Analysis

Consumer Fatigue

We saw this near the end of the first Internet boom, and we’re starting to see it again — consumers are just getting tired of trying out all the new online services we all are cranking out. What that means is that even if you find a way to get a great, new, differentiated service in front of them in a cost effective manner, the consumer is significantly more likely to pass just because they’re too busy figuring out other services they found earlier.

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Analysis

Let Social Networks Turn Your Organization Inside Out

Time Magazine has an interesting article this week about a new book out called “X-Teams” by a professor at MIT Sloan School and one at INSEAD. The thesis is that in corporate management theory, we have become overly obsessed with the internal dynamics of teams as a way of improving productivity and happiness in our companies, while, in fact, the relationships and communications employees have with people external to the company are equally important to productivity, happiness, and ultimately to success. The authors show decades of research proving this is the case.

The article doesn’t mention online services, but it got me thinking that this is yet another reason companies should actively embrace work-oriented social networking services like LinkedIn and Xing even though those services are hosted outside the company firewall, and even though those tools open up their employees to being poached.  For anyone reading this blog, I’m not saying anything new.  But the “X-Teams” research at least provides a credible and logical counterpoint to the fears of corporate managers who have blocked these services or purchased social software tools that are hosted inside the company firewall (company directories, blogs, etc).

The turning of companies inside out is good for them, ultimately. My bet is that tools like LinkedIn and Xing are in their infancy as to what can be done for making work much more fun and much more productive. Those companies will keep pushing the boundaries, or other companies will come along that do even more to connect people inside their company, turn that network outside to great benefit, and make it all more fun, fast, and productive. Regardless of who does it, we will continue to need arguements such as that of “X-Teams” to help managers get over their fears so they can let these services turn their companies inside out to great benefit.

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Analysis

Google is the Platform

A lot has been written about Facebook getting thousands of developers to build applications inside the Facebook wall using FML and other proprietary languages.  The excitement is in part due to the idea that much of the value created will somehow accrue to Facebook because they are now the platform (even though it’s unclear Facebook has figured out really slick ways to monetize all that action, but they probably will).  I agree it’s very cool.  Like Second Life has been doing for 5 years and Microsoft did so well 20+ years ago.  But as I was thinking about building a branded destination site today, it occured to me that because 65%+ of all Internet visits start with them, Google is the real platform and we are all building applications on top of their platform, the Internet, using their languages HTML, XML, etc.  Just as people go to facebook.com to get to FB apps, people go to google.com to get to ALL the apps.  And with Ad Words, Google has actually figured out a slick way to make money off it already.  And they make us bid against each other!  A pretty slick way to monetize us app builders on their platform. 

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Analysis

Health information + Internet

On the one hand, we see a mess:  we see 6.5+ billion people most of which know nothing about managing their health, we see the wasted billions people spend on their health every year (or is it trillions), we see charities spending billions (e.g. Gates Foundation) to improve health, we see the battle between scientifically proven medicine and the persistant superstitions, we see obesity and late night TV, the list goes on.  On the other hand, we see the Internet, free, increasingly robust, growing like a weed to every corner of the globe, fully capable of getting the right information to the right place.  So what gives?  Why is health information on the Internet still so bad 13+ years into this?

Has anyone been on WebMD recently?  Given it’s the #1 medical site (by Comscore, so take it with a grain of salt), I found the experience suprsingly lacking…lacking in depth, readability, clarity, humanity.  Not only does the site navigation and design feel so 1997, so does their unwillingness to give much information other than “consult your physician.”   I was hoping that Revolution Health was going to make a difference, and their interface does scream Web 2.0, but I don’t see them getting much traction, and I heard they are burning $6 million per month.  With deep pockets, strong vision, real passion and a bunch of very capable management, Revolution Health has probably bitten off more than they can chew. 

60% of all medical searches online start at Google, and they do seem to be making some small adjustments to their product that may pay off for users.  (See screen shot)

google-common-cold-search.JPG

Right above their results for “common cold,” they let you narrow your search so you have a better chance of avoiding the Spam Sites that are trying to swamp their SEO results.   If they do that, people will certainly get marginally more educated.  But Google, from what they say, are not focused on education as much as they are focused on patient records.  It’s certainly a huge mess deserving of attention, and if they solve it, it would make a big difference.   (That’s also probably a wise strategy for them — letting other companies come up with the great health information sites they can spider and put ads next to.)

So we are still left with the sense that getting good health information to people in a way they can absorb it and use it could have a big benefit to the world.  Could be world changing.  The fact it hasn’t happened could be a result of 1) intractability of the problem, 2) entrenched interests don’t want it to happen, 3) good laws and processes we’ve put in place to stop health fraud are now also stopping us from sharing truly useful health information.  I’m interested to find out which one it is.

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Analysis, Cool companies

Kevin Rose — Silicon Valley’s first Tom Cruise?

Here’s more indication that the consumer Internet is moving closer to the Hollywood operational model. In Hollywood, movies are often popular because of a star power like Tom Cruise. The movie doesn’t have to be good, but if Tom is in it, it will make money. In tech, things have traditionally been different: your product has to make sense and work. Value is created, not just through popularity, but by first-mover advantage, or technical excellence, or discovery of a new business model… typically something substantial.

Certainly there are a few serial winners in Silicon Valley like Steve Jobs, or Mike Cassidy (directhit, xfire) or Peter Thiel (paypal, facebook), but each time they’ve succeeded, they’ve done it from scratch, producing great products and great teams that battled their way to the top. They were never Tom Cruise. Their involvement didn’t guarantee success. In fact, most of the time, when you see people say “He’s done it before, so he can do it again this time, I’m puttin’ money in!” … it typically doesn’t work out. The tech market is unforgiving.

But Kevin Rose, with Pownce at 700 on Alexa in the U.S., may be revealing himself as Silicon Valley’s first Tom Cruise, where if he’s involved with something, it gets high adoption, which creates value, as long as it’s a network effect business. Is “Executive Producer: Kevin Rose” (ala Speilberg) far off?

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Analysis, Cool companies

Facebook F8, a big mistake?

Given the glowing reviews F8 is getting, can we pause for a minute and consider that F8 was a pretty big mistake for Facebook? They say that smart people don’t make small mistakes, they make big ones. Consider that Facebook was going to win anyway, so they could have held off for another 12-18 months before they “platformed” their company. They weren’t facing much tough competition, they had a lock on the flexible clean interface, they were simultaneously growing their new user base and deepening the number of connections per user. By opening up, they have taken on a number of risks they didn’t have before:

1) Their site could MySpace-ize pretty quickly, get chaotic and ugly and loose its interface advantage

2) Worse yet, the UI could get so confusing with so random apps being thrown at you and the feed getting too long that users wouldn’t adjust their settings to reduce the chaos, rather they’d just get overwhelmed and stop using Facebook

3) What Facebook IS to people (their brand) could get confused, and it would be picked apart by a swarm of competitors like LinkedIn, MySpace, Yelp and the 10’s of new vertical social networks. Maybe even some clean college networks would spring up to siphon off users.

4) Maybe this would give too much value to their partners, and the resultant energy would dissipate into the wider net rather than accrue to Facebook like it would if they just build the key apps themselves

All are still possible downsides for Facebook, but in the end, after considering these issues, it’s still a very strong move. First, it is energizing and exciting to their young staff, who are working longer hours than any other startup in the Valley. That alone could be worth it. Second, sure they could have waited another 12 months, but this leaves their any competition flat-footed. Third, there is a magic and a power to the distributed mind, in the collective efforts of 10,000’s of smart people. We saw it with Microsoft and you can see it at SecondLife. Now, of course API’s are not nearly as hard as Win32, so Facebook’s defensibility isn’t necessarily the same as Microsoft’s, and I expect other big social networks to get in the platform business over the next 10 months, but by then, Facebook will be well ahead and be down the learning curve on managing this business.

I think they were right to trust their instincts and fall backwards off the stage into the crowd. For instance, already, several of the applications being built by some of the 30,000 platform developers address my four concerns above. Magic and power. Facebook may not have all the answers, but they’re betting 100,000 smart people do, and that’s not a bad bet. My props to the team at Facebook. They are showing themselves the class of the competition, and they are accelerating the evolution of the social Net dramatically by letting 1000’s social application ideas be tested quickly and easily. Everyone in the social Net, including Ooga Labs, now gets to accelerate their thinking.

As a side note, people have asked what Facebook is worth now. I think of it rather like Schroedinger’s cat where the actual state of the cat cannot be known. This is true for Facebook’s valuation because there is no transaction to be had, so the valuation is indeterminate. Given that the management team knows they will create $X billions of value over the next 12 months, and given that they haven’t done it yet, no one can step up and pay something close to what they know they will be worth. And most likely, even if there were such an offer, it would cause the management team’s belief in their prospects to increase. Perhaps justifiably. And since the company isn’t ready to go public (and shouldn’t!), there is not deal to be done, either by a corporate buyer or the public to establish the state of the cat.

Oh, one more thing, small companies to sell to Facebook in the next 6-9 months will do well. RockYou?

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Analysis

Signs the boom is entering the 3rd quarter

3rd-quater-graph

The tech industry cycles very predictably, and somehow it always feels as if it’s for the first time.  Very refreshing in a way.  Eating lunch at the picnic table in the office, we were talking about what would be some signs that the tech boom is getting into the 3rd quarter…

1) high number of new G.P.’s being hired at VC firms, just in time for their investments to crater in 3 years.
2) more people with British accents around Silicon Valley
3) increasingly attractive people, both men and women, around Silicon Valley
4) VC’s you’ve never heard of, backing companies you think, eh? What the hell is that?
5) new HBS grads joining startups
6) guys in their late 20’s breaking up with their girlfriends rather than getting married and getting distracted from work
7) married couples delaying having babies so they can focus on work
8) pretty large and pretty swanky company parties
9) oversized marketing departments
10) PR companies growing
11)  decoupling of earnings from valuations (e.g. Aqantive, You Tube)

Another thought we had was that if a viable business model emerges for YouTube, justifying the acquisition cost and calming the IP lawsuits, the boom might extend because the markets might assume it means that the ad dollars from TV will continue to migrate online, and perhaps subsequently, the online companies could inherit the viewership from the TV companies, NBC, ABC, etc.  If a good business model cannot be found for YouTube… then maybe the party in our little corner of the IT world will end more or less on schedule in 18-24 months.

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