Category Archives: Internet & Web X.0

The Integration Company

I was on the phone with a founder of a major data play within the digital ecosystem this afternoon.  We were discussing the next 12-24 mos of acquisitions and who the big players will be.  This post is not about who will be acquired or do the acquiring, or the bankers who will make some good dollars off the deals, but rather the single most important part:  Integration.

There is no doubt that there will be mergers and acquisitions.  The main reason why deals fail is because the integration between the two companies doesn’t happen.  There are a slew of reasons for this, but most of the time, culture and mismanaged expectations are what drives companies not to integrate well.

If I were going out on my own and wanted to start a services organization, I’d build up a company specifically geared toward making integrations work and take a % of the deal for compensation.  I’d have a team of ad tech and business professionals who have been through it before and make sure that all the boxes are checked around a solid integration.

There will be no shortage of M&A in the ad tech space in the next 12-24 mos so this should be a nice opportunity

Cash Crunch, Herd Mentality, The Big Picture, and We're Hiring!

I spent Tuesday of this week out of the office and at the NY Athletic Club for the Big Picture Conference, a conference that focused on financial markets, global economy and trading.  It was my first year in attendance but have been a regular blog reader of Barry Ritholtz (Big Picture).  Of the many topics we covered on Tuesday, I’d like to highlight two in this post as they are timely to the conversation circulating around Web Startups Hitting Cash Crunch and Fred’s perspective from Union Square Ventures.  Note, we didn’t really speak about Venture Capital or angel investing at the conference but there are similarities.

In one of the talks, Barry came on stage and discussed investing behavior.  It was less of a conversation around around the act of investing, but more about the behavior and perception around how investors think.  Of the many topics that Barry discussed, one of them in particular stood out:  Herd Behavior. He used a cartoon that I’d not seen before, but it quickly made me understand what he was saying:

As you can see from this cartoon, things can become misinterpreted quickly and then irrational behavior stems.  I don’t think our current entrepreneurial/funding environment is misunderstood, but I do think there is a strong sense of herd mentality at the macro-level.

Angel investing is the cool thing to do.  For many, it’s actually the right thing to do.  If you’re an entrepreneur who has raised money from angel investors and then got lucky with a liquidity event, many of us, myself included, pay it forward by investing in other early stage startups.  We don’t do it purely for the “karma” it brings, but we also do it for the potential of the financial returns (early risk, high rewards).

It seems these days that everyone and their uncle are investing in startups.  This has pushed the seed stage funding rounds much higher which has changed the venture financing world, maybe temporarily, or maybe structurally.  Time will play this out.

Around Advertising Technology, there is certainly a funky behavior going on.  We see too many investors without any marketing or advertising knowledge chasing Ad Tech deals.  I spoke about this at a conference a few months back and my friend Will has a great post about this that appeared on DigiDayDaily yesterday.  The infamous Lumascapes which have made the rounds of every ad tech company and put Luma Partners on the map (beyond Mr. Kawaja’s smarts) have actually created a sense of transparency in which allows non-ad tech investors to suddenly become ad tech investors.  Think about that.

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One of the talks during the BPC referenced a gentleman by the name of Bob Farrell.  Many people in the audience knew exactly who he was, but I had no clue.  I quickly Google-d him and it turns out he was the Chief Stock Market analyst at Merrill Lynch & Co from the late 60s thru the early 90s.  Apparently, he was highly well regarded.  Over his career, he came up with 10 Rules for Investing, which is highly regarded.

As you read through the 10 Rules For Investing, think about them in the context of the recent meme around startups/fundraising/angel investing.  His wisdom lives on and makes a lot of sense.

1. Markets tend to return to the mean over time
When stocks go too far in one direction, they come back. Euphoria and pessimism can cloud people’s heads. It’s easy to get caught up in the heat of the moment and lose perspective.

2. Excesses in one direction will lead to an excess in the opposite direction
Think of the market baseline as attached to a rubber string. Any action too far in one direction not only brings you back to the baseline, but leads to an overshoot in the opposite direction.

3. There are no new eras – excesses are never permanent
Whatever the latest hot sector is, it eventually overheats, mean reverts, and then overshoots. Look at how far the emerging markets and BRIC nations ran over the past six years, only to get cut in half.

As the fever builds, a chorus of “this time it’s different” will be heard, even if those exact words are never used. And of course, it – human nature – is never different.

4. Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways
Regardless of how hot a sector is, don’t expect a plateau to work off the excesses. Profits are locked in by selling, and that invariably leads to a significant correction eventually.

5. The public buys the most at the top and the least at the bottom
That’s why contrarian-minded investors can make good money if they follow the sentiment indicators and have good timing. Watch Investors Intelligence (measuring the mood of more than 100 investment newsletter writers) and the American Association of Individual Investors Survey.

6. Fear and greed are stronger than long-term resolve
Investors can be their own worst enemy, particularly when emotions take hold. Gains “make us exuberant; they enhance well-being and promote optimism”, says Santa Clara University finance professor Meir Statman. His studies of investor behavior show that “Losses bring sadness, disgust, fear, regret. Fear increases the sense of risk and some react by shunning stocks.”

7. Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names
This is why breadth and volume are so important. Think of it as strength in numbers. Broad momentum is hard to stop, Farrell observes. Watch for when momentum channels into a small number of stocks.

8. Bear markets have three stages – sharp down, reflexive rebound and a drawn-out fundamental downtrend
I would suggest that as of August 2008, we are on our third reflexive rebound – the January rate cuts, the Bear Stearns low in March, and now the Fannie/Freddie rescue lows of July.

We have yet to see the long-drawn-out fundamental portion of the bear market.

9. When all the experts and forecasts agree – something else is going to happen
As Stovall, the S&P investment strategist, puts it: “If everybody’s optimistic, who is left to buy? If everybody’s pessimistic, who’s left to sell?”

Going against the herd as Farrell repeatedly suggests can be very profitable, especially for patient buyers who raise cash from frothy markets and reinvest it when sentiment is darkest.

10. Bull markets are more fun than bear markets
Especially if you are long only or mandated to be fully invested. Those with more flexible charters might squeak out a smile or two here and there.

Sources: The Big Picture, 17 August, 2008 and MarketWatch, June 11, 2008.

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Lastly, if you made it this far, we’re hiring.  kbs+p Ventures is looking for an Intern to come and join us at our offices.  The job description is here.  We’re looking for someone who is knowledgeable in advertising/marketing and it’s technological applications.  Someone who will roll up their sleeves with administrative work around our financing and portfolio companies but also help us with diligence and strategy.  Don’t hesitate to reach out.

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Building a Data Empire On Your Back

This post was inspired by an email conversation between Taylor Davidson, Adam Liebsohn, and myself early this morning.  Taylor works at kbs+p Ventures and Adam is the founder/ceo of a startup called VoyURL.

“The best way for a startup to get a dataset like that is to create some sort of self-expression platform, a way to express what you’re into …,” says Lavingia, who also designed the Turntable.fm iPhone app. “You can’t directly ask users, ‘Hey we’d love all of your data! List the songs you like and the albums you’ve bought and the places you’ve visited and the food you’ve eaten.’ But you need these answers to ultimately make money.”

The above quote comes from a post on TechCrunch titled Pinterest Joins Twitter and Facebook As The Newest Self-Expression Engine.  It’s hot on the heels of a few other posts (BloombergBetabeatUncrunchedTechCrunch) that talk about how Facebook and the like are building massive data assets on the backs of consumers and reselling them to advertisers.  Consumers for the most part, are not fiscally compensated, but some of the technology services can argue that they are getting value in exchange for their data.

Bloomberg’s latest headline, “Getting Rich From Others Has Never Been Easier,” pretty much sums it all up.

I think there’s an expression, “there’s no free lunch in life.”  When was the last time you signed up for a service and wondered how it was making money?

For the next 24 hours, look at all the sites you visit.  Are they collecting your data and reselling it?  Are you making any money off of your data?

I think we are going to see some sort of reform in this area.  Imagine going to a website and seeing a “ratings” of some kind which shows what they are doing with your data, similar to how the movie world uses different types of ratings (G, PG, PG-13, R, MA).  A little icon or graphic which shows if your data is being sold, transferred, stored, etc.  I think I’d like this – and folks like Apple who take leadership positions with App Stores would have to roll this out next to each app I download.  I’d like to know what’s happening with my data.

Just some food for thought on this Tuesday morning.

YCombinator Ad Innovation Conference Keynote Breakdown

Today’s opening keynote was given by Paul Graham, at the YCombinator Ad Innovation Conference in Mountain View.  I attended along with @tdavidson and @barryl530 to see the early stage innovation that’s happening in the ad tech space.  We were certainly impressed not just with the innovation but with the amount of great agencies in attendance such as AKQA, Goodby, Sapient, Omnicom, Cadreon, VivaKi, and Jess3 amongst others.  We were in good company, to say the least.

Paul admitted he wasn’t an advertising guy, but knows technology enough to understand how tech will influence advertising in the next few years.  The data he used to back his claims were based on the thousands of applications YCombinator receives and is able to forecast and see trends in where innovation is happening.

Here is a summation of the 9 trends that’s pushing advertising, per Paul, but I tend to agree as well.

1. Tablets are important and might call for their own unique advertising platforms to take advantage of the user interface.  Apple and Android will dominate the market and Apple will dictate the ad formats.   Tablets are genuinely a big deal and we aint seen nothing yet.  My take:  Yes, he’s spot on.  Tablets penetrate and are both a content consumption device but increasingly, a content creation device, as long as we can innovate and create good input devices.

2.  All data lives in the cloud. All data about a consumer, transaction, records, etc will live in the cloud and ostensibly, be located in one database that can be used.  What will hold this back will not be technology, but will be government and policy.  My take:  Totally.  We’re seeing this today.  I’m all about data.

3.  More stuff happens peer 2 peer.  Paul used an analogy that I don’t know if I agree with, but he claims that hotels exist because consumers couldn’t find any other way of staying in a remote city or town, so hotels were built to meet this demand.  Now with services like airbnb, hotels could cease to exist as we know them.  My take:  I like what he’s trying to say, but don’t know if I buy the entire analogy.  Not everyone wants to stay in someone else’s home.

4.  There are going to be a lot more startups.   I liked where Paul went with this.  He basically said that engineers had 2 choices after college:  go to graduate school or join a big company.  Now, they have 3.  The third oppty is to create a startup.  Paul threw out the 1% number which was how many developers/engineers start companies… and if this increases 10%, then that’s 10x the amount of startups in the ecosystem.  Again, we aint seen nothing yet with the volume of startups out there… there are going to be many.

5.  Facebook is already a big deal.   Paul said that the $1.6bln from Facebook is quick and simple money and they haven’t really began monetizing yet.  They are focused on growth and even have a Facebook Growth Group, which is one of the most powerful groups in Facebook.  He thinks that when they start monetizing, they can seriously move into markets and kill competitors such as PayPal or Wepay.  My take:  I agree with Paul, but they have to be careful in how they approach this as to not alienate developers and users.  I don’t want Facebook to be 100% of the services I use as a consumer.

6.  Software eating the world.  Don’t be an advertising company that does software.  Be a software company that does ads.  Having this mentality is obviously valley-driven, but allows you to scale a business and think more product focused, which theoretically, should have better outcomes.

7. Target Ads Precisely.  Google could target their ads much more precise but they don’t have to yet, as the market isn’t necessarily requiring it or does it make economic sense for Google to do it until they must.  Paul said a great quote:  “Assume you can read someone’s mind, what ad would you give them.”  My take:  This is one of our investment thesis at kbs+p Ventures – application of data to drive advertising decisioning.

8.  More things will be done by numbers.  If an investor had to place a bet on quantitative measurement/analytics of creative, bets should be placed on measurement.  Numbers will/can/do drive decisioning and with ROI driven world, we need to quantify it.  My take:  Spot on, another investment thesis of kbs+p Ventures as well as what we apply at VMM and The Media Kitchen.  Couldn’t agree more.  I even treat my fantasy football teams this way.. and I want 2-1 this past weekend!

9.  Creative.  Creative will begin to become “generated.”  Paul essentially argued that the best creative in the “future” world will have to be generated because of all the varieties that are needed.  My take:  I think he’s onto something if we’re able to deliver the right creative to the right person at the right time.

I loved Paul’s opening.  This wasn’t 100% of everything, but was a lot of it.  My friend Roger of IA Venturesc also talks about similar trends on his blog, in a post titled, changing polarity in advertising, if you want to continue being inspired…

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An Ad Tech Roll Up

I’ve been noodling the opportunity around an ad tech dream I had.  Yes, I really do dream about these things.

We all know the positions that Yahoo! and AOL are in.  I won’t go into that here, other than they will need to make some short term decisions rather quickly.

As a proactive entrepreneur, what if you could acquire the assets of Right Media (including client contracts) from Yahoo! and Platform-A (whatever is left of it) from AOL, roll them up, put on top of a 2.0 infrastructure such as AppNexus and scale the business?

Pros:

  • Client contracts lead to instant revenue
  • RMX has a name for itself in the industry
  • Could probably get it for fire-sale pricing

Cons:

  • Contacts/clients might not transfer
  • Yahoo! inventory is not guaranteed if moved away from Yahoo!, so that would need to be written into the agreements
  • Implementation of both platforms might be more hassle then they are worth
  • Much of Yahoo! RMX talent has already left, but not all

There is an opportunity here, at least at first glance.  It’s less about the technology and more about the contracts to advertisers.  The hypothesis that the acquisition of these both would lead to a faster time to market and revenue out of the gate.  There are probably quite a few other ad tech companies that you could bundle in here at the same time.  Might be worth investigating?  I’m sure a few people probably are…

Examples of Applied Data Visualizations

This past week, I tweeted the following:  “the data itself isn’t overly interesting.  the application of data is what is fascinating.”

Tweet about data

This wasn’t the first time I tweeted something along these lines and if you’ve heard me speak publicly (or inside the agency) over the past few years, I’ve probably touched upon the topic, if not spoken all about it.

A few people reached out and asked me to write about where I see this playing out – as to illustrate the point about the application of large data sets to make decisions.  I thought I’d use this post to do just that – give 3 sites that you can check out to see what I mean.  In no particular order, they are listed below.

#1:  Numberfire

Numberfire is a fantasy football GM’s mecca.  If you are managing a fantasy team and want to compliment (and/or replace) watching ESPN Fantasy Football Now, reading all the blogs, etc, why not apply large data sets worth of performance data to predict performance of players?  If you can aggregate plenty of data sets, normalize them, and run regressions/etc, then you can figure out which players have a higher probability of performing better each week.  I used Numberfire last year, which was their first year and they continuously outperformed the ESPN and Yahoo! rankings (7/10 times).  What’s nice too is that Nik, the founder, has an eye for design and made his site very usable and IMHO, probably the best site within this space.

Numberfire Chris Johnson visualization

#2: TRUEcar

I read last week that a site named TRUEcar raised $200MM for vehicle-data related purchases.  Anything that has a nine figure capital raise and data related to it immediately got my attention.  What TRUEcar does simply is help people decide what to pay for a used or new car, based on historical information.  Seems simple, right?  Have you ever tried buying a used car and all you had to rely on was the KBB value of the car (kelly blue book)?      See the image below, as it illustrates a search I did for the 2011 Range Rover Sport, a car I fancy.  Their visualization of large amounts of data is what is extremely important and will help separate them from forthcoming competitors.

TRUEcar Range Rover

#3:  NFL Decision Maker

I did not realize that Bloomberg launched Bloomberg Sports and it includes a decision making program for fantasy football rosters.  Essentially, Bloomberg is leveraging it’s data infrastructure and visualization tools to help make informed decisions of whom to sit/start each week for your fantasy or handicapping needs.  This product certainly competes with Numberfire (and vice versa) but it’s not as robust.  However, this is a great start for Bloomberg Sports.

Bloomberg Sports NFL Decision

PaidContent recently re-posted a vision I had regarding the Bloomberg Terminal for Advertising.  This is an area that is ripe and one I’m currently exploring.  Would be really interesting to bring advanced visuals and analytics to the world of real time bidding and media trading.

I believe that just having data or access to data will be table stakes in the next few decades.  The organizational winners will be ones who can apply the data to whatever they might be working on.  These are early days for this now, but I believe this will play out over a long term vision.  Data scientists + Data visualizers = data visioneers = people I’d like to meet.

Kids & Content Consumption

My almost 3-year old son, David, loves watching Thomas & Friends.  We have countless DVDs, iPad apps, and other Thomas inspired entertainment.  When Thomas is on television, my wife either DVR’s it or David ends up watching it live.

However, when online, David watches Thomas & Friends, but it’s not the Thomas and Friends you’d expect.  There is a sizeable amount of professional content uploaded on YouTube but David prefers the custom home videos produced by kids about Thomas.  YouTube says there are about 123,000 results for “Thomas the Tank Engine.”

It’s amazing how long David will sit and watch UGC content of Thomas the train, which were created by kids and their parents.

A video called “Accidents Happen” has been viewed 13.4MM times… yes, 13.4 million.  All created by a kid and his dad for Thomas.  I’m sure David has been 50 of those views in the last 2 weeks alone.

There is also a ton of this content on YouTube, not just for Thomas & Friends but for plenty of other shows.

I almost think David prefers this kid-produced UGC over the professionally done content.

There’s something here… a hypothesis, an entrepreneurial endeavor, a marketing opportunity… just can’t put my finger on it.

You can learn a lot from your kids, be sure to keep your mind open.

Areas of Interest from kbs+p Ventures Summit

We launched kbs+p Ventures about 6 months ago as an early stage investment arm of our agency, kbs+p.  Last Friday, we hosted a summit where we brought a small group of people with both visionary and tactical backgrounds to help us filter the areas that are of potential investment focus.  While most firms keep this confidential, following Fred’s recent post over at AVC, I’ll open these thoughts up as well.

Why?  I hope that any of you reading this blog might help point me/us in the right direction of entrepreneurs who are innovating in any one of these spaces.  You can easily get in touch with me here or on Twitter or LinkedIn.

In no particular order:

1.  Virtual Currency – what will the impact be of Facebook Credits?

2.  Measurement – how do you measure engagement?  How do you value “social”?

3.  Fan Acquisition – what are the best ways to acquire “fans” and “followers”?

4.  In-Stream – should brands participate in the stream of conversation and if they do, what are the rules to play by?  A company who is participating here is 140Proof

5.  Influence – how do you buy influence?

6.  No two networks or channels are used the same way.  I.e. While Facebook is a social channel, so is Linked In.  Think about the differences in your usage.  Compare this to 20 years ago when ABC and NBC, both television stations, were used similarly.

7.  With millions of web publishers, how do you match creative to each individual publisher?  It’s tough.

8.  We spend a lot of time targeting specific audiences, but an additional filter to overlay is “mindset.”  Are they currently in the “mode” to purchase? How do we differentiate messaging based upon where audiences are in the funnel?

9.  How do we combine SEM + social media monitoring.  If a topic is trending, how do we buy SEM against it?

10.  Predictive Trending – how do we predict what might trend and then purchase advertising around it.  (current company doing this is buzzfeed)

11.  How do we create video at low-cost, and then scale the distribution

12.  There currently isn’t one cohesive “stream” of me.  How can we harness the entire stream?  Where will the meta-stream live?

Leave comments and/or questions.  Would love to elaborate on any or all of these.

We (and they) are hiring!

At my last startup, we used our investors not just for business guidance, but also as talent scouts.  They were constantly meeting interesting people who were looking to join or build the next big idea and they helped us place some great talent within our organization.

Now, as an investor at kbs+p Ventures (and still an entrepreneur), our portfolio companies are asking us for hiring help.  Taylor and I are working on an internal & external talent management tool but I didn’t want to wait to publish these until it’s polished and released as it could be another month or so.

Here are some awesome opportunities from our portfolio (and friends of ours) who have asked us for candidates:

Crowdtwist:  A New York based startup who drives customer engagement through next generation loyalty software. CrowdTwist’s activity engine intelligently tracks consumer interactions with your brand (i.e. consuming, creating, sharing, purchasing, etc.) within your own site and across other destinations online. They are currently looking for:  Director of Engineering, Project Manager.

Adapt.ly:  A New York based startup who has made it extremely easy to buy media and audiences across the social web.  I personally call these guys the first social DSP.  They are currently looking to hire:  Ruby Developers, Data Scientists, Account Managers, and Summer Interns

The Media Kitchen:  New York based communications planning and buying agency (part of kbs+p) is hiring an Associate Director of Media Technology.  This position will be reporting into myself and will be an awesome role for someone who understands the infamous GCA/Luma Partners slide and reads AdExchanger daily.  Job description is located here.

If I missed any opportunities, I’ll post again in a few weeks.  If you are interested in applying for an opportunity, please contact the company directly (follow instructions on the opportunity page).

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Incentivized Viewership

I wrestle with whether or not I like the notion of  Incentivized Viewership.  It’s coming up a lot lately around the office as we’re starting to see more and more vendors offering us solutions to have viewers watch or interact with our clients ads because they are being compensated to do so.

I decided to write this post to get my thoughts out in the open and hopefully have a dialogue with all of you who can help create a better informed POV.

My general thought is that incentivized viewership is negative for the ecosystem because the quality of the view is diluted because the person did not decide on their own to watch or interact with the ad unit.  The person is only watching the ad unit because they earn a Facebook credit, a game credit, or some other form of compensation.  Here are a few posts about Facebook and some partners incentivizing video watching to earn Facebook credits.

Does anyone have any research that uses a control and variable group to measure conversion and/or brand metrics around people who are incentivized to view?  I’d love to see it.

Do you believe that incentivized viewership is good for the ecosystem?