Friday, February 29, 2008

why Google buys companies

via Google Blogoscoped

Watching Google from the outside – with the limited information that offers – it seems they buy companies mainly to get more:

  • Data. Like articles, meta data, digital archives, photographs.
  • Users. Or in more general terms, customers or market share.
  • Technology. Mostly, that's software, like web or desktop applications.
  • Developers. Or, in more general terms, call it employees.

Some of above items are interrelated; especially with technology and developers, there's not always a clear distinction.

Furthermore, Google sometimes invests in foreign partners out of legal or political necessity, like when they partner with Tianya or Ganji in China; or they may subsidize a company to skew the market in disfavor of competitors... e.g. when they pay Mozilla developers to progress Firefox, or pay Mozilla when users search Google using Firefox, to balance the market against Microsoft Internet Explorer. While there isn't a lot of evidence it may also be possible they sometimes buy companies just to silence a competitor, or to prevent a competitor from acquiring it and growing too strong. The philanthropic arm of Google, called, also invests in green energy and more to improve the world at large. But again, as we don't sit inside Google's strategic company meetings, much of this is just speculation.

The end goal of acquiring a company may be aligned with Google's overall mission. We can paraphrase it as 1) grab all the world's data, 2) make that data useful and accessible in order to direct user attention towards it, 3) profit from ads displayed with the data. Google's hardware business aside, the company indeed just sells attention. If you look at it from a bird's view, you could perhaps split up Google's goals into the two philosophies make money (more the manager or ad sales types) and build the ultimate AI (the developer types). Ideally, these two camps work hand in hand, as the ultimate AI would generate the ultimate user attention generating loads of money.
This whole mission is then accompanied by a moral framework that started with "do no evil" and changed to "do good," a more traditional but less powerful construct as it transcends from a restrictive consideration to a potentially restriction-free justification... a self-referential "do Google."

Looking at past acquisitions

Here is a limited selection of Google's many past acquisitions, checked mainly against the four parameters data, users, technology, and developers:

  • In 2001, Google acquired Deja's usenet archive. This seems to have been done simply to get more data... the archive contained over 500 million discussion group postings, Google stated back then, saying that "Usenet and its thriving community is one of the most active and valuable information sources on the Internet." Today, Google displays advertisements next to these messages. They also utilize the archive as a bit of a lure to get people to sign-up with Google Groups, a discussion group tool merging usenet and Google's own groups software. A good groups search was also beneficial for Google's search engine soul, though they removed the link from the main homepage links after some time (currently putting it in the "more" menu on the homepage).
  • In 2003, Google acquired Pyra Labs/ Blogger. Having a working blogging technology might have given Google a chance to be ahead of competition, but I would find it hard to imagine that was the actual reason they acquired this company. Moving the software, which worked sluggish for years, to their own system might in fact have caused more trouble than building an in-house application would have. Rather, it's more likely Google simply acquired blogger to get the existing users (all those who signed up with Blogger and produced posts) as well as the data (every word written on a Blogspot blog resides on Google's servers, so they may more easily index and analyze it).
  • Also in 2003, Google bought Kaltix. Larry Page at the time stated, "Kaltix is working on a number of compelling search technologies, and Google is the ideal vehicle for the continued development of these advancements." This seems to be an example of a technology as well as developer acquisition.
  • In 2004, Google acquired a stake in Baidu. The shares are sold by now, but finding a local partner in China might well have been out of political reasons, indirectly triggered by legal restrictions of not being able to simply offer their own technology due to China censorship.
  • In 2004, Google acquired the Picasa desktop software. The application is for photo management. I find it hard to tell what this acquisition was good for; the technology of photo management seems trivial in relation to some of Google's other undertakings. Perhaps this was a bulk developer acquisition, in terms of quickly adding the right team for Google's photo management strategy. In a press release from mid-2004, Google argued, "Picasa is an innovator in the field of digital photography, and we're excited that the Picasa team is joining Google." Out of Picasa's offline suite at Google grew Picasa Web Albums, a product not unlike Flickr.
  • In 2004, Google also acquired Keyhole Inc. In a page copyrighted to 2004, Keyhole advertises its product that was later turned into Google Earth: "Keyhole 2 LT is a software application that you download and install. It's only 9MB, but with an annual Keyhole subscription, you can fly through 12+ Terabytes of Earth imagery and data – spinning, rotating, tilting, and zooming. Think magic carpet ride." More than a data acquisition – Google still needs to license satellite data from e.g. Tele Atlas, DMapas, Navteq, Geographic Data Technology Inc, MapData Sciences, Georoute IGN France – this was possibly a developer and technology acquisition.
  • In 2005, Google snapped up Dodgeball. Like the addition of many other mobile companies – Reqwireless, Android, AllPay, Zingku – this seems to have been Google trying to get a foothold in a market area where they might not feel positioned strong enough. In the case of Dodgeball it seems hard to imagine they did it for the Dodgeball user base; perhaps it was just to get the Dodgeball developers on board to speed up Google's own mobile projects (existing Dodgeball technology may have been a reason as well). The Dodgeball founders weren't too happy with what happened to them at Google, though. When they called it quits in 2007, they gave the company a thumbs-down and said, "It's no real secret that Google wasn't supporting dodgeball the way we expected. The whole experience was incredibly frustrating for us – especially as we couldn't convince them that dodgeball was worth engineering resources, leaving us to watch as other startups got to innovate in the mobile + social space."
  • In 2006, Google acquired YouTube. According to an ex-Google employee, many people inside Google were surprised at the acquisition of the video site at the time, saying "But they have no technology!?" Google already had the technology in-house, named Google Video (superior, too, just considering technology and not the social side). However, YouTube was also ridiculously popular with many people, and a whole lot of YouTube videos were embedded in blogs, directing a whole lot of attention towards them (with attention being Google's main product, in a way, as mentioned above). So this was both a video data and video user acquisition. And considering the YouTube team continues to work partly separated, perhaps it was also a developer/ employee acquisition – Google buying a company that "gets" communities. Today, YouTube continues to thrive and YouTube video results are more visibly integrated into Google web search results (receiving special rating stars in the seemingly neutral web search results). The Google Video program director Jennifer Feikin, on the other hand, left the company last year.
  • In 2006, Google also announced the acquisition of Neven Vision. The company focuses on image object recognition. As such, it is most likely to have been added to Google's repertoire due to technology and Neven Vision developers. The Picasa product manager in 2006 said Neven Vision comes to Google with "deep technology and expertise".
  • Google also acquired Writely in 2006. This product was turned into the Google Docs documents editor, so it was likely a developer and technology acquisition. For similar reasons, Google acquired Tonic Systems to help develop their Powerpoint web app clone Google Presentations. With acquisitions like these, you get to wonder what would be the more successful strategy for someone to develop a product for Google: to apply for a job with them and then launch something in-house, seeing it potentially repeatedly shredded apart by the many management layers of this 16,000+ people company... or to just start-up your own company outside, and then get acquired by Google. If the latter would turn out to be easier, it's probably not the best motivator for Google employees.
  • In 2007, Google started the acquisition of DoubleClick. This seems to be a good example of acquiring a user base, though here the word customer base – all the advertisers using DoubleClick – may be more appropriate. Also, with DoubleClick Google snapped up a lot of employees with good connections in the market, growing their web ad presence closer to the size of a monopoly.
  • In 2007, Google also acquired Gapminder's Trendalyzer and the team. It seems the motivations to get more user and data can be ruled out almost completely for this acquisition. And while the technology of the software might have been a reason, I would guess Google was mostly interested in grabbing these Scandinavian developers. When Google's Marissa Mayer welcomed the Gapminder team to Google, she wrote that "[b]uilding flexibility into search, email, and other Google products is critically important".

Trends in Google's acquisition strategy

As the chess master once replied when asked about his favorite piece on the board: "My favorite piece is whichever wins the game." Google seems to be getting more and more pragmatic about acquisitions in terms of buying whatever advances their strategic interest. Formerly, the focus was slightly more on technology and data acquisitions, while nowadays it's also often about mere land-grab of user base. But even one of the earliest acquisitions – Blogger – was a lot about users, albeit in a more technical and geeky space (blogging) than e.g. the acquisition start of DoubleClick (hit-the-monkey ads). If Google starts focusing too much on land grab acquisitions though, they may get into legal troubles due to accusations of being a monopoly – just buying market share does not progress technology, which in the end hurts users.

When looking into the future to understand which companies Google might buy next, it still helps to check against all four main parameters. Some companies sole reason of existence seems to be trying to create "Googlebait," wanting to be snapped up by Google. This hardly seems to work because the goals of a company which has time to think about being acquired are apparently not sufficiently directed towards data, users and technology, perhaps due to a lack of great developers on-board.

Some companies also try to make it seemingly really easy for Google to acquire them, by already working a lot within Google frameworks: RememberTheMilk's todo suite (which works on top of Google Calendar) or the Zoho office suite (using Google Gears) come to mind. Indeed, Google may look at these companies in terms of adding new good developers to their own teams in that space. However, in many acquisitions Google may also want precisely the opposite, namely to increase their developer knowledge delta. Just buying a team that understands Google may not help Google tackle new problems.

Thursday, February 28, 2008

10 o'clock morning rule

morning.pngWhether you wake up every morning in an anxiety-driven frenzy or a sleep-deprived stupor, weblog LifeClever suggests de-stressing your mornings and getting more done by setting your watch to beep every night at 10 o'clock (or whatever time works for you), then getting started preparing for tomorrow. That means tackling everything from planning your breakfast and grinding your coffee beans to laying out your clothes and eying your calendar for important events the next day.

There are two main benefits to the 10 O'Clock rule. First, you're much more likely to take care of those end-of-night chores that sometimes get skipped, from washing the dishes to flossing, because you're tackling them before you've completely run out of steam. Second, you'll be much more likely to wake up on time, and have a pleasant morning.

Wednesday, February 27, 2008

how to start a startup

Paul Graham of Ycomibnator says about how to start a startup

You need three things to create a successful startup: to start with good people, to make something customers actually want, and to spend as little money as possible. You don't need a brilliant idea to start a startup around. The way a startup makes money is to offer people better technology than they have now. Look at something people are trying to do, and figure out how to do it in a way that doesn't suck.

Build something users love, and spend less than you make..

Beware of FREEconomics

a WONDERFUL article via Wired Magazine

A few weeks ago we published a piece on this blog entitled The Danger of Free, in which we discussed the rise of free - a marketing strategy where digital products are given away. This month's issue of Wired magazine features a cover story on the topic by editor-in-chief Chris Anderson. The article is a preview of his forthcoming book, called (you guessed it) Free. However in this post we look at two issues that make this new economic model rather worrisome: monopolistic markets and complex transactions.

Chris and other advocates of freeconomics argue that with costs of digital products rapidly dropping, it is best to give them away for free. This ensures customer commitment, because people would much rather get stuff for free than pay even a penny for it. Chris cites examples like free web mail, free DVR, free 411 and even $20 airline tickets (not quite free, but getting close) as evidences of the emergence of freeconomics.

While it is true that people like free stuff and it is true that large companies can afford to give away stuff for free, what is not clear yet is whether freeconomics is a good thing.

Monopolistic Markets: The Tale of GMail

One of the main examples that Chris cites is web mail. Yahoo! had a free version with limited space and charged for extra storage. Then Google came along and made email free along with a ton of extra storage. So some people (albeit mostly early adopters at this point) moved away from Yahoo! and began using GMail. But the trend was apparent, so Yahoo! had no choice but to add more storage and make it all free to stay competitive. Seems like a clever move by Google and a win for the customer. But is this a fair tactic?

The argument that it cost Google nothing to develop and offer GMail is wrong. Likely it costs millions of dollars each year. The fact of the matter is that GMail was offered for free mostly because Google could afford it. This is a standard monopolistic tactic used to enter a new market - drive the price down (in this case to $0) and kill off the competition. Yahoo! was actually first to market and had a perfectly good product with a fair model: they offered a basic product for free and a premium product with more storage for a price. But when Google made its move, Yahoo! could not compete.

Monopolistic Markets: The Tale of DVR

Another example used in the article is that of digital video recording devices (DVR). Comcast gives out DVRs for free, just like cell phone companies give out basic cell phones for free and then make up the money with the service charges. Perhaps DVRs are a bit of a stretch, but this example is very different from GMail. This is a case of something given away for free in order to get the customer to pay for service - and the cost is recovered over time. It is not the same as when a company offers a product for free to enter a new market.

Yet, the other aspect of free is quality. Anyone who owns a Comcast DVR knows that humans have never invented a worse remote control. It is just bad. Even with my masters degree in computer science, it took me a long time to master it. Free is not always good. Sooner, rather than later, free might deliver a punch on quality. If it's free, put less engineers on it. If it's free, then why do we need to fix bugs? It's free - so this is good enough.

Monopolistic Markets: The Tale of the Unfunded Startup

Perhaps the biggest worry of free are startups. To begin with, how do you compete with free? Suppose someone has a great idea for improving web mail. Entering the market is really difficult. A lot of inertia is now behind Google and in the new world of freeconomics, you can no longer compete on price. Not that long ago the concept of better and cheaper allowed startups to make the bet. But now that cheaper has been replaced with free, that axis is shut out.

Even more problematic is funding. How do you fund a startup that a priori can not charge the user? One might argue that we're now living in an ads-only monetization world, which of course we are, but things are not that simple. First, how many startups are actually making money on ads? Sure Google is doing great, but is Yahoo!? We used to live in a world where Flickr could charge $25 per year for premium use. Now we are talking about a world where Flickr has to be completely free to everyone and have unlimited storage to survive. What's the model for ads next to your own pictures?

The entire model sounds broken and certainly venture capitalists are going to be cautious until proven methods of making money arise. This is a bit of a chicken and egg problem, but in the meantime there may be an impact on innovation. If the monetization is difficult and financial upside is unclear, entrepreneurs will think twice about jumping into the game.

Complex Transactions: The Tale of The Middle-Man

Nothing good can come from a monopoly. It smiles at us first by giving a carrot, but the stick is sure to follow. Yet, there is another worrisome aspect about freeconomics - the middle man. To understand the worry, consider any company that makes an ad-supported product. The man in the middle is the ad network. You have the core product that the company makes and you have the audience that is interested in the product, but does not want to pay for it. Here come the ads - a panacea for the problem.

But is it really? We are in an economic downturn and suddenly companies do not want to spend money on advertising. So your business is immediately impacted, even though the demand for your product has not diminished. How strange is that? Even as your customer base grows, you'll still be losing money.

The fundamental problem is that every business needs to now learn the intricacies of advertising. Not only do you need to be good at delivering your core product, but you need to be really good at placing advertising on top it. You need to make the tough choice of using someone else's ads or building your own ad network, which is a costly proposition.

Complex Transactions: The Tale of, well... Complexity

Speaking broadly, freeconomics leads to a family of indirect monetization techniques. Chris cites an example of a European airline that charges people only $20 for the ride. The rest of the money they make up on meals, drinks, priority boarding, credit card handling, advertising revenue, etc. This sounds incredibly complex for both the business and the customer.

The cost of inventing and accounting for all these different small channels of revenue is high. And to the customer it's just a headache. Oh, you mean you actually wanted to sit on this flight instead of standing? That will be an extra $20. What seems to be forgotten is one of the lessons large companies have already learned: you should sell bundles for one price. People want all inclusive, not all excluded.


While we are certainly seeing more and more examples of products being given away for free, it is not necessarily a good thing. There are different aspects and faces of free. The Flickr free, which Fred Wilson calls freemium, is the model where the basic version is free and the premium one costs money. This model is very different from the GMail model where the entire product, with full features, is completely free. The downside of freeconomics is a monopolistic market, with barriers to entry, and little incentive to innovate. In addition the middle-man and transactional complexities are the other side effects of this new economic trend.

Is this good or bad? Please tell us what you think in the comments below.

Image credit: Wired Cover, March 2008

Tuesday, February 26, 2008

Slow is the new fast

via Startup Blog


WAS (fast)

IS (slow)

Fast food, take out

Slow food, cooking, dinner parties

'Super' market, processed food, discounts, shelf life, conveniencve

Growing vegetables, farmers market, gourmet food, butchers, real ingredients, less packaging, joyful inconvenience and hence quality

Get rich quick, money making schemes, flipping –shares & property assets, asset accumulation

Passion jobs, wealth in doing, not keeping score, grand designs, experience accumulation

Instant coffee – isolated ergogenic aid

CafĂ© latte, macchiato, espresso cappuccino – discussion and social facilitation.

Cheap, more, value

Premium, less, gourmet,

Doing more, expectations

Taking time, internalizing

Ladder climbing, competition, job hoping

Ladder building, collaboration, sabbaticals

Long hours, skipping meals, avoiding exercise, financial objectives, excuse making

Work (no such thing) 'life' balance, not skipping anything worth doing. Late on purpose.

Spending less on more

Spending more on less

Pay rates, fringe benefits, promotional opportunities

Mind growth, real flexibility, independence

Monday, February 25, 2008

Mobile Advertisement CPM


[by Chetan Sharma] At least half a dozen press releases popped up during the writing of this book claiming a $50 or $60 and higher CPM rate for mobile ads. A brief look back at Internet advertising from 1998 to 2002 shows that a $50 CPM, or anything near it, is not defensible for very long. For the CPM model to work at any price point, even in the short term, these networks need a critical mass of advertisers willing to spend branding (versus direct marketing) dollars on a new, untested medium that will appear in a wide range of content. That is going to be difficult, if not impossible, to find. Since the agency ecosystem is rooted in print and TV, it is also anchored in CPMs and GRPs (gross rating points). For the near-term future, CPMs probably will determine the ratio of dollars spent in mobile. But the ecosystem is being yanked into the digital world with more transparent ROIs that gauge new levels of consumer interaction and impact. Outcomes need to be tied to more than just the theory of eyeballs in the living room. Lots more in extended entry....

Assuming for a moment that the mobile ad networks can find enough advertisers, it will increase the attraction for publishers to run ads on their networks, adding more inventory and depressing prices. In addition, web-based interactive agencies were already burned once by ad networks with prices above a $30 CPM. It is likely that the entire mobile CPM model will shrink, as it did on the Web. In both the PPC (pay per click) and CPA (cost per acquisition) models, more responsibility is put on the content providers, insulating advertisers from some risk until the consumer clicks toward a transaction or sale. However, the implementation and success of CPC and CPA models rely on huge impression volumes, an ad sales system more scalable than is required for CPM models, and a mobile infrastructure capable of monetizing consumer clicks or actions. All these are a long way off for mobile advertising. As noted by Larry Shapiro, VP of Disney; We might have 10 percent to 20 percent of click-through rates (CTRs), but 90 percent of unsold inventory and CPMs are high indicating the early stages of the market and all of this will trend down like the way you had on Internet when we had $30 CPMs, 10 percent CTRs, and 95 percent unsold and all those numbers changed in the mature market.

Two major groups are using mobile for advertising today. First are the companies that want to advertise on mobile to get consumers to click to their point of sale to buy a game, mobile music, ring tones, or video. For these advertisers, mobile advertising is about accelerating the process of acquiring a new customer. Their ad spending will be measured and driven by the lifetime value of that new customer. Mobile CPM rates above that are not sustainable for this group. For lifetime economics in these scenarios to make sense, CPM rates must drop to between $5 and $10. As mobile search-based keyword auctions appear, these advertisers may well move their budgets over. But is this type of advertiser really going to scale mobile advertising revenues? No. It will basically be capped by the marketing budgets of these smaller companies. Beyond the CPM and economic issues, arent all mobile application providers essentially competing with each other for the same time and service spends from the same consumers? How do mobile portal managers feel about semicompetitive mobile media advertising on their prime real estate with the goal of stealing a customers attention? Will every ad have to be preapproved? Will this really be the market force that drops CPM rates? No, it will not.

The second group of mobile advertisers consists of companies outside the mobile industry looking to increase the awareness of their products and services in a high value, personal scenario. These companies are just beginning to understand the unique value of mobile advertising for relevant, targeted, effective presentations to their audience. Selling these companies on the concept of mobile advertising and getting them to spend more than just their trial budgets is a long, arduous cycle. And the high CPM rates are often confusing to this group. Compared with $10 for a run on an untargeted network to $20 for a targeted web site group, there is still a question of cost and value of the $50 CPMs in mobile. Part of this high mobile CPM rate is driven by lack of mobile inventory today. Once the inventory arrives, that pressure will force the CPMs down in mobile.

Similar to the Web, the mobile CPMs will bifurcate into a lower cost, less targeted run-of-network (off deck) with CPMs between $2 and $9. The higher tier will be targeted mobile sites with specific audiences, where CPM rates will be around $12 up to $20 on the high side. The CPM rates simply follow the degree of targeting value. Better targeting equals higher CPM rates. In mobile, these will be mostly on-deck with high degrees of targeting based on proprietary mobile data being exposed anonymously for the ad campaign. Todays mobile press releases touting costly, untargeted inventory is absurd and wont last. Off-deck mobile ad networks, with less well-defined targeting approaches, will turn into the equivalent of the Webs run-of-network buys, where inventory should always be inexpensive. CPMs will be tied to a certain size of advertising buy, but it wont be an unreasonable premium for smaller buys.

But with the potentially higher value of mobile targeting into niche audiences in a fractured mediascape, is there another level of ad targeting rates, metrics, and value beyond the tried-and-true CPM of yesteryear? Yes, there is!

This article is excerpted from forthcoming Mobile Advertising: Supercharge Your Brand in the Exploding Wireless Market (John Wiley, 2008) by Chetan Sharma, Joe Herzog, and Victor Melfi.

Sunday, February 24, 2008

watch this guy

Entrepreneur Marc Benioff is afraid of him. Venture king Mike Moritz wants to invest in him.

You have never heard of Sridhar Vembu, founder and CEO of AdventNet, the company behind newly launched productivity suite Zoho.

Vembu is a low-profile guy if there ever was one. He is also cheap as hell. Yet, of course, you know that among entrepreneurs, frugality is a virtue. A tremendous virtue.

Vembu has stretched this virtue to extreme limits, and added layers and layers of creativity upon it. The result? A 100%, bootstrapped, $40-million-a-year revenue business that sends $1 million to the bank every month in profits.

Doing what? you might wonder.

Selling network management tools, to be precise. But with a unique twist. Vembu employs 600 people in Chennai, India, and a mere eight in Silicon Valley. Imagine what that does to his cost structure!

Not only that, in India Vembu's operation does not hire engineers with highflying degrees from one of the prestigious India Institutes of Technology, thereby squeezing his cost advantage.

"We hire young professionals whom others disregard," Vembu says. "We don't look at colleges, degrees or grades. Not everyone in India comes from a socio-economic background to get the opportunity to go to a top-ranking engineering school, but many are really smart regardless.

"We even go to poor high schools, and hire those kids who are bright but are not going to college due to pressure to start making money right away," Vembu continues. "They need to support their families. We train them, and in nine months, they produce at the level of college grads. Their resumes are not as marketable, but I tell you, these kids can code just as well as the rest. Often, better."

(Read my full interview with Vembu here.)

With that rather unique workforce of 600 engineers, Vembu has not only built an excellent, cash-cow, network tools business, but he recently launched Zoho, which is getting a lot of buzz in the Web 2.0 community.


Well, Zoho does everything that you would do with Microsoft Office. It also has a hosted customer relationship management service that is free for very small companies and only costs $10 per user per month for larger ones. It competes with (nyse: CRM - news - people ), which charges $65 per user per month.

Marc Benioff, chief executive of, has made an offer to buy Zoho for an undisclosed amount. Benioff seems appropriately nervous, since's sales and administration costs are high, eating up most of his earnings. Can he afford to compete if Zoho undercuts him at such a dramatic scale?

Vembu has turned Benioff down.

Many venture capitalists want to invest. Vembu's situation is one that every entrepreneur dreams of. You don't need money. VCs are chasing you. Freedom is delicious, and Vembu knows it.

Vembu has a very exciting opportunity ahead of him. What the Chinese have done in manufacturing, he is showing that the Indians can do in software: undercut U.S. and European software makers dramatically. Not in information technology services. Not by body shopping. Vembu has done something few Indian entrepreneurs have been able to achieve--build a true "product" company out of India. This is not a head count-based business model.

A brief primer would perhaps help put things in perspective. "Product" companies build once and then market and sell the same thing multiple times to multiple customers. "Services" companies that do custom software development have to use "bodies" to do customer-specific development over and over again, with limited leverage. Theirs is a head count-based business model. Recently, popular software-as-a-service companies have come up with the model of "renting" software over the Web, thereby offering "products" as "services" while maintaining the scalability advantage of products.

Vembu has first done a network management product. Then he has done productivity suite Zoho as a software-as-a-service.

True, Vembu is a rare species in India these days. As far as I know, he's one of the very few entrepreneurs who has been able to execute on the premise of building software "products" and/or software-as-a-service out of India. He has a big vision, and so far, he has executed flawlessly.

Watch this guy!

Sramana Mitra is a technology entrepreneur and strategy consultant in Silicon Valley. She has founded three companies and writes a business blog, Sramana Mitra on Strategy. She has a master's degree in electrical engineering and computer science from the Massachusetts Institute of Technology.
via via Hacker News (Ycombinator)

Friday, February 22, 2008

I would take that $99 unlimited plan

Om Malik, Friday, February 22, 2008 at 9:10 AM PT

I've been watching the mobile industry commit hara-kari over the past few days. US Cellular is the latest to join this mad dash to the bottom. Their new $99 unlimited calling plans make me wonder if they have actually thought through this move and its long-term implications.

A friend of mine, a veteran of the long-distance wars who's worked with the phone companies, both the wired and the wireless kind, described the big three mobile carriers — Verizon, AT&T, and T-Mobile — as dumb, dumber and dumbest.

These moves remind him of the crazy 1990s, when Sprint, MCI and AT&T fought over long-distance minutes by offering lower prices and thus slowly destroying their ability to make money to support their bloated infrastructure. It's pretty much the same situation here — but the pain is going to be felt much sooner.

Here is why: I am one of the high-end customers of AT&T, locked into a 2-year contract for my iPhone. I've been paying $99 a month (plus about $40 for data and messaging) for 2,000 rollover minutes, free weekends and evenings.

It's never been tough for me to go over the 2,000 minute-limit, since my mobile is my primary phone. Result: I end up paying between $25 to $150 in overages, depending on the amount time I spend on the phone. I am the perfect customer, the kind that makes up for the ones at the bottom of the pile who either don't spend enough money or didn't care to get big buckets of minutes.

But now I am going to get an unlimited plan. And that is the big question: Why would you as a company limit the amount of money spent by some of your best (and I mean high-spending) customers? I suspect most of the people who are going to sign up for these $99-a-month plans are going to be folks like me — existing customers who are looking to bring their  wireless bills under control.

These are particularly attractive options for small biz, startups and web workers. Now your communication costs are pre-determined, which is a good way to budget. I am asking the GigaTEAM to switch to a $99 plan (on offer from whatever mobile operator they use) and also putting the PBX-land line option on hold…forever.

End of Social Networking?

According to yesterday's article in the Guardian, the three largest social networks in the U.K., MySpace, Facebook, and Bebo, all experienced large drops in membership between December, 2007 and January, 2008. Is this one month of falling numbers a fluke or have the networks reached a plateau? Says, Alex Burmaster, Nielsen Online analyst, "One month of falling audiences doesn't spell the decline of Facebook or social networking. However, most of the leading social networks are less popular in the U.K. than they were a year ago."

Losses By the Numbers

According to the article, Facebook saw a 5% drop between December, 2007 and January, 2008, but still had 8.5 million users in January. This keeps Facebook in the number one position as the most popular social network in the U.K. However, after 17 straight months of growth, this drop of 400,000 users, is the first on record for Facebook in the U.K.

MySpace also lost 5% drop in traffic between December and January. They are still the number two social network in the U.K. with 5 million unique users.

Bebo only saw a 2% drop, and ranked third with a total of 4.1 million users.

Growth Rates at an End?

These drops in growth, if anything, point to the fact that the massive growth rates the networks were experiencing could not be maintained indefinitely. For example, Facebook's audience is 712% bigger than it was in January of 2007 and Bebo saw a 53% increase in the same period. I would argue that these numbers point to the networks being more popular, not less, than they were a year ago, so I'm not sure what Burmaster meant in that earlier statement unless he was solely referring to growth rates.

However, Facebook and Bebo's growth may have come from MySpace's loss. The News Corp. giant actually saw its number of unique users fall by 9% since January, 2007. Says Burmaster, "Growth among the big players looks to be more about getting people from their competitors, not attracting new people to social networking."

Does these findings foretell a saturation point for social networks? Or are the networks just not that cool anymore now that everyone uses them? In a BBC News article on the subject, Nic Howell, deputy editor of industry magazine New Media Age claimed, "Social networking is as much about who isn't on the site as who is - when Tory MPs and major corporations start profiles on Facebook, its brand is devalued, driving its core user base into the arms of newer and more credible alternatives."

Interestingly enough, the exodus from the larger networks may have had an impact on some of the smaller networking sites that grew during the month of January. Less trafficked social networking sites like Windows Live Spaces, which just launched a refreshed version with some Facebook-like features, saw a rise in number of users at this same time. Other U.K.-oriented sites like BBC Communities and Friends Reunited also saw growth in January.

isn't that wonderful - a home made motion control system

or this one: head tracking control

Thursday, February 21, 2008

how to publish facebook status updates to twitter

With the addition of public facing feeds to Facebook I am now able to publish my status on Facebook to Twitter.   
Here's how you can do it also.

First, find your status RSS feed on Facebook.   It is buried.  (Thanks Bizzle! for helping me find mine.)  To find it, you need to visit your profile on Facebook and on your mini-feed select "See All".   On the right you will see a list of items, select "status stories" and finally below this a feed link can be found.

Don't see a mini-feed on your profile page? 

You've most likely been changed your feed settings.  Resetting them to their default values from the feed preference page will bring back the mini-feed.

Finally add your newly found status RSS feed to the TwitterFeed service.  I set mine to update every thirty minutes, prefixed it with "From Facebook..." and am publishing just the title from the status feed.

Wednesday, February 20, 2008

Now T-Mobile USA Announces Flat-Rate Too; SMS/MMS Included For $99.99

So now I may not have to change to AT&T (NYSE: T) after all: T-Mobile USA, which is the carrier I have been using for a long time (and Staci and Tricia here do too), has also announced a flat-rate unlimited package, costing the same as the ones announced by Verizon Wireless (NYSE: VZ) and AT&T earlier today. The plan from T-Mob is $99.99 and begins Feb. 21, and cover all types of mobile messages, including pictures, in addition to voice calls.

Meanwhile, Sprint (NYSE: S) said today that it was testing plans in four markets with unlimited voice, text and Web access for $119.99 and $149.99. Meanwhile, MVNOs Boost (owned by Sprint) and Helio. co-incidentally tweaked their unlimited plans earlier this month.. Also, second tier carriers Leap Wireless and MetroPCS offer unlimited calling for customers, but with no roaming.

AT&T Joins The Flat Rate Bandwagon, Hours After Verizon Wireless; Only Voice

Yea...finally competition is spurring some change. Hours after Verizon Wireless (NYSE: VZ) made it official that it was going flat-rate unlimited on certain plans, rival AT&T (NYSE: T) comes out with its own announcement: it would offer unlimited mobile phone calls for a flat rate of $99.99 a month, same as VZW. AT&T said the new fee option would be available on February 22 and that existing customers could sign up without having to extend their service contract. Unlike VZW, however, it only includes voice calling, and data and messaging will still require an additional fee. More info in the release here.

Sprint-owned Nextel and some other smaller carriers have had unlimited plan s for a while. As Dianne mentioned in her post on VZW, will Verizon's plan spark a price war that will lead to the commoditization of mobile voice calls? Seems like it now. According to UBS analyst John Hodulik, quoted in this Reuters piece, the move would likely spur Sprint (NYSE: S) to come out with an even more aggressive offering, which could be bad news for the entire industry. "A more competitive Sprint combined with increasing pressure on voice ARPU does not bode well for medium-term growth of carriers with significant wireless exposure," Hodulik said in a research note.

Verizon Rolls Out Unlimited Flat Rate Monthly Calling Plans

Verizon Wireless (NYSE: VZ) is rolling out an unlimited flat rate monthly plan today, which it says will help it lock down high end users. But is Verizon's "Nationwide Unlimited Anytime Minutes Plan"-starting from $99 a month-the beginning of the end for operators? That is, will Verizon's plan spark a price war that will lead to the commoditization of mobile voice calls? reports that Verizon COO Jack Plating says the company "isn't expecting a price war," and that the plans are really aimed at high-end customers who spend at least $100 month for mobile services. But he added that Verizon would be able to differentiate itself with the quality of its network should other operators match its plan. Full list of changes from Verizon are here.

Plating also said that Verizon is not abandoning the lucrative "bucket business." Operators usually price minutes by the "bucket,"-for example, 450 minutes for $39.99 a month-and literally bank on the fact that consumers will go over their allotted talk time. "Millions" of wireless consumers apparently exceed their minutes each month, and are then charged up to $0.55 a minute for calls. Apparently, these charges are called "overages" and make up around 15 percent of the wireless industry's annual revenue.

Saturday, February 09, 2008

from powerpoint to webapp

via Hackernews
In my consulting career, I've been fortunate to see similar problems multiple times -- hopefully, I'll learn from each one and not make the same mistakes the next time I encounter that particular situation. One situation in particular involves a conversation with an entrepreneur, and it goes something like this :

Entrepreneur: I have an idea for a web app that will revolutionize the [blank] industry, and make us bajillions!

me: That's great! I can tell you are passionate and excited, and that's critical to your success. But do you have enough cash to pay for this coffee?

Entrepreneur: Yes, we have some funding to get started. And I have a business plan explaining our strategy, and I have a powerpoint deck of what the product does.

Me: That's even better! I'll have another espresso then.

Entrepreneur: We'd like you to get us started on our website development. Here's our feature set for beta release. How long is this going to take? How many people, and what other stuff do we need?

Me: Ummm....and that's where the conversation gets difficult. Because the business plan doesn't go into great detail about the product (it shouldn't), and the powerpoint slides have a bunch of boxes and arrows but don't show what the screens look like or what actions the user takes, we can assume the founding team hasn't thought much about how people actually use their product.

So at this point in the conversation, I face an uphill climb. I have to explain to (and convince) my client that they have a lot of hard work figuring out how their users are going to use this tool to accomplish their tasks, what those steps are, and what they look like. I have to tell them I don't know how long this is going to take, and I doubt anyone else knows either.

Most of these conversations end with me suggesting some homework for the founders. It's kind of a toolkit of useful things that you probably need, but it's definitely not everything you need. But it's a start.

  • read "Getting Real", the 37signals book. PDF, online, or print version, I don't care. Read it, and know it. When in doubt, consult this book. When not in doubt, consult this book and make sure you are still on the path. I hate to use the word 'bible', but it's the closest thing we have. It lays out the process of building a web product, from concept to delivery and beyond. If you're under 25, I guess you can real Paul Graham too.
  • setup a server on slicehost for development (for rails, anyway). Easy, cheap, and upgradeable.
  • likewise, set up a subversion repository to hold your source code on You could host your own, but I like the peace of mind I get knowing my source is backed up and secure. As a bonus, you get a Trac instance for bug tracking, and it includes a wiki and other tools to make developing your web app easier.
  • hire a designer, probably a freelance one, to draw some wireframes for you. Give them lots of your time, because that's how you're going to figure out what exactly your app does. This is probably the most important person on your team right now, and you should be focused on this. Ideally you can find a good reference through your network, but if not post a well-crafted ad on craigslist and look at their portfolios.
  • At the same time, you probably want a developer to start working on your site. Maybe the developer came first, and she's found someone designer-y to work with -- even better. Just get some stuff down on paper so you can discuss it, scrutinize it, see what works and what doesn't. If your designer is good, and you've spent enough time with them describing what you want, they should have something workable.
  • Start building your product. Get your developer, or outsourcer, or nephew or whatever to hack some code.
  • Your developers are probably following some sort of Agile process like Scrum. You should be seeing new features and changes on a daily or weekly basis. This is important, so you can play with your app as it is being born and give some feedback, change it, and make it better. If you're waiting weeks or months before peeking, you're doing it wrong. Good chefs taste as they cook.
  • Once you have something you like, and works, and does what it's supposed to, consider doing a limited release. Announce to your friends and families, have them play with it, ask for their feedback. If you can't get your loved ones to pay attention to something you've been slaving over, well, that's not a good sign.
  • While you're at it, put some site monitoring on it like site24* -- so you'll know if you get swamped with too much traffic from Digg or Slashdot or, should they write about your site.
  • Go slow. look how your userbase is growing, if it is at all. Get some more users -- email more friends, or blog about it, or buy a few Google ads. Setup Google Analytics to track visitors to your site, and learn what is working and what isn't. Measure, always measure.
  • Get more feedback. Listen to your users. Make them happy. As your userbase starts to grow, spend some time thinking about how you can handle the extra load.

... and that's about it. You've just built and launched an app. Hopefully, you have some users and they like it,maybe even willing to pay for it. Maybe it sucks, and is a stupid idea. But more likely, it works, has some flaws, and could use some work. So work on it. Improve. Iterate.

Of course, what is considered 'best practices' today may not be the preferred methods of tomorrow. So I read a lot to stay on top of where the industry is going. A have a million feeds in my Google Reader account, but only a handful I consider invaluable -- including TechCrunch, Found+Read, Read/Write Web, and Signal vs. Noise.

Tuesday, February 05, 2008

Microsoft/Yahoo - a Good Deal for Silicon Valley ?

fantastic post via
This post is not about the potential Microsoft/Yahoo merger.

Instead, let's just assume for the moment that Microsoft succeeds in its bid for Yahoo.

What would a Microsoft/Yahoo merger mean for startups in Silicon Valley?

Some smart people whom I respect a great deal believe that a Microsoft/Yahoo merger would be bad for Silicon Valley startups.

Says Bill Burnham, for example: "By swallowing up Yahoo, Microsoft will be removing one of the biggest and most active acquirors of start-ups in Silicon Valley... [making] M&A less competitive in general and [reducing] the # of potential exits... [which is] bad news for Internet [startups] and their VC backers anyway you look at it."

I respectfully disagree; I think that a Microsoft/Yahoo merger would have practically no impact on any high-quality Silicon Valley startup.

And here's why:

First, Yahoo has simply not been all that active in buying Silicon Valley Internet startups -- nor, for that matter, has Microsoft and Google -- contrary to popular perception.

Since Terry Semel's arrival as CEO, and continuing since his departure, Yahoo has become quite conservative when it comes to buying startups.

Yahoo only bought a relative handful of companies in 2007. The big ones were Right Media and Blue Lithium in the advertising space -- where Yahoo was highly motivated to make progress -- and Zimbra in the email space. The small number of other acquisitions (three in the US, I believe -- Mybloglog, Rivals, and Buzztracker) were tiny enough that Yahoo didn't even have to disclose the purchase prices.

Similarly, Microsoft bought surprisingly few companies in 2007. aQuantive was the big dog, and Microsoft was similarly motivated by a high degree of urgency to get on the advertising bus. Apart from that, you're looking at a very small number of very small deals, such as Screentronic and Jellyfish -- fine companies, I am sure, but tiny deals.

And even Google, which did more deals than Microsoft and Yahoo combined in 2007, only did a coule of sizeable ones -- Doubleclick (again that advertising thing), and Postini in email. And, Feedburner got a fine exit from Google given that it hadn't raised much equity funding. But most of the other companies Google bought largely to acquire engineers, and perhaps nascent products that hadn't yet shipped -- not doubles or triples or even necessarily singles from the perspective of venture-funded Valley startups.

Microsoft, Yahoo, and Google are only buying a relatively small number of smaller companies at all today -- so given that, taking Yahoo, or even Microsoft for that matter, out of the M&A races isn't going to reduce the number of deals going down each year by very much.

Second, the spectrum of companies that are doing Internet M&A is surprisingly broad, and, drawing from lists of deals from just 2005-2007, includes names like:

  • Akamai
  • Amazon
  • American Greetings
  • AOL
  • CBS
  • Cisco
  • CNet
  • Comcast
  • Digital River
  • Disney
  • eBay
  • Expedia
  • HP
  • IAC
  • Jupiter Media
  • Liberty Media
  • Marchex
  • MercadoLibre
  • Monster
  • Motricity
  • NBC Universal
  • New York Times
  • News Corp
  • Omniture
  • Priceline
  • Publicis
  • Real
  • Sabre
  • Scripps
  • Shutterfly
  • Sony
  • Valueclick
  • Viacom
  • WPP

So the base of buyers for Internet startups is considerably more diversified than you might think.

Third, consider what's likely to happen next.

Many of the traditional media companies -- in the US and overseas -- are looking at their core businesses today and seeing either rapid or imminent deterioration. This is certainly true for television, radio, music, newspapers, and magazines, and quite possibly also true for movies (given the decline in ticket sales and the recent apparent stalling out of the DVD market). And this is also true -- or will be true -- for a pretty broad range of various other businesses that are getting touched by the Internet.

For historical reasons -- skepticism about the potential of the Internet, combined with the false hope presented to many traditional businesses by the dot com crash of 2000-2002 -- many of these traditional companies are not yet appropriately positioned for an Internet-dominated future.

And now, if the Microsoft/Yahoo deal does go through, those same companies in many cases will be looking down a very scary double-barreled shotgun of an ascendant Google and an armored-up Microsoft, aimed right at their lunch, if you know what I mean.

I'm pretty confident guessing that the level of concern and even panic among many traditional companies -- particularly media companies -- is only going to escalate from here, as traditional non-Internet businesses in various sectors deteriorate and consumers continue moving en masse to the Internet.

And from there, it's not hard to guess that Internet M&A is likely to heat up considerably over the next several years, compared to the last several years, across a very interesting and surprisingly diverse cross-section of buyers.

Fourth, new buyers appear on a regular basis.

It wasn't that long ago that Google would not have gone on anyone's list as a significant buyer of other companies.

In the meantime, Facebook has emerged as a company with considerable financial firepower and is already starting to do M&A.

If past is prologue, several new buyers of one form or another will pop up over the next five years, and one or two of them will probably be on the "top buyers" list in 2010 or 2012 -- when you'd be selling a company you start today -- even though we probably haven't even heard their names yet.

Think also about the telecom companies, the mobile carriers, the Japanese consumer electronics companies, the Korean conglomerates, the mobile handset makers -- Nokia is ramping up their Internet M&A efforts right now, European media companies... not to mention the Chinese Internet companies. Any of these could emerge as meaningful buyers of Silicon Valley Internet companies of various forms in the years ahead.

After all, in a world where Cisco is buying social networking startups, anything is possible.

Fifth, building your startup with a goal of getting acquired is foolishness anyway, in my opinion. Smart people disagree with me on this, but I'll make my case in two points:

  • Big companies don't want to buy startups that want to get bought. Instead, big companies buy startups that have built something of value that they decide is important to them.

  • You can't possibly guess what things of value big companies are going to want to own in one or two or three years. The world is changing too fast -- witness the Microsoft hostile bid for Yahoo itself! -- and besides, big companies are Moby Dick and you can't understand the reasoning behind their decisions anyway.

Combine those two points with the fact that no big company buys that many startups each year anyway, and it's easy to see that the odds of you successfully anticipating something that a big company is going to want in the future and then actually selling your company to them -- as your strategy -- is a very risky proposition that is highly prone to failure.

And in fact, in my experience, most startups that start with the goal of getting bought, fail.

The formula for success in startups is the same today as it's always been, and it will be the same post-Microsoft/Yahoo:

Build something of value -- something that people want, and something that will be profitable at the appropriate point -- and the world is yours.

Successful companies -- companies that have built something of value -- have many options. They can stay private and throw off dividends. They can go public. They can get acquired by big companies who suddenly decide, hey, that looks really valuable, let's buy that. They can sell minority stakes to big investors or strategic partners at very high valuations. All options that are typically not open to the startup that started with the goal of getting bought and didn't build something of independent value.

Or, reduced to a phrase: the best way to get bought is to not be for sale.

Because of this, even if Microsoft, Yahoo, and Google stopped doing M&A completely, the strategy of any high-quality startup in the valley would not change one bit.

Sixth, I believe that a Microsoft/Yahoo merger would actually be a net positive for many high-quality Silicon Valley Internet startups, for a completely different reason.

Again, suppose the takeover bid succeeds. You're looking at probably a year of government approvals, followed by at least a year of integration.

You can't speed up the first part, because that's up to the government, and they don't react well when you scream "hurry up!" at them. And you don't want to speed up the second part, because integrating two companies of the scale and scope of Microsoft and Yahoo is an absolutely enormous undertaking and you want to make sure you do it right, or you're not going to get any of the benefits.

In practice, that will be two years in which both Microsoft and Yahoo will most likely be considerably less aggressive on rolling out new products and new initiatives -- because the key people at both companies will be consumed with the merger.

And, just think, if they are buying fewer companies as a consequence, that also means they're less likely to buy one of your competitors and come after you while you are building your thing of value.

I think this merger, if it happens, will help clear the field for a whole new generation of Silicon Valley Internet startups to create and scale the next set of killer consumer services that will go mainstream and be used by hundreds of millions of people worldwide.

Where does that leave us?

The Microsoft/Yahoo deal, if it happens, means very little for the entrepreneurial climate in Silicon Valley, or the opportunities available to you and your startup.

Your job is exactly the same as before: build something people want, scale it up, make sure it's defensible, and make sure you can make money with it.

Build a company you are proud of.

If you do those things, you'll do just fine; if you don't, neither Microsoft nor Yahoo nor any other big company were going to rescue you anyway.

Nobody ever said this was easy, but in a world moving this fast and this much in flux, it certainly is fun!

Monday, February 04, 2008

everything you need to know about advisors

lovely post from Venture Hacks

Microsoft/Yahoo - a Bad Deal for Silicon Valley

via Burnham's Beal
There's a ton of discussion today about Microsoft's unsolicited bid for Yahoo.  Much of the discussion focuses on whether or not the deal is a good thing for Microsoft, Yahoo or Google's shareholders.  While it's possible it could be a good or bad deal for one, the other, or all three, one thing is for sure:  this a bad deal for Silicon Valley start-ups and their VCs.

How could that be?  Because by swallowing up Yahoo, Microsoft will be removing one of the biggest and most active acquirors of start-ups in Silicon Valley.  The intense competition between Microsoft, Google, and Yahoo has arguably been one of the main factors helping drive up M&A activity and prices for internet related start-ups.   It seems like every rumored acquisition over the past few years has had all three fighting in some way to win the deal.

Even though Yahoo has been wounded of late, it still had a market cap in the 10's of billions of dollars which allowed it to be a legitimate competitor for any deal under $1BN and in fact Yahoo has been a pretty active player in that market whether its, flickr, Rivals, etc.

If it's acquired by Microsoft, that will leave only two Internet media/search acquirors with the ability to easily do sub $1BN deals.  What's more, while Microsoft has recently show a willingness to deal really big deals such as Acquantive and now Yahoo, it has traditionally been less willing to smaller "tuck in" deals, deals that Yahoo has traditionally been much more active in.  Indeed, Microsoft has traditionally been dismissive of these deals because they just don't move the needle for them and their engineering staffs still retain a relatively high degree of NIH attitude.

Losing one of the Valley's most reliable "tuck in" acquirors and second place bidders is a net negative for the Valley.  It will make M&A less competitive in general and will reduce the # of potential exits for "me too" start ups" to 2 instead of three.  That's bad news for Internet content/search start-ups and their VC backers anyway you look at it.