Category Archives: Internet & Web X.0

Silicon Alley Awards

Alley InsiderThe New York scene is heating up and lots of amazing people were highlighted today when Silicon Alley Insider and Bricabox released their lists of the top 100 most influential people in the New York digital media scene.

According to Silicon Alley Insider, I made the 2007 Up and Comers list… not bad!

The People’s Choice awards over at Bricabox (my buddy Nate’s company) had me in 4th place… thank you to everyone who had voted!

There are some amazing people on these lists and I’m glad that I can be part of them. Want to congratulate Charlie, Roger, Howard, Brad, Fred, and Sanford, all people who I know fairly well whom are doing some amazing things here in the city.

Hyperdistribution: The way to win the game

If you are reading this blog, you are probably someone who is involved with content or digital media. When we analyze the content/media business as a whole it’s all about distribution. The content can be OK (i.e. Britney Spears) but if the owner has the means to distribute, it can be monetized.

As content becomes increasingly cheaper to create and polish, many more people have the need to create distribution channels. Since traditional distribution channels can only handle so many pieces of content, we need to innovate how we distribute our content.

To give an example of old-school distribution, let’s use the music CD. Historically, CDs from major record labels would be shipped to Walmart, Virgin, Best Buy, Target, etc – and with a little marketing expenditure from the label, people would begin buying the album (demand). These stores may have a massive footprint, but they cannot hold every album. This is why Amazon and CDNow emerged and increased the typical music store inventory that is available to consumers. Because of these virtual stores (CDNow now defunct), consumers have the ability to buy the current hits and also, the long-tail of most content.

If we look to the television model, we’ve got 4 top networks (ABC, NBC, CBS, FOX) accounting for most television viewing and advertising dollars (a combined total of $22.7bln in 2006). In television, if you do not have enough eyeballs viewing a particular show, it doesn’t become cost effective to keep it on air.

I hate to break it to you but in the content business, it’s not always about the quality of content, but it’s about the quantity of eyeballs who are viewing it.

There are quite a few content verticals out there that are extremely popular amongst people but for whatever reason, they cannot attract a large enough audience on television to substantiate the reason to keep them on air (not enough ad dollars for major network television). As part of the digirati, you and I both know that we do not just want video content on television, but we watch it on different mediums such as the Internet, PSP, iPod, mobile, etc.

While television may still be the dominant medium to view video content, the playing field is being leveled quickly.

If history is any forecast for the future, innovation doesn’t normally occur from the industry titans but it occurs from little garage companies who then either a) grow quickly and build a sustainable business which forces the market to adapt or b) get gobbled up quickly and become the new strategy for the titan. In the case of television, the titans control the networks and the former primary way to view content.

Since the playing field is being leveled, the video content industry (inclusive of television networks) is going through a radical transformation. The most interesting change is what I call, hyperdistribution. I spent a lot of time above talking about distribution and how it’s changing but the simple premise here is that video content is agnostic from it’s viewing device. As a consumer, I do not care whether or not I view my content on my MacBook, my Samsung 64″ HDTV, my iPhone or even my PSP. I want my video as part of my life conversation. The conversation is going to go on with or without me, so I might as well have technology adapt with it.

Grab your time-remote, and rewind to 20 years ago. If I wanted to watch the Cosby Show, I would have to sit in front of television at 7:30pm on Wednesday evening or else I would miss it. My Wednesday evening revolved around the Cosby Show. Isn’t that amazing?

Should my lifestyle be distrupted by the content I want to view? Why shouldn’t the content be available to me where and when I want it?

Here in New York, there’s a bullish startup named Next New Networks (NNN) who are creating the next new network, no pun intended. They are founded and believe in this very premise: just because content doesn’t exist on television doesn’t mean it’s not good, and that you don’t need to have a single place to watch video content, it can be distributed all over digital mediums.

Next New Networks - Flickr

If we look at the image to the left, we see Fast Lane Daily. This show, executive produced by my brother Kenny, is one of the shows on their automotive network. Just like any other piece of content, you can view it on it’s natural state (it’s own webpage) or you can view it on one of many hyperdistribution partners including YouTube, Veoh, MySpaceTV, Joost, Tivo, MetaCafe and many others.

Next New Networks realizes that if you allow your content to be freely distributed, it can be watched my exponentially greater amount of viewers than if it just existed on it’s own singular website. Because the content is fairly decent (they should replace their executive producer…. just kidding), they got top slots on these particular distribution partners. Some of their shows are getting millions of views… not bad for non-network television distribution.

NNN also allows anyone to grab the embed code of a video/network, and embed it on their own blog or webpage. If I wanted to, I could add another tab on the top of this blog and have Fast Lane Daily displayed. Readers of this blog could not just read my every day rants, but they would have the option to watch Fast Lane Daily as well.

From a business perspective, NNN wants to monetize these videos through advertising dollars and they know that they need eyeballs to do so. I wrote about the Eyeball War last week, but they are clearly chasing their slice of the pie. Video is an extremely hot segment for advertising dollars as the CPMs are higher than most other digital areas and television advertising has the largest share of overall advertising expenditures. NNN knows that building top destination sites for their videos on a regular basis is almost impossible and overall expensive, but smartly understand that if they can strike deals with multiple distribution partners and leverage their platforms, they can gain hyperdistribution and win the game (get eyeballs).

From my personal perspective as a media agency guy (this is the first time I’ve publicly said it on this blog), I like it a lot. I know that if I were to spend my money on a NNN produced show, it would be hyperdistributed and it would attain a lot of exposure across the digital medium. Unlike other innovative technology companies who come to me for ad dollars, they don’t have the distribution. At the end of the day, the content has to be good and it needs to be out there. If you’re a content or IP owner startup, make sure you have a distribution plan for your property. If you’re looking for advertisers to add it to the media mix, you need to show that it will have viewership.

Fred Wilson said that business development may die (in not exactly those words) and I totally and fundamentally disagree. Unfortunately (or fortunately), business is usually done through relationships and friendships and if you have the ability to secure great placement in distribution channels, it could make or break your company. This is done through a business development deal. Yes, there are APIs and other ways to technically integrate your product with another, but when it comes to premier distribution, getting on the phone certainly helps.

Tying in to another post of mine about letting go of your brand, if you let go of your content, the people who derive value from it will start spreading it. Note: only the people who derive value. Just because you have highly polished content doesn’t mean that people will automatically enjoy it. If you have quality content that people want, they will promote it. It doesn’t just pertain to video.  Look at RockYou’s dominance.  Put it out there and let consumers control the distribution.  There are more of them then there are of us.   Don’t be afraid to let go. Hyperdistribution wins the game.

Who am I secretly following?

I get an email every once in a while asking me which blogs I read and which RSS feeds I subscribe to.  My RSS feeds are my NY Times or WSJ.  It’s where I get my news from.  While not everything in each feed is relevant, the majority is appropriate and I enjoy reading what my colleagues and friends are writing.  Not every RSS feed I subscribe to is a blog either, which is becoming more of a trend.

I use Google Reader (used to use Newsgator) as my primary RSS feed reader and they have a nifty “trends” area.  While I do not give out my OPML, I did however take a screenshot of my Top 20 public feeds and am sharing them with everyone.  According to my “trends,” I currently subscribe to 202 RSS feeds.

RSS Feeds

I'm Officially a Chef

DarrenI’m extremely excited to announce that I’m officially a chef. Well, not a chef you’d find in a typical kitchen, but more like a chef that you’d find over at The Media Kitchen. MediaWeek and PaidContent have released the news and I guess I can go public with my new role.

For those of you who know me well, I’m infatuated with the white space that exists between marketing, technology, and media. In my past entrepreneurial endeavors, I have innovated within this white space almost exclusively. Whether it was working with some of the original architects for the DART advertising server, executing a campaign across one of the top student websites in the 90s, helped land one of the largest online-only accounts in ’96 to an interactive agency in Silicon Alley, or co-founding a world leading in-game advertising company with several other amazing co-founders, my experience has always been around brands and how they should interact with digital media.

Corporate entrepreneurship is what is next for me. I’m tasked with joining the senior ranks of The Media Kitchen to build out their entire digital media practice, from start to finish. I’ve got some incredibly talented and gifted individuals who have paved the path so far and they’ll be teaching me the ins/outs of the agency. As Mike Shields worte in the MediaWeek piece, I wanted to have the ability to help mold digital media when the opportunity is still around. By participating in the multiple conversations occuring now between the tech giants and the emerging startups, I can gain invaluable insight into the space and help The Media Kitchen position themselves as one of the most agile and forward thinking agencies.

I do bring an entirely different perspective than most agencies would staff in my rank. The perspective I am bringing to TMK is my entire thesis going forward: you cannot accurately and adequately plan digital media without understanding technology and emerging companies at the lowest level. Innovation creates new technologies and touchpoints where marketing can intersect, but unless you know how to harness these technologies and what they can do for your clients and the greater community, it’s a mute point. I am going to attempt to lead the charge at The Media Kitchen to understand this and build an entire group that believes in this at it’s core.

With this all said, I encourage ANY startup or emerging company to contact me through this site and I’d love to hear from you. My team is always on the lookout for new opportunities to join the marketing conversation and if your startup or emerging company has opportunities, we’d love to chat. If you’re passing through New York or wanted to know how an ad agency works, I encourage you to reach out.

To an amazing future and much more to come in the coming weeks,

Darren Herman

Friends vs. Islands – a look at communities

I received a few emails today about Spark Capital, Sequoia Capital, and Union Square Ventures setting up their own Facebook “friend” pages so I thought I’d join them. I have friends at each firm and thought it would advantageous to add them to my friends on Facebook. So I did.Facebook Friends


So as you can see above, I added them to my friends list and anywhere from one hundred to a few hundred other entrepreneurs added them as well (depending on the firm). Who would have guessed Union Square Ventures has more friends than Sequoia Capital?

Anyway, this got me thinking about Second Life. A weird parallel to draw, but one I’d like to make nonetheless. Second Life is an immersive online world in which you build your own experience much like Facebook. It’s exactly what you make of it. Second Life isn’t really a game as there is no overall “point” but it does contain individual games within. Some of these games have been signed by major game developers and released for PC and potentially console platforms.


History repeats itself. The first time I met Pip Coburn, we discussed this over breakfast. You cannot predict the future without understanding the past. Very important. If you look at the Second Life hype cycle which was made popular by a few bloggers, you’ll see the following:

Second Life Hype CycleThis is the traditional Gartner Groupe’s Hype Cycle and Second Life has been applied to it (as you can see). I think it’s interesting to compare Facebook to the Hype Cycle and then look at these Venture Capital pages (friend pages).

If we learn from Gartner Groupe’s Hype Cycle, a product or service generates quite a bit of initial buzz through the peak of inflated expectations and then drops back down until it reaches it’s slope of enlightenment.

Based on this, we’re going to see Facebook take a drop in expectations which I’d argue we’re currently experiencing with the current privacy issues. Once we work through those issues and Facebook carves out it’s real niche, we’ll reach the slope of enlightenment and plateau of productivity.

The issue here is that with Second Life, many brands (Toyota, American Apparel, Sony BMG, etc) all rushed in to create brand experiences which tended to be on their own virtual islands. These islands were not on the main grid and you needed to find out about them one way or another to be able to teleport to them. Greg Verdino and I publicly agreed that you couldn’t really show clients this because they were ghost towns. Yikes.

Lets look at the Facebook pages of the venture capital firms. These are like islands in Second Life. They are cool for the moment (peak of inflated expectations), but after 4 weeks of having the page up and running, what are the VC firms going to do to keep their pages updated? My guess is that they are going to become stale and irrelevant and essentially become ghost towns for technology entrepreneurs.

What we told clients with Second Life is just because you can build it, doesn’t you should. You may have one or two curious early adopters but what can you do to sustain the traffic? This is why I’m skeptical about brands creating their Facebook profiles. Don’t just build something and leave it there to rot; keep it current and exciting and you’ll join the conversation with your fans. If you update it once and never touch it again, you’re going to look like a poser and it’s better that you stay away from the beginning.

I Want My Slice of the Pie: A look at startups and ad spending

Howard Lindzon wrote a fairly straightforward and blunt post about Freemium and “Business Development” yesterday that I would have to mostly agree with. One area in particular that he outlined and I quote:

Waaaaay to much revenue being left on the table by Web 2.0 companies and way too many Web 2.0 companies being started and funded without revenue number one on their mind. It is really time to start caring if you are a founder and a VC.

His posting led me into thinking about the startup market in general and what’s actually occuring from a macrolevel, so I spent some time doing some back of the envelope calculations and I put together some charts/graphics. Lets analyze it together (please comment).

This post is relevant if you’re competing for a slice of the [American] pie: US advertising dollars. In the recent years, I’ve been building business and reviewing business plans and financial models (for friends and companies that I advise) that revolve around advertising dollars as the sole revenue source. This is not a bad thing, but it may not be ideal either if you’re not familiar with how advertising dollars are spent.

Stepping back to 30,000 feet, we’re going to discuss The Eyeball War. This is a term that I came up with (or someone else did that I’m not aware of) where startups are building companies who hope to generate revenue by aggregating enough eyeballs to sell into advertisers.  The thought process here is that if you aggregate 1MM eyeballs together, it’s worth more than having 200,000 eyeballs.The Eyeball War

Silicon Valley was heating up in the late 80s and this contributed to the first “Internet” only startups in the early 90s. It became “cool” to be a “click” shop or a “clicks and mortar” store and we began hearing that in the Industry Standard or Red Herring. The ecosystem surrounding web-only startups was forming it’s foundations and the ability to build these companies became a bit easier.

One of the first major acquisitions in the space happened in 1998 when MSFT acquired Hotmail (congrats, Tim Draper) in 1998. This major acquisition provided entrepreneurs both big and small the lucrative vision to start building companies who could aggregate eyeballs online to monetize them later. Eventually, these companies could be sold to larger media conglomerates or tech companies who have the monetization abilities that could turn on a ‘spigot’ of revenue.

Life was good through the late 90s… lots of innovation, some garages got famous, and the IPO market made billionaires. We had a dip in 2001 that was felt throughout many industries and in 2003, we saw the digital media and technology market heat up again. The Eyeball War was back. Lots of innovation in the technology space led to venture money chasing new startups being created to capitalize on making life easier (GTD) or connecting users (social networking) amongst many other things. Building a technical infrastructure that could support millions of users didn’t always follow with building a business model that could account for the users. With over 250 websites generating millions of eyeballs each, competition for the almighty ad dollar became tough (and still is- due to competition).

This is where I personally have an issue. We have thousands of sites competing for a piece of the advertising pie today… the problem is, innovation is outpacing ad spending at this point. This means that if your business is relying on advertising revenue as a sole source of revenue, you better be speaking the same language of the ad agencies and brands today. Love agencies or hate them, if you don’t speak their language, you won’t capture a piece of the billions of dollars they control each year.

Think about your competition. It’s not just your direct competitors anymore. RSS is competing with in-game advertising who is competing with Internet video. Podcasting and social media ads are competing with each other. Any innovation that is occuring on the Internet is in competition with each other, whether you talk to an ad agency or a brand directly. If you’re too ahead of the curve for an advertiser and don’t build a sustainable revenue pipeline (not just a one-off deal), rethink your model. Building cool technology is amazing and for the dozen (note, not plural) startups that the big guys acquire each year is inspiring, but are you going to be one of them? If you look at the chances of that happening, it’s probably not very good. Time to build a solid business.

Ad Spending per User

In 2002, there were 167,196,688 US Internet Users. US Advertisers were spending about $6,000,000,000 to market their product/service to these users. That’s about $35.89 per US Internet User.

If there were 1,000 startups chasing the $35.89 per user and the top 20% of the sites (200) took 80% of the revenue, the remaining 800 startups/sites are chasing the remaining $7.18. Yikes. The numbers don’t look so lucrative, do they? The only way to do real revenue is to aggregate enough volume to make up for it (many, many eyeballs) which bring us to the Longtail Model. The issue that I have with the Long Tail play is how many sites can utilize this? You’re either a top 20% site capturing real brand advertising dollars or you’re a Long Tail play being mostly monetized by the ad networks and exchanges.

So with all of this, I don’t mean to put a dampen on startups chasing the all mighty advertising dollar. I’m not the first to do this analysis.  Venture Capitalists do this every day and they still continue to invest in this area.  There must be something here.

There are more advertising dollars flowing into the Internet on a yearly basis, but we need to reevaluate how we’re conducting business. Returning to Howard Lindzon’s rant that I signaled out early in this posting, “it’s time to really start caring.

Pace of Innovation Technology is a commodity. Anyone with a few developer friends or some cash can have anything build or re-enginneered. You build a sustainable business through relationships and creativity. Keep this in mind as you entrepreneer in the coming years – and try and build a sustainable revenue model from day one. Your VC money generally will run-out and you may take a down-round of funding; that’s never fun.

If you are going to try summiting the ad-supported business model mountain, keep the following in mind:

  • Not all ad agencies are created equal and your brand many have multiple agencies. Make sure you’re dealing with the right one.
  • When trying to figure out whether or not to have a direct (straight to brand) or agency approach for ad sales, look at your top 50 list of favorite advertisers and see what they prefer. Don’t piss off the agency if you can help it.
  • You’re one of 100-250 companies who are talking with the agency on a daily basis. Keep that in mind. As special as you think you are, there are 100-250 other “special” companies.
  • Research and statistics. If you don’t have it – get it. Agencies typically have to justify to their clients why they want to carve out money and spend it with you. If you don’t have research or statistics on why advertising with you makes sense, don’t waste their time. 99% of the time, this is needed. Spend $15-30k on research (OTX, Nielsen, Dynamic Logic, etc) and then approach the agencies.
  • Sometimes, brands will want to do emerging media opportunities in-house. Make sure you have the righ person to champion you inside of the brand. You will need a champion which will be someone who pushes you through many layers of politics and the like.
  • Just because an agency buys from you once, doesn’t mean they will re-up with you for the next campaign. Campaigns have a target audience and a specific message and this may change from campaign to campaign. Don’t be surprised if an agency doesn’t buy from you even though they had a successful campaign the first time around.
  • Try to stay top of mind with media buysers and planners, but don’t annoy them. Like I said above, they are dealing with 100-250 different folks just like you – so time is limited. “Poke” them every now and then… but do not be annoying.
  • Know the difference between a media agency and a creative agency and when to go to either.

Being an entrepreneur is extremely exciting. Do not get caught up in The War for Eyeballs because you’re competing with so many other companies. Remember that users will pay for a service if they derive value. If you can build a service that has value to a lot of people, then you have a big business. Nothing is new anymore, remember old-school business philosophy. Take care of your users and they’ll take care of you.

Making Progress in Digital Media & Technology

Progress PartnersI met an extremely active Skidmore alumn back in 2004 who had been in the entrepreneurial finance world and we remained networking buddies since. We get together about once every two quarters and discuss promising new startups, emerging trends, and the perils and hardships of entrepreneurship.

His company has been making some significant progress in the digital media space and I wanted to highlight their newsletter which is a welcome addition to my inbox each day. I know there are many places that aggregate news together, but Progress Partners does a great job highlighting the relevant news and briefly sum it up in a simple paragraph for each headline.

If you’re part of the digital media or technology industry, certainly subscribe to the Progress Partners email list, NextMediaUpdate. For Progress Partners, this is a great tool to help showcase their thought leadership to prospective clients.

Frits Abell is heading up their NYC presence and is doing some great work here… if you are looking for strategic planning an execution, M&A work, or corporate finance, certainly give him a call. If you’d like a private introduction, please contact me (if it’s relevant, I’ll introduce you).

Email. Thought it was going somewhere?

Charlie has an excellent point in this post about email.

So, while the kids, with their rock and roll and their ripped jeans and hacky sacks… err.. chrome spinners, may not have a need for e-mail now, it’s not going away anytime soon. Plus, most alternative methods, like Facebook, MySpace, Twitter, require both the sender and the recipient to both be on the same social network. E-mail is a least common denominator. We all have one and it requires no additional signup/login to send someone a message.

There’s been lots of talk about how we need Inbox 2.0 or that kids don’t use email any more (only IM, social network messaging, etc) but remember, they’re not in the work force. Typically, the work force moves at a snails pace (with technology infrastructure) so when kids come of legal age to work, they’ll be using email for the foreseeable future.

Just because a kid uses IM or MySpace to send messages, don’t mean his boss will want to use that. At the end of the day, sending a spreadsheet or pitch document to your team/boss is necessary – whether it’s thru an attachment or an online URL; and email, as Charlie says, is the lowest common denominator of everything [today].

Fred recently (today) posted about messaging and that’s the larger conversation here.  If you step back to 30,000 feet and look at email/SMTP/POP/Exchange/rss/sms/IM/etc – it’s all about messaging.  He believes that there will be open platforms and that’s where it’s going in the foreseeable future.  I agree.  If my Outlook could send SMS messages/IM/etc – and group it all in one place, that would be fantastic.  A great name for this would have been Grand Central, but that’s taken by another startup (now owned by Google) in the telephony industry.  We should potentially call this Penn Station?

We all love innovation and in my opinion, there’s a heck of a lot of it occuring right now in the technology scene. Entrepreneurs are turning out radical new ideas almost daily and we haven’t caught up to even 10% of what they are churning out. Just because kids are using IM to converse with each other, doesn’ t mean we should drop what we’re doing now to adopt these alternative methods of communication. They aren’t mutually exclusive. Also, lets not get too far ahead of ourselves for the innovation curve. Innovation is great – but consumer adoption is more important (to build a sustainable business).

Web 2.0 T-Shirt

G.Verdino pointed me to a social media/web2.0 t-shirt and the nerd in me loves it. Going to add it to my home office.

Social Media T-Shirt As Verdino illustriously comments:

A couple of enterprising gents in Germany have the solution — they’ve teamed up to produce a t-shirt that features scores of Web 2.0 chicklets, alongside check boxes so that the wearer can tick-off all the online networks that they call home. It’s something clean to wear and a great conversation starter to boot — “Hey, you’re on Orkut? Me too. Wanna Pownce? No? OK – well, see you on Ustream sometime.”

You can check out the t-shirt here. The pessimist in me is wondering how many of these startups will still be around by the time the t-shirt arrives. I think I’m going to “check” them off when they hit the dot-com dead pool.

I may add it to the list of what to buy entrepreneurs for the holiday.

Alley 100 Contest

BricaBoxNate Westheimer, a friend of mine is running an “Alley 100” contest with his new startup, Bricabox.  A good PR stunt if you ask me.  Charlie O’Donnell mentioned that this would become a popularity contest between bloggers (thru nextNY) which may certainly happen, but shinning some of the light between the skyskrapers of NY may be a great thing for the NY entrepreneurial industry.

I believe you need to log-in/register to vote (it’s free and takes 2 seconds):