialized categories, metadata, attributes, etc. But before you try and build that, what is the "core mechanic" of eBay? You could argue that it’s really just a test of whether or not people want to put product listings in a forum. You might even argue that the auction piece of it is extra, which Craigslist pretty much proves.

So take your product, remove the user authentication (use e-mail or something else instead), remove the fancy tagging and extended profiles, take it all out. What’s the thing that people spend 99% of the site doing? On MySpace, it’s messaging and browsing profiles. On YouTube, it’s viewing a video. On World of Warcraft, it’s walking around and clicking on things. Once you get the 5 minute "loop" of the core mechanic right, then extend it out with all the fancy stuff. But if you focus on the profiles, tagging, social networking, and other fancy features, and then have a crappy core mechanic, you’re screwed.

In fact, a rule of thumb should be that you can prototype the core mechanic within a week or two at MOST. Most people think in months, but you should think in days.

Where do your users live? Can you get a couple of them to fill out a form?

One other issue I wanted to touch on is the tactics of reaching out to users. I think nerdy, product-centric people like me typically focus on the technology and not on the people, which is a huge mistake. There are lots of ways to make sure you can tap a willing-and-able audience for your site. Here are two variations…

First, there’s the beta-signup page. Make one up that articulates the offer, and asks them to put in an e-mail address to get announcements when the site is done. Maybe put in a text field that asks them why they are excited. This will take you an incredibly short amount of time. Now go get some traffic from your site – from blogs, forums, Google Adwords, etc. Track your conversion rates, so that you know how many people are actually interested. Theoretically, if your site is awesome, people will want to sign up, and they might even forward the URL to their friends too! But, if your conversions suck and the people fill out weird things, you’ll have learned something.

Another option is just to hook up a SurveyMonkey landing page to Google, and ask your users a bunch of random questions. Do they want to upload videos of them dancing? Do you have a webcam? Do you spend money on shoes online? (Or whatever) This is NOT a replacement for qualitative interviews with your user market, but you can learn a thing or two. You can verify a couple assumptions around issues like, how much of the MySpace crowd has a webcam to shoot  videos? This can be life and death for your little project.

Go collect those startup scars :)

I’m just pontificating off of random scars I’ve picked up from starting projects, and I’m sure very smart, intelligent people have had different experiences. The most important part is to start trying, as often as you can, and learn your own set of heuristics at evaluating these situations. A couple have really stuck with me because of my product/technology-bent, but if empathizing with customers is your thing, you’ll learn a whole set of other interesting things about the product side.

Comment with any additions to my notes above!

Saw this on Delicious a second ago: DoIt.

I immediately read “Dolt” rather than “Do It.” In fact, there’s a

Link: Urban road race to test limits of robotic cars.

I’m very excited to attend the event later this year – one of my genius colleagues, Sven, was lead engineer in last year’s winning entry for the DARPA Grand Challenge. It’ll be great to see the MDV logo on a car trying to navigate an urban traffic setting.

Here’s what will be expected of them:

The Stanford car will compete in the agency’s third and most challenging derby — the DARPA Urban Challenge, in which robotic cars will drive in a mock city environment. Cars must merge, navigate traffic, traverse busy intersections, avoid obstacles and master the most delicate of skills — determining who has the right of way.

Maybe we are closer to Terminator than we thought? :)

I’ll be at this if anyone else wants to join me: Future of Entertainment Conference @ Stanford GSB.

There continues to be a really interesting debate on the value of engagement versus raw pageviews. For anyone who hasn’t been following it, the summary is that:

1. People used to watch 3 TV channels
2. Now they watch network, cable, YouTube, XM, mobile, IM, etc., which is called "media fragmentation"
3. This means that the scarce commodity is not media time, but rather, the attention of people

The question then, becomes, how do you measure intangible things like attention and engagement?

Whereas most online media is currently bought by the raw number of ad impressions, a more favorable measurement would be the amount of time people spend on a given page. Although it’ll take years for media-buying to go down this direction, using this sort of evidence would be a huge boon for online publishers to get more of those brand ad dollars.

Here are two interesting articles that call out the debate:
First, an analysis on Yahoo versus MySpace, and relative pageview value: The Economics of Content.

So Yahoo’s pageviews—despite trending lower—are therefore worth more to advertisers than those on MySpace. However, if advertisers and social networks can get better at leveraging traffic to build deeper connections – and be able to somehow measure that engagement – with users, the pageview/uniques ratio may diminish in importance, Adweek concludes, noting that the above numbers represent “the ultimate technological expression of word-of-mouth, where people make connections to other people, entertainment and services through the most massive chat rooms ever built. And most of the online ad industry’s metrics don’t really get at that.”

Another great blog is from an EIR in Boston, Nabeel Hyatt, who’s doing some interesting stuff in online games. He writes about the attention being spent on games (lots!) versus the pageviews generated:

This is happening at the same time as a movement of folks calling for
the end of measuring page impressions, and calling for measuring time
instead (see Evan, Fred Wilson, and Steve Rubel).
If Flash, Ajax, and widgets really cause the industry to start
measuring properties by time spent instead of impressions, I would
argue that the attention to the gaming category is going to go through
the roof.

Either way, it’ll be very interesting to see this movement develop, in particular as AJAX and Flash become even more commonplace. Brand buying on the internet must adjust, and my guess is that it’ll be great for the overall online ad market.

I recently posted a question on LinkedIn, to get some feedback on my blog. I asked people what I should write about on my blog, and for general advice.

I got a number of answers back quite quickly, many of which were quite good! Thanks again Ramachandran, Lori, Michael, Josh, and Jon.

Here’s a sample below…

Ramachandran Iyer writes:

Whatever you please. The whole reason of having or keeping a blog is write off your daily thought and if its good enough there might be folks following it daily as well. So its just what are like and what you are passionate about.

But a general suggestion would be that- stick to some macro topic or subject of disucssion, so for readers there is a continuity aspect. Also when you start writing on a said veritical, there is lot of focus and learning for yourself as well. It also helps gather momemntum on that blog, as it becomes a big repository of collected information ,research articles, which will add lot of value to the readers.

Lori Laurent Smith writes:

Whatever you are passionate about. I started about 4 blogs before I landed on my current one based on finding a really great retail deal at the upscale stores I like to shop at for my family. Web 2.0 is all about YOU, not me or anyone else. Do what you like and people will come…slowly at first and then you will build a following as long as you do it reasonably regularly (every 2-3 days at max, everyday is best but hard). Post comments on other blogs and soon you will find you have a following. Send me a link when you’ve got it up and running. Good luck!

Michael Nachshen writes:

Andrew — to answer your question, I have to ask you one back. Why did you start blogging in the first place? Are you trying to drive business? Educate/inform people? Persuade them? Express yourself? Or are you doing it because everyone has a blog, and by golly, I need one too.

If the answer is the latter, then you are blogging for the wrong reason. Think of it this way. A blog is just another communication channel. Too many people (including, I’m embarassed to say, many communication professionals) think a blog is the end-all-be-all. But it isn’t –-a blog is easy, cheap, and potentially has a great deal of reach. But at the end of the day, Andrew, a blog is just another way to get your message out.

So, to get back to my original question – what is your reason for blogging in the first place? There’s nothing wrong with doing it just to have fun – these days, my favorite blog is about my little brother’s travels throughout Latin America -– but if you want people to read your blog, you should have a reason for blogging in the first place.

Think of it this way – a blog is a conversation between you and potentially millions of people. If you have something to say, then say it. But ask yourself this – would you spend time listening to someone who had absolutely nothing to say, but was simply talking because everyone else was?

Josh Kwan writes:

I’d like to know how you spend your time as an Entrepreneur-in-Residence. What interests you as an entrepreneur? How do you prioritize your projects? What evaluation system have you devised to measure potential ideas or business plans? Tell me about the ideas that flow across your desk. How do you rate them, maybe against long-term trends or capacity to scale or strength of technology or quality of management team or personalities of founders? What metrics work for you? And why would you jump in or pass on particular companies? Basically, I would want to read on your blog the inside scoop on what it’s like to be a designated “entrepreneur-in-residence” at a prestigious VC firm. (Granted, you are probably restricted from sharing a lot of what you see and hear because of NDAs…)

Jon Fortt writes:

Right now, your bio is more compelling than your blog. I think that’s because it’s taking me too long to figure out what your blog is about.

I suggest you narrow your focus to “Advice for Entrepreneurs” and change your blog’s title to reflect that focus. Then add categories to your posts that reflect the theme — maybe some posts will be about conferences, some will be your own personal stories, some will be about networking.

I also suggest you pay close attention to the way you title your posts. I love “10 tips for meeting people at industry events” because I know exactly what I’m going to get when I read it. “Eyeball companies vs. revenue companies” is less clear; “check your motives before starting a company” would be better.

Well that was pretty damn useful! I really have to applaud LinkedIn for putting together a service like this, since obviously people are wandering around chiming on subjects, and putting together pretty useful responses.

I think net/net, the main advice is to make the blog more accessible by making clear what the focus of the site is. So if it’s entrepreneurship, the reader has to be able to make that judgement right away, in 30 seconds, or else they will wander off. I’m going to noodle on this a bit further and see where I want to go with it…

The venerable Chris Yeh recently remarked on an entrepreneur that DIDN’T want to verify his assumptions:

Whenever someone comes to me with an ecommerce idea, I tell them to sell some of their stuff on eBay and let me know about the results.

One entrepreneur actually refused to do the experiment. “Chris,” he said, “I might learn that my idea sucks. I’d rather not know that until after I’ve raised my money.”

I think he was missing the point. I’m sad to report that the business failed.

Now let me confess why someone might do this, as someone who did EXACTLY this several times in a row for different projects. I think the ultimate reasons come in a bunch of different flavors:

5 Deadly Sins for Blind Business Creation
1. “I’m smart, I know this will work.”
2. “I’m introverted, and I like the technology more than the people.”
3. “I’ve spent too much time building already, I’m afraid of the results.”
4. “I think we should build all of it first, then figure out if it works.”
5. “I’m dumb, I don’t know what assumptions to verify.”

Any of these sound like you? If so, you might be in trouble :) In almost all the cases, I’ve mostly been guilty of #2 and #4. I enjoy tinkering, and that coupled with an overly-structured approach (waterfall??) to problems leads to a blind approach to major problems. This is an area I really came to identify and accept over the last few years, and it’s been very helpful.

Anyway, let’s break this stuff down.

1. I’m smart, I know this will work.
If it’s consumer internet, no you don’t. In fact, being smart will make it harder to relate to most people in the world, who are by definition average. All the time you spent trying to act and sound smarter (and more logical) will bite you in the ass. Seriously.

The big risk is how OTHER people think, and no matter how logical it is for them, it’s up to you to design something that works for the people, not the other way around.

2. I’m introverted, and I like the technology more than the people.
This one comes down to what you’re trying to do. If you don’t like people, and don’t want to design for real, live customers, then you’re not really doing a startup, you’re doing research.

You can either handle this by trying to fight it, maybe by appointing a less-introverted co-founder the task of talking to the target customer and building/relaying a persona. Another option is to go find someone who is in your target market to work with you, in which case you’ll talk to your customer every day.

3. I’ve spent too much time building already, I’m afraid of the results.
I’m not even going to address this one :) Get over it, quick.

4. I think we should build all of it first, then figure out if it works.
For the really organized, structured people of the world, they prefer to think in terms of top-down innovation and delivery, rather than letting innovation grow like weeds. How Microsoft of you :)

I’ve gotten really comfortable with this by relating it to the pharma world – you start with 100,000 compounds, and you narrow this down to 1 drug and 99,999 failures. If you accept this as a normal part of the process, then you can start thinking of pushing out prototypes on a weekly basis (prototypes can be powerpoint or paper or whatever, not just code)

5. I’m dumb, I don’t know what assumptions to verify.
Try. Fail. Try again. Fail again. Eventually you’ll learn. Read books and talk to people too!

I recently blogged about one of the websites I worked on straight out of college, and the lessons I learned about verifying assumptions early on.

Let me give you 5 customer-centric questions and then 5 business-model centric questions. These are all things you should be working on before, or along side, development of your consumer internet product.

1. Who is your product is for?
2. What is the context of your customers’ world?
3. What motivations and values do they have behind their actions?
4. When potential customers see your product, what happens?
5. Do you talk to your customers every day?

6. What is the “core mechanic” (or minimum feature set) of your product?
7. What factors can kill your business model?
8. How do you acquire users? Can you make an existence proof?
9. How do you make money? Can you make an existence proof?
10. What technology do you depend on? Can you prove it can work?

I’ll blog in more detail about each one of these tomorrow.

I love Urban Dictionary…

Definition for: connectile dysfunction.

1. The inability to gain or maintain an internet connection.
2. The inability to print, email, or get to the internet.

My computer had connectile dysfunction (CD) yesterday, so I couldn’t check my email.

In my last post, I talked about the second bad website I had started. I learned a lot of lessons (some of them very obvious and amateurish) in trying to explore the idea, and here are some of them:

Focus on the core problems, not on “acting” like a business
To a complete startup newbie, there’s a lot of pressure to create legitimacy when you’re a total nobody. This can manifest itself in many forms, and the more corporate/traditional/Microsoft you are, the more likely you are to cave into these pressures. So what are some things that people expect “real” companies to have?

• Business cards
• Office space
• “Experts”
• A really big, complex idea
• A big team
• Lots of money
• etc…

Ultimately, this insecurity about what a startup is about can really gnaw away at new entrepreneurs, and they focus on the wrong things. In fact, whenever I see a new startup with 4 MBAs, I imagine them running around making financial models, getting office space, and trying to decide on the “brand” behind their business cards when they should probably be trying to prototype their product and verifying consumer/market assumptions.

From the venture capitalist’s standpoint, they are betting on the team to execute against a bunch of unknowns, and that involves collecting fundamental data right away. So that should be 90% of your time with 10% being dedicated to whatever minimal things are necessary to support the central tasks.

For us, of course, Jake and I spent a bunch of time creating business cards, trying to convince our friends to join us, architecting for “massive scale,” as well as forecasting and re-forecasting financial models. Luckily we didn’t waste a huge amount of time and money doing this.

Nerds love to jump right to the code, but you should probably start elsewhere
If you get a bunch of engineers together and you have a great idea, there’s an instant desire to jump to the code right away, and start developing the product. Let me argue that while this is a great way to get some intuition about the idea, it’s probably not the right thing to do at first. (Although you want to get there quick!)

At the end of the day, investing in the development process is a hugely expensive thing to do, by time or money. Once you build out a wonderful dating site, it’s hard to turn that into a photo-sharing site. Yet at the same time, these days the development process is not the highest risk thing. Instead, the highest risk thing will be consumer behavior risk, or market risk, or some other issue. Put those two together and you can safely say that it’s probably more important to identify the key risks, test for those, and move on.

The key assumption in our business idea was that there was enough value to be collected from these books that it would make it worthwhile. While there are several ways to test that assumption, we jumped into the code very quickly. We later realized that the right approach was to call up a bunch of these charities and used bookstores, and ask them how many books they had. We also figured out that we should actually figure out how many of these books had value, versus being scrap. We ended up creating a pilot program with one of the Goodwill charities to collect data on this, using little more than a barcode scanner and Notepad. Even then, we probably invested too much in our technology system to price things in real-time, post eBay listings in real-time, etc.

Iterate quickly and cheaply (rather than slowly and expensively)
Some folks that are reading this might think that going to the code is the cheapest thing to do. Let me beg to differ. For almost any consumer site out there, the risk on consumer behavior is really the biggest. How do you know that people will like your site? How will you know what audience will love it the most? What features will appeal to them? These questions are impossible to answer.

So I think ultimately, you have to go down the IDEO approach where you pick a general target market, interview a bunch of people, and build a persona for the person you’re trying to target. That way you can have constructive conversations about Artsy Anna and how she reacts to new feature X on your photo-sharing site. But after then, you have to be prepared to build 20 different concepts, iterating on each one, until you catch the perfect customer experience.

The key thing that eventually caused us to stop working on the books idea was that Jake had the great thought to grab a dozen books and auction them all off on eBay. Theoretically, a bunch of what we were doing was contingent on eBay being a “perfect” marketplace for books. If Amazon priced a used book at $20, then the eBay closing price would hopefully match that.

Of course, we found that $20 books went unsold, while $0.05 books sold for $10. At the end of the day, our model was broken because there wasn’t a good way to figure out what books were monetizable and which ones weren’t. While we could have pushed it further by trying to pattern match and creating our own eBay pricing predictions algorithm, instead we laid down our cards – Jake was going to NYU Law School in a month or two anyway, so our little hobby was over.

In retrospect, of course, we should have just done that first. When we came up with the idea, we should have iterated on it by just auctioning off 10 books right away. And if that worked, we could have gone to verify our other assumptions, but we chose to start nerding out right away. Although this could have worked if we were lucky, I think 9 times out of 10 it doesn’t end well.

So if you are working on a new website and 10 months into it, there’s no traction and you don’t know why, you probably could have stepped into it more experimentally. Take the approach as “finding a company” rather than “executing on a plan” and you’ll get more mileage from the situation.

In a previous blog, I had mentioned some of the random stuff I’ve tried to build with my friends that really didn’t get anywhere. I also wrote, in an even earlier blog, how I screwed up my first website – that might be an interesting glancing at also, if you haven’t seen anything.

If you’re the impatient type, here are the slides for my website idea:
Download the PowerPoint: SwiftHarbor_Customer_blog.ppt (103.5K)

The story behind the slides
After trying to build some web stuff as a sophomore in college and not being able to even ship a small version, I realized that I probably needed some more industry experience. I spent 3 more years working on that, and eventually got good enough to know how to build some small things.

When I was 19, my friend Jake Kreutzer and I started talking about random things we could do to make money on the side, while we were both essentially unemployed. We brainstormed a bunch of stuff, and we ended up coming up with the idea of going to used bookstores, charities, and other places with lots of remnant “junk” and trying to identify the valuable stuff from the not valuable stuff.

Huge numbers of remnant books
The thing that was really attractive about charities was that they get a TREMENDOUS number of book donations every day. When I volunteered at a charity, I saw garbage containers literally 40-feet long filled with books and sold for scrap every day.

When we called up charities and asked them how many books they were getting per day, here were all the actual data points:

• 22,000 books every other day
• 4,500 books every day
• 100,000 books every 3 months
• 100 books per day (after they started explicitly discouraging book donations)
• 60,000 books per week

We thought at this rate, at 10,000s of books per day in total, that we’d probably be able to do this as a nice side gig. The idea was to start with books and then try other donated items, like CDs, DVDs, etc.

… to be continued
I’ll write more about what happened after we came up with the idea – until then, flip through the powerpoint to get a better sense of what we were trying to do.

First, a shout-out to my friend Noah for putting on the very successful CommunityNext conference on the future of online communities.

You can take a look at the agenda for a general sense for what the conference covered. It was amazing to see the CEOs of Offermatica, Userplane, VideoEgg, Threadless, Hi5, Suicide Girls, HotOrNot, PlentyOfFish, Slide, and Fark all in the same day. Even more amazing is how this adds to the lineup of the Stanford Business School conference I saw last week, which had the CEO/co-founders for YouTube, PayPal, Meebo, Facebook, Pixar, VMWare, and Juniper Networks. I’ve never seen a group like these before, particularly within a week of each other.

I just wanted to highlight a couple random points that were brought up during the conference that I liked:

On engagement, in brand and in metrics
Several folks, particularly in the Founder’s Panel, mentioned the term "engagement" as a catch-all for creating a successful community. Folks defined it in several different ways – one was to have a strong and clear mission for the community. Another was to give the users the ability to do whatever they wanted to do on the site. Yet another was to make sure you had an authentic voice and you engaged your users honestly and with respect. Obviously each of these concepts are valid, but also pretty fuzzy.

One should ask the question: How do you quantify engagement? For any community, different metrics have to be created, based on what the company wants its users to do. Obviously retention, frequency of use, and activity on the site are all good things. You want people to visit often, connect with a lot of "social objects" like other people, blogs, comments, pictures, etc.

And as the DIY measurement panel suggested, you could even open some of the metrics up to be things to incent the user. For example, by browsing you get 1 point. By posting you get 5 points. Etc. And then you reward users that have collected certain numbers of points with extra features, VIP status, etc. This resonates with me since it shows a very game design-esque approach to interacting with users.

Diminishing returns on social communities?
Another common theme was the rapid proliferation of user communities. Ultimately, you’ll start hitting diminishing returns as companies niche-ify their products, into everything from old people to parents to kids to surfers.

I think the way to think of communities is that they are merely one use case for people, but it’s common across lots of disparate groups. So people are very focused on exploiting this use case for now, because it’s easy (just web forms and DB) and you get content out of it. Let’s keep in mind, though, that there are millions of other things that people care about – matching their socks, finding a girlfriend, wearing the "right" clothes, learning to draw, etc., etc. After this gold-rush is over, I think we’ll go back to solving a wider set of needs that users have, not just connecting people.

As with all media, the scarcity lies in the "attention" of the user – with the number of websites, TV shows, radio, billboards, and other ways to reach people, it’s hard to fight for time in front of any given person. So because social networks are so sticky and engaging, you can only be active on a couple. Once most of the world is on a social network of one kind to another (similar to how everyone has an e-mail, even a disposable one), there will be a saturation point. I have to imagine we’re years, not decades, to this point.

Increasing competition leads to deeper functionality
In fact, I’ll argue that the products and technologies involved will have to grow far more sophisticated. On TechCrunch, one often sees the very simple sites that are just web forms that take in information then spit it out later on a different page. This "store-and-retrieve" model will only take you so far.

I think competition will lead sites to several avenues of increasing technical complexity:

• Take in more external/proprietary data
• Apply smart transformations/condensations of the data
• Or, combine platforms and disparate datasources

For more sophisticated levels of "external data," you’d likely see that in the form of proprietary/scarce datasets like the MLS, Yellow Pages, and PRISM. Because this external data requires time to acquire, format, and expose, this creates a higher competitive bar.

For applying smart transformations to this data, you’d expect functionality like clustering/recommendations/summarization/etc. The future of the Internet will look more like eHarmony (with its profile clustering) or Zillow (with its automated valuation algorithms) than Imageshack.us.

And for combining platforms, you’ll see more cross-channel interaction from phone to home PC to work PC to game console to whatever. The plumbing involved here can be daunting, which is why small technologies like recording voice data via phone and playing it on the web is not accessible for a random Web 2.0 entrepreneur. You’re already seeing some interesting companies playing in this space, where state is not tied to a platform but across platforms, and this trend will only continue.

UPDATE: Noah Brier pointed to the great Wired writeup on the Threadless guys.

I have been spending a lot of time talking about and thinking about starting a new business. With a multi-month “windup” process like an EIR, you have a surprising amount of time to think about your interests and constraints. I think typically, without a process like this, I’d probably start tinkering away on any ol’ thing that caught my eye – I simply enjoy building new ideas, and the decision-making process on this stuff is a week or two at most, and then a couple months of initial commitment, rather than six months of hard thinking.

In fact, at this point, I’ve probably had six projects I’d count as startup-y. Many of them didn’t go anywhere, but they were all designed to be used by other people, starting with a real estate app when I was 17. Here’s a quick list of things I spent multiple months on, with other people, starting at the top:

• Apartment listings website focused on deep coverage in local markets (never shipped since we built too many features early on)
• Automated used book/CD/media UPC scanner and software that instantly prices and posts listings on eBay (useful for used bookstores and charities)
• BitTorrent search engine and client embedded in an Internet Explorer toolbar (launched on Slashdot!)
• Video website for requesting and posting BitTorrent videos with one click client (doh, people don’t like downloading clients)
• Video website for posting Flash videos with one click from the browser (built over a couple weeks, eventually getting 15k+ videos)
• Social shopping website for bookmarking and sharing products (doh, don’t try to build stuff for women)

I also have lots of random start-and-stop personal projects, but I don’t think these count. I could write for hours on the lessons from each of these projects, but most importantly, I’m glad that we did them. We did manage to sell one of the projects, which is always nice. (Note that this makes me 1 for 6, woohoo!)

Starting a new company is a deeply personal endevour
First off, it’s clear that starting a new company requires a lot of introspection. I think it’s very easy (and misleading) to figure out areas where you can make money, and just build that. Instead, realize that building a company requires 4 or 5 years (YouTube aside) and you have to do it in an area where you have a lot of interest and energy.

For me, that means realizing that ultimately, I get excited by the idea that random normal people use the stuff I build, and that interaction seems really tangible and interesting. I spent the last 5 years of my life helping people invest in B2B companies and working in B2B online advertising, but you can see from my projects that they were all pretty consumer-oriented.

Building for yourself (at least somewhat)
Another opportunity that was really tempting was to build products for people significantly different than me. It’s easy to go to a Walmart and see the huge outdoors section, with BB guns, fishing gear, etc. and say, “gee, that’s a huge market that no one owns – I’m going to make a big Web 2.0 outdoors company!” The problem is, when you don’t relate much to the product, and instead relate onto to “people” and “money,” I think ultimately it’s very hard to be a good steward of that product.

It took me a while to be convinced of this: A couple months back, I ran my friend Max Noy through a couple concepts like this over brunch, and he said, “Andrew, I’m sure you can make money a bunch of ways but I don’t see that as your style.” He proceeded to talk about how to take things in your life and build products to solve those problems, and why hobbies are important and useful for this reason. Thanks Max, your advice has been helpful – now leave Microsoft already :)

Does building for eyeballs work?
Another interesting question is the current vogue of “building for eyeballs.” What this means is the temptation to make things that are useful for people without any business constraints. If you just wanted people, things like communication tools and media sharing are particularly useful for getting eyeballs.

I think this is a perfectly legit strategy, if you have an eyeball company RIGHT NOW. After all, two kinds of companies are getting exits – first, companies with lots of revenue and actual businesses. The second kind are eyeball companies where dollars are being spent in anticipation of media spend following eyeballs. Anything in the middle – small without a ton of revenue – aren’t going anywhere, whereas in the last bubble they were going public!

But if you are going to start a company now, and get to maturity in 3 or 4 years, you simply don’t know if a purely eyeball company can succeed. So I think the right thing to do is to use the tools that make an eyeball company successful – great interfaces, tapping user emotions, viral growth strategies – and apply them to areas that can clearly hold value even if our little mini-bubble pops.

Anyway, that’s where I net out after 2 months of thinking about the problem – good thing I can defer making a decision for a while longer!

As someone who’s brand new to Silicon Valley, one of the most important, yet difficult, things to do is to meet new people. The best ways to meet people in the Bay Area is to have grown up here, gone to Stanford or Berkeley, to work at a company or in role where you meet lots of new people, or any combination thereof. For me, unfortunately, I don’t have any of these. All I have are industry events and conferences.

Conferences are a real pain in the ass – there’s a ton of people, it’s loud, and it can be intimidating. It’s particularly hard if you don’t feel like you belong – either you’re trying to break into an insular crowd, or you’re just starting to learn about an industry.

Here are some tips I’ve learned from going to half a dozen such events in the last couple weeks:

1. Use the time before the conference wisely
The hardest thing in the world is when you don’t know anyone at a conference and you’re expected to fit right in. If you can, use the time before the conference to ask people you’ve met whether or not they’re going to go. If so, that’s great! You can tag along with them and they can introduce you to a couple people.

Another option is to e-mail people that are working at the event, and let them know that you’re new. If they’re nice people, when you see them at the event, they’ll introduce you to a couple people. Either of these options should result in 2 or 3 introductions at the very minimum.

One incredibly important way to use pre-event time is to create a little sound bite about yourself. When you say, “Hi, I’m Joe” you want to be able to follow up with a 30 second, 60 second, or 2 minute blurb about yourself and your interests, depending on the context and interest. You may want to make it a little punchier than usual, and get to the salient points quickly. You need to help other people size you up and fit you into their universe as fast as possible.

2. Arrive early, and get some 1:1 time
When there’s lots of people, and circles of 4 or 5 people that all know each other form, it’s tough to break in. The best time to meet people is when there isn’t much competition, and you can have a quick conversation to introduce yourself. So show up early, find someone who looks bored (checking their phone or whatever), and introduce yourself. That way, you’ll have a tiny bit of familiarity that you can reuse later on in the event.

Another good thing to do, if you show up early, is to catch a couple minutes with the speakers, organizers, or panelists. They’re often milling around, waiting for something to happen, and you have a chance to speak to some of the more well-informed and well-connected people there.

3. Sit next to interesting people, and introduce yourself
There are several bad places to sit during a conference. One is at the very front, where people get intimidated by the speakers, so that the seats are usually empty. Instead, do yourself a favor – sit in the middle of one of the rows, and introduce yourself to the people to the left of you or to the right of you, as the event starts. This is another example of the easier 1:1 interactions that happen because of your captive audience.

Sitting next to people who aren’t interesting, or don’t want to talk? That’s easy, just go to a different seat. If you’d rather be polite, just excuse yourself to go to the bathroom and then come back to sit in a different area. The best part of multi-session conferences is that you can constantly mix with different crowds as you enter and leave the rooms.

4. Break into circles of people
By far, the hardest part of a conference is during the “official” mixers. Oftentimes, you have groups of people who are all friends form, and they talk to each other intensely. If they are nice, they’ll welcome new people in, introduce themselves, and help you join a conversation. Oftentimes, they’ll be so engrossed in a inside baseball sort of conversation that it’s hard to break into a circle and start talking.

The best way to resolve this is to look for easy circles to join. This can be made up of people you’ve met earlier in the conference, so you can catch up and ask them how they’re enjoying things. Another option is 1 or 2 people loitering at the edges, who aren’t part of the action. You can make your own circle that way. Another is to watch for groups that have huge holes, with people standing in a U shaped pattern. You can jump in and fill the circle, and try and jump into the conversation.

How do you jump into a conversation? A question is usually a good start, or an observation if they are talking to something accessible. That way, you can shift some attention towards you, and start participating rather than being a bystander.

That said, if you join a circle, don’t understand anything they’re saying, feel free to jump in and out – don’t feel bad about leaving the group and finding another one that’s more approachable.

5. Invite people to talk to you
Once you’re in a circle, you should make sure to invite people to talk to you. So make a hole for people to come join you, if you can, by standing somewhat perpendicular to the other people. And if people come by and stand there, stop the conversation and introduce yourself. That way it’ll be easy for people to join the conversation, rather than feeling excluded.

6. Bring business cards, and ask for business cards
People go to industry events to meet people, period. So bring your business cards, and do the “card blast” when appropriate. And ask for peoples’ cards after you talk to them for a couple minutes. Don’t be bashful, that’s what these industry events are about. And remember to bring enough cards based on the context of the conference. For a 2 day conference, you’ll want to bring a fistful, rather than a 5 or 6, like you might usually do. Sometimes it might make sense to keep a bunch in your car, or your bag, so you can refill if necessary.

On the other hand, asking for business cards is helpful too, but only if you remember who the people are. If you just grab random ones, it’s a waste of time – instead, focus on having quality, interesting conversations with people, so that it’s memorable enough to associate with a card.

7. After the conference is as important as event itself
After you leave the conference, you’ll often have a bunch of business cards and maybe even a member directory of all the people that attended. Remember to follow up there! Send an e-mail, summarize a point or two in the conversation you had – hopefully a memorable one – and ask for whatever followup is appropriate. That might be a phone call, or a coffee, or just a “let’s keep in touch.” Put them into LinkedIn, or your address book, so that you keep some record of it. LinkedIn is great because it also helps you remember a particular person’s professional relevance to you – otherwise, use Outlook’s address book to annotate comments or notes so you won’t forget months down the line.

8. Learn to spot VIPs
One fun trick is to learn how to spot the VIPs at a conference. Oftentimes, this is very hard because they look like all the other conference goers. But there are ways to tell – first off, they may know the speaker well. So if the speaker is having a 1:1 conversation with random dude X, maybe you want to talk to random dude X to figure out what he’s about – he’s probably a friend or affiliated with the speaker, which is always great.

Small social cues are great to pick up and learn as well – at the airport, the guy in the track suit, blackberry, and small bag is often a senior executive who’s learned how to optimize for travel, whereas a young guy who’s overpacked is a complete corporate newbie. Learning small cues like that can be important.

9. Don’t overdo the conference circuit
Going to events and conferences are nice, but remember that at the end of the day, DOING is more important than NETWORKING. Other than the speakers, the most senior folks are generally not at conferences – they are busy doing things, and they can usually talk to whoever they want. So in general, industry events are usually populated by newbies and marginally senior folks – it’s an alliance of people who aren’t quite senior enough to skip the networking thing altogether.

So the important part is to do enough interesting things outside of conferences, and realize that networking is an investment of time – you still need to turn that potential energy into kinetic energy.

10. And finally, have fun! It’ll get easier, I promise
The first couple times going to conferences and forcing yourself into awkward social situations often isn’t fun. But it gets a lot more fun once you meet a couple people, find yourself talking to the same folks, and generally insinuating yourself into the club. It’s a great experience to meet super smart people, and very rewarding.

If anyone has other tips or ideas, I’d love to hear them!

My family and I moved to Seattle when I was 5 years old, and I grew up there, went to school there, and generally have had my social landscape shaped by that experience. It was a very interesting foundation in which to compare the new experience of meeting dozens and dozens of Bay Area people.

Seattle people versus Valley folks: Brothers lost at birth
In general, the vibe here is very similar to Seattle, and the people are similar too. San Francisco city roughly maps to Seattle, and Silicon Valley roughly maps to the Eastside. Currently I’m living in Menlo Park, down in the Valley, and wherever I go, I see packs of nerds acting and talking in a familiar way – except here, they wear Google shirts and not Microsoft fleece jackets.

The entrepreneurship culture
And of course, there’s the matter of the much vaunted Bay Area culture. There are, of course, more entrepreneurs here than in Seattle. But at the same time, the percentage breakdown of good entrepreneurs versus bad entrepreneurs versus tech poseurs seems about the same. For every guy incorporating a company from Stanford, there are 100 that are brainstorming on it, and 200 that are blogging about it :) At the end of the day, a lot of tech people have normal jobs here – after all, there are 10,000s of employees locked away at companies like SAP, IBM, HP, Oracle, and other huge companies. Entrepreneurs are certainly still in the minority.

A network built for introverts?
Navigating the social network here has been interesting – there are lots of overlapping few-to-few connections. For example, my friend Noah and I might know a lot of the same people, but neither of us know that fact we know the same people. I think this is driven by the "quick intro" culture here, where you meet a lot of people once or twice for coffee or a quick lunch or whatever, without context elsewhere in your life. It’s for this reason I often hear the question, "Oh, how do you know X" over and over again. That said, one interesting implication of this is that most people are only 1 or 2 hops away from an experienced entrepreneur or a VC. So if you’re tinkering on a website for fun, and all of a sudden 100,000 people join the site, you can find experienced advisors quickly – this was never the case in Seattle.

Moxie prized over experience
Another interesting factor has been the sheer number of 20-something entrepreneurs running around, many of them with venture funded companies. Let’s face it – in Seattle, smart people from Stanford and MIT only go there for one reason: Microsoft. So by the time they go in, buy a condo in Kirkland, do some skiing, and go from Program Manager to Group Program Manager, they’re pretty old! And definitely more risk-averse. The kids here come from Berkeley, Stanford, UCSF, and numerous other schools around here, and start companies from an early age. Young folks here are treated as equals here, and taken very seriously, whereas in Seattle I constantly got advice to "get more years under my belt."

All in all, it’s been a great experience – a couple subtle surprises here and there, but overall, it’s a very similar culture to the one I left.

Whew, I can finally catch a breather and write a bit in my blog. I’ll try and get back into a daily routine!

The story so far
So first, a quick summary of what I’ve been up to – since leaving my job at Revenue Science in late November, I’ve been working hard as an Entrepreneur-in-Residence at Mohr Davidow Ventures. The people here are awesome, and I’ve enjoyed every day of my first three weeks. Every firm’s EIR program is different, but here’s another perspective at Mayfield, another VC firm.

The key elements to an EIR program
Essentially, the key elements are that:

• EIRs come from industry with background in a specific area, in my case advertising
• They are sponsored by a partner to start a company after some time period (let’s say 3 months to a year)
• EIRs may come in with a specific idea, or not – in my case, not :)
• They find team members, incubate the idea, and find funding
• The EIRs will also often work with the investment team to do due diligence on new companies coming in
• There is no quid-pro-quo that you have to get funding from the specific firm the EIR is at, and no guarantee the VC will fund the business

The day-to-day is always different
The actual day-to-day has been very fun and interesting. First off, expect very little structure, similar to doing any other startup. When I first showed up at the offices, I was shown my office, computer, and the bathrooms, but then it was my job to just go… do some stuff!

The first few weeks have been focused on getting my roots into Silicon Valley. I actually showed up with a couple ideas, a few relationships, and having conducted interviews with a couple dozen folks in my target industries, but have gone broader since. I’ve been meeting with many folks throughout the day, be they recommendations from people at the firm, my friends in Seattle, or folks I am meeting at events. I’ve also been attending a lot of random get-togethers throughout the Valley, based on things I’ve heard of. So this week, I went to Entrepreneurship Conference at Stanford, a Microsoft event on mobile, and also the Mobile Persuasion conference also hosted at Stanford.

I’ve met a tremendous number of people, and have been impressed by everyone. More on that to come… ;-)

Link: Flickr: Photos from andrew_null.

Oh yes, I’ve been a major slacker in terms of writing new blogs, but I have some new pictures from my drive down to SF, and also a couple pictures of the city.

My schedule should be settling down in the next week or two, so I will find time to blog. Here’s a couple topics I’ll discuss:

– The social structure of Silicon Valley
– Seattle culture versus Silicon Valley culture
– Cool new startup areas
– The life of an EIR
– etc., etc.

I look forward to writing more soon!

Link: Community Next » The Present and Future of Online Communities Conference.

If you’re in the Bay Area, you might want to check that out. If you want to meet up for a drink or coffee sometime around the conference, just send me an e-mail.

I’ve been slacking on blogging lately, but my schedule has been 8am to 8pm for the last 2 weeks. I’ll let you know about my first impressions of the Bay Area soon enough.

VentureBeat writes an article on a vertical ad network centered around women’s interests: Women’s online network, Glam, fastest growing on the Web.

Pretty interesting stuff, and shows some smart thinking by the folks at Glam. When you’re an ad network upstart, by far the hardest problem is the chicken-and-the-egg problem. To have a happily functioning ecosystem, you need publisher ad inventory and advertisers that want to buy it – but neither set of parties will come to the table without the other.

Owning a destination site is good
In the case of Google, they already had their own destination site, so they were able to bring their own inventory to the table. Once they had that, they were able to attract advertisers, which they could then tap as they expanded their base of inventory through partner deals.

In fact, you could imagine that since YouTube is such a huge % of videos played on the internet, they might try to do the same thing with video ads. Very smart.

Not controlling your own destiny is bad…
In contrast, if you don’t have a destination site, you are very much at the whim of your partners. You may be able to do a couple key deals to get publisher inventory or advertisers, but that might not be enough of a critical mass to provide the highest rates. And on top of that, because you are competing with all the other ad networks, you’re forced to optimize for RIGHT NOW so that you can retain inventory, at the expense of longer-term experimentation. Bad news for a startup.

Glam’s business future
For Glam, they can do the same thing as Google. They can aggregate all the mom-and-pop bloggers and websites that have been able to hit on the right consumer nerve, and provide them with the sophistication and expertise to sell to the brand advertisers that drive the higher CPMs.

There are a couple dangers to this business model, in the long run. The first is that advertisers may think that they are buying inventory on Glam-quality sites, and may not approve if the umbrella gets too big or the standards are too lax. So the advertisers will try to figure out what sites are ACTUALLY in the network, and whether or not they should be buying directly from them. The second issue is that within the Glam network, a couple sites may emerge as outsized winners by pageviews or people – over time, these sites will want to build their own direct sales teams and get capture more of the higher CPM dollars. In either case, Glam can probably acquire some of their publisher partners to get bigger and keep those dollars in-house – that might be a smart way to spend their venture dollars and cashflow from their advertising business.

Can you build lock-in with ad networks? An example with MySpace…
And finally, one might ask where the vertical ad network thing could go in the long run? Could more large destination sites create loose conglomerates of sites under one ad network? For example, you could imagine that MySpace has various reasons they might want to assert control over all the MySpace-related layouts/backgrounds/icons sites out there. They could ask ALL of those sites to run under a MySpace ad network, and trade that for preferred access to an API or something similar under a "Premium Partner" program. That way, they can make sure they are getting a slice of all the ad dollars related to MySpace, whether it’s directly on their site or not.

UPDATE: Here’s an example of the bad coverage that can happen if you slap advertisers’ brands on websites you don’t own… (and report the stats as your own)

There’s been some conversation recently on Web 2.0 as a bubble, and whether or not it’s going to pop in 2007. Here’s the coverage from Techcrunch, and here’s one on Bubble 2.0 from the WSJ. It seems to be driven by the entire “Make your 2007 predictions” meme.

Related to this topic, I’ve had a couple folks ask me what kind of company I’m looking to start – they ask, “Are you thinking of something in the Web 2.0 area?” usually followed by “… because that’s really crowded.”

Web 2 point what?
Here’s my take on the topic: Classifying all the Internet companies created in the last year or two as “Web 2.0” is too simplistic, and thus, asking about trends within Web 2.0 is the wrong question to ask. Considering that people still disagree on what the Web 2.0 term means, and how vague and all-encompassing it seems to be, it’s pretty funny to think you could say anything about all the companies under that umbrella.

So instead, the questions should be about what the company does for customer, industry the startups are in, how they make their money, and what limitations exist for scaling up. The questions should be about what problems they are trying to solve, not the technology that supports their websites. Zillow is not a Web 2.0 real estate website that incorporates AJAX and mapping. Instead, think of it as a tool that lets people look up the value of houses before they’re going to sell or buy, and/or fantasize about where they’d want to live. That’s the change in perspective I’m talking about.

What kinds of areas might be in trouble?
So if we take this perspective, one might still ask what customer problems are overfunded and bubble-like. I might speculate that there are quite a few out there, but there are also huge untapped markets that present large opportunities.

From this lens, I might advance that the new “media sharing” startups – ones that let you post pictures, videos, etc. – are in trouble unless they are already big players. There are lots of companies, undifferentiated technology, and winner-take-all dynamics. Furthermore, the advertising/monetization of these sites is really difficult, and as the ad networks and advertisers get smarter about conversions, their revenues may fall.

I’m sure you could theorize the same thing about lots of “blogging features” that are coming out as whole companies, when they are instead very small add-ons to existing blogging infrastructure targeted at a small, tech-savvy audience. Another soft spot consists of social networking sites, some of which are too targeted and niche, and others which are too generic and incapable of building critical mass.

Even so, these categories will have tremendous innovation in the next couple years – I just wouldn’t want to be someone starting a company in there ;-)

But would I say the same thing about industries that NEED innovation, like real estate, health, personal finance, education, and other huge consumer industries? No. I think these industries are still mostly untouched by new technologies, and deserve to be examined closely by entrepreneurs with their new Web 2.0 technology toolkits.

We should chance our focus to people, not technology
The key is to think about the problems people are facing, not the tools we use to solve them. This will shift the conversation away from Web 2.0 and towards the needs of customers.

We, as technologists, have a deep toolkit of techniques to solve peoples’ problems. We know that AJAX can make richer interfaces, when those interfaces are relevant. We know that social features can be very powerful, when the problem demands it. And we know that with the proliferation of digital cameras and broadband, the Internet’s as much about video as text.

But at the same time, by broadly generalizing across Web 2.0 is just not smart enough to capture the wildly different dynamics within each industry. So let’s start segmenting Web 2.0 companies based on target audience and application, not technology platform.

UPDATE: I missed this
comprehensive coverage of Web 2.0 carnage blogged at VentureBeat.

… I’m driving down the 101 right now, currently in Eureka, CA. I should arrive in Silicon Valley before the weekend. Hope everyone’s having a good 2007, and my blogging will resume once I have a steady internet connection and am not driving around trucks at 70mph ;-)

Another great post by the very smart Noam Wasserman on Founder Equty: Implications for Team Stability.

Included is this handy diagram on various stability and instability factors. Pluses indicate stabilizing factors, and minuses indicate destabilizing factors. Read the article for the full analysis.

Link: Google Starts Selling Domains For $10 Per Year.

Huh, Google’s selling domains? Maybe it seems weird, but my theory is that Google makes so much money through ads from small businesses that it’s in their best interest to subsidize EVERYTHING that small businesses pay for.

The more they can offer, and the more sticky that relationship is, the more they can ingratiate themselves on the advertising side.

So other than domains, transactions (Google Checkout), and analytics (Google Analytics), what else might be on the table?

• Server hosting
• Commodity storage and compute power
• Small business software (as services of course) like CRM/accounting/etc.?
• Supply chain or fulfillment?
• Banking services?
• Web design or outsourced programming relationships?
• Outsourced HR, accounting, legal relationships?

Obviously some of these are more likely than others, but it’s worth thinking about.

Interestingly enough, Amazon is way ahead of Google in offering some of these, as Businessweek’s recent article on Jeff Bezos mentions.

I love it: MMO in the business of matchmaking.

One of the main reasons why games don’t turn into huge multi-billion dollar franchises is that they can’t make money off of offline items and services. If they could, they could get a piece of any transaction, the way that eBay and Google do.

This is one interesting step in that direction, where a game becomes a competitor to dating services. What’s next? An eBay booth in Second Life? :)

In a day filled with storms and accidents here in Seattle, Isilon kicked some ass: Isilon’s IPO best performer in years. Great news for the Seattle tech scene, of course. (Although the big pop means it was mispriced, silly bankers)

… except in this analysis, it’s TV versus cable: Bear Stearns analyst report on media value chains.

Great analysis of the media value chain, including content creation, content packaging, distribution, and user interface. However, the best part starts on slide 16, which covers a retrospective on TV versus cable, and fragmentation and trends that ensued.

TV started out at 3 channels, then went to ~40 with cable, and now 125+ with digital cable. What happened with this proliferation of choice?

– Overall demand for TV went up
– Audiences fragmented
– Hits became less big

In the long run, the “long tail” of TV now drives more revenue than broadcast TV. Very interesting to look at the history of media to understand the potential impact of podcasts, video games, and other new media channels.

Or so you could interpret from this NY Times article: Workplace Rumors Are True

:)

A friend of mine started using eHarmony and I became fascinated with their people matching mechanic. It’s made me ask, why is it effective? What other kinds of problems could a similar matching be useful for? But first, a brief overview of online dating.

Classic dating sites overwhelm people with choice
A site like Match.com is like a bar scene, times 1000. You enter in a zip code, and it gives you 100s or 1000s of hits. You sort through them slowly, winking and messaging the ones that interest you, and skip the ones that don’t. Perhaps you read through their profiles, but because they are so many, I’m guessing that many folks simply glance , write, and keep going.

My guess is that it creates a “winner take all” type system, where desirable people get a huge number of matches and perhaps, haha, a Long Tail effect. It’s a “hits driven business” :) You don’t even have a physical limitation like in real life, where a person can only have a conversation with one or two people at once.

eHarmony’s matching mechanism is a selective black box
Compare this with eHarmony’s model, where the selection criteria is based on a black box. You go and take a long quiz about your interests, personality, and interpersonal style. Then you sit back and wait for matches. You might not even get matches immediately, but rather, you get matches over time, once a couple days.

Then once you’re matched, you go through a very long funnel process where you start by asking each other quiz questions, then more open ended questions, and finally you have unstructured discussion. I think this is a 5 or 6 step process, which is amazing.

This mechanism caters to a different crowd, and it’s marketed as such:

• First off, the high qualification bar means only serious daters get involved
• The low number of matches means that each match will be highly considered
• More qualitative information is conveyed through the lengthier process, which means less opportunities for bad first dates

Where else might it work?
Ultimately, it seems that eHarmony’s matching mechanism might be useful for other problems, particularly when the following criteria are met:

• Both parties need to have qualitative, compatible values
• Each experience has to be highly personalized
• Equivalent levels of interest are useful
• “Bad” matches are highly undesireable

(Maybe other folks have parameters here that they agree with)

So what else would work really well here?? I think there are many possible opportunities, but just to throw some out, what if you used this to select service providers like graphic artists and programmers? Would it be important to have compatible aesthetic values, the same professional style choices (structured versus unstructured, etc.), the same technology ideas (RoR versus ASP, etc.)?

Another option here is also jobs – what if you picked your criteria for jobs and then had a couple hand selected for you rather than browsing hundreds of random job descriptions? Would that get you a better fit?

I will leave it an exercise for the reader to think through these scenarios. Another interesitng question to ask, as well, is how to do a multi-person eHarmony, to help find study or activity groups where people are all compatible.

I’ll probably blog more about this later :)

Great slides detailing the evolution of eBay’s technology platform, from the initial version onwards. In fact, here are the short bullets from V1.0:

V1.0
– Built over a weekend in Pierre Omidyar’s living room in 1995
– System hardware was made up of parts that could be bought at Fry’s
– Every item was a separate file, generated by a Perl script
– No search functionality, only category browsing

See the slides here.

UPDATE: Fixed link – thanks Mike and Noah.

Pretty fun review of an upcoming Christian RTS game: dorkbot talk I attended earlier this week. The quote is about the fact that “Serious Games,” a new genre focused on learning or imparting ideas in addition to creating fun, often suck:

I confess I did not expect much of the game. The history of Christian computer entertainment is not particularly, uh, blessed. The games have tended to be numbingly boring side-scrollers in which the action serves merely as a clumsy deus ex machina to entice kids to reading dollops of in-game scripture.

They suffer from the tragic flaw of all “serious” games, which is that they get so wrapped up in honing their message that they don’t notice until too late that, yikes, the gameplay sucks. Play is an incredibly precious thing, and an extremely difficult thing to craft. Forcing it to serve moral instruction is like dipping it in formaldehyde.

It turns out that making things fun is very, very hard. The typical way that a game starts is not by building menu systems, installation programs, etc., but rather trying to perfect a very small slice of the program: The Core Mechanic. Basically whatever you spend 99% of your time doing, you try and prototype that really fast. In Pong, it would be moving the paddle around trying to bounce the ball back. In Mario, it’s jumping. In Zelda, it’s moving around the map exploring and occasionally hitting things. You spend months experimenting with, and refining, the core mechnic until it’s shiny. Popcap did a presentation of this which showed their mastery of this process of creating fun.

As an aside, web developers have a lot to learn about this. Rather than building things like user management or database caching or other infrastructure, web applications should probably be built from their innards out. So if you were building Digg, the most important part is to make the 90% lurker view of browsing from page to page of articles fun and interesting, then the 9% of folks who comment and vote useful, and then the 1% contributors to make posting articles really easy. Anything else is should probably be built later.

Ultimately, if you prioritize learning (or function) over fun, you might end up with what you wished for, an educationally-packed yet boring game.

Anyway, at the dorkbot talk, the Popcap presentation showed a complete focus on fun at the expense of pretty much everything else. The “Serious Games” presenters were instead very academic, and focused more on abstract educational ideas and didn’t really even talk about fun. Something tells me they won’t be releasing any games through EA :)

Just a quick continuation of my LinkedIn post – ultimately, even using Google and LinkedIn, it was still hard to get in touch with people. It’s surprising to see this even in cases when you had people that WANTED to be discovered (For example, consultants or other service providers)

I think almost everyone on LinkedIn, ultimately, would welcome inbound e-mails in some form or another. Depending on what you do, perhaps you want to make a couple hurdles to ensure qualified people, but talking to interesting people is fun.

So here were the various levels of contact information obscurity that I saw on LinkedIn. Some of the encouraged me to contact them, others made it incredibly difficult to the point where I gave up:

1) Name but no last name, no profile information
2) Name but no last name, company information or two

Even then, Mary A from Microsoft is not that useful :)

3) Name with last name, company information
4) Name with last name, company information, blog link, etc.

The folks above are generally pretty easy to get ahold of using the Google + LinkedIn method

5) Name with last name, company information, blog, AND e-mail in the profile

Obviously having the full panel is great. A blog is a huge plus. This way, you can very easily identify this person, browse their blog to get a sense of what they’re interested in, and contact them regardless of your connections to them.

So if you want random people like me to contact you, remember to edit your LinkedIn and stop being so introverted :)