On Marines and Twitter

Image via CrunchBase

I’ve been reading a book about maneuver warfare as practised by the US Marines. This is based on principles such as focus, surprise, flexibility, tempo and boldness. In each chapter examples are given and what I have found interesting is they give examples on either side. On the face of it one may think that boldness would emphasise taking action over not doing so.

Applied to the current rumours of Google buying Twitter it may seem like the bold move is to go ahead and buy, but it is not. The bold move is to pass. There is no question that Twitter is the hot startup at the moment. It gets the Daily Show mentions, the celebrity tweets and the avalanche of tech blogosphere coverage. People urge Google into doing the deed and that $1bn is nothing against the cost of missing out. It is true that Google needs another giant revenue stream to continue its growth and that it hasn’t really diversified away from its original idea despite many attempts. The problem is that Twitter is not yet a business. And Google has already been burnt spending 10 figures on another not to be missed startup when it bought YouTube.

If the bold move is to pass the really bold move is to buy delicious from Yahoo. I noticed that Google has added a ‘bookmark this’ button. It is hardly well publicised and I suspect nobody uses it. Unlike Twitter whose value is in the immediacy of its content, delicious has quietly built an alternative index of the web. It doesn’t matter that it is far smaller than Google’s robot built index, its value is that it was built by humans. I only bookmark a few pages each day, on a good day, but those I do have far greater value than something indexed by a robot because I can understand the content of the page far better.

Each page I bookmark links me to a group of likeminded individuals and I am always interested to see what they have bookmarked under the same heading. This is in embryo a ‘PageRank for web users’ rather than links. It has the potential to be a powerful search engine but delicious is not hot any more. It got swallowed by Yahoo and left to rot.

The bold move? Pass on Twitter and buy delicious. They already have Schachter, might as well rescue his creation.

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On new facebook

Facebook finally bit the bullet and migrated everyone over to the new design. There has been some squawking from a small number of users and developers who are moaning they no longer have access to the profile page.

As we are developing a facebook app I’m in a good position to comment. My first thought when seeing the new design was that it wasn’t a massive deal. You still had the option to send updates to the news feed and it was my guess that the boxes page would still get a decent amount of traffic. From our perspective the greatest part of the new design is the ability to create a tab.

The trick is to design your app so people actually want to display it prominently, seek it out and tell others about it. I have been reading some books about marketing in anticipation of our launch. Stuff like Purple Cow, The Anatomy of Buzz and Beyond Buzz. I’ll spare you the dollars because they all say pretty much the same thing: products must be inherently viral, it’s not something you can slap on at the end. If you haven’t been thinking about the users from the first time you put down code then you are in trouble.

For us it guides everything we do and having that clear touchstone makes decision making far easier. Now we have different classes of users but anything we do with the app has to benefit one or more of them and cannot cause annoyance to any of them. You cannot compromise. If you start designing something with features that users have to put up with your product is not going anywhere.

The Curse of Google

I also think you have to bite the monetisation bullet early. Many web startups suffer from what I call the curse of Google. This is the idea that you can build a great product and someone else will figure out how to monetise it. Google were lucky that Bill Gross came up with paid search because in their initial paper Brin and Page baulked at the idea of advertising. Now Google implemented advertising in a better way than GoTo by separating the organic results from the ad but the basic concept was Gross’. Google doesn’t suffer from the curse but everyone trying this path after them does. I cannot think of another startup which has had a meteoric rise then cracked a solid business model down the line. I can think of a lot that haven’t. Napster was just as revolutionary as Google but without any business model it burnt pretty fast. Others like YouTube and Hotmail have managed to get bought by a larger company who could cover the costs in order to get a good position in an emerging market.

It doesn’t work for us because we are not hackers. We have to raise our own money to build the software and I wouldn’t be comfortable asking people for money, and putting my own money, behind something which does not have a clear path to revenue. Being so business model focused makes us different from other startups but we can’t afford any other route.

On Digg

Another chapter was added to Digg’s unhappy history of aborted acquisitions when the proposed sale to Google for $200m fell through. To go back to the beginning there was the Calacanis deal which was a good bullet to dodge. Since then there have been various rumours surrounding News International, Yahoo and Microsoft. They are running out of buyers, maybe AOL or CBS but those two have their web 2.0 prizes in the shape of Bebo and Last.fm respectively.

I think the problem is that the founders have convinced themselves Digg is worth a lot of money by reference to deals that have already gone through. The bottom line is that if they wanted to sell they should have done it between YouTube getting bought in October 2006 and the Bebo acquisition in March 2008. That was the boom for web 2.0 acquisitions and they missed it. Things are heading south for a couple of years so Digg will have to raise more VC or live within its means but by then Digg will be old news. It’s possible that they could come up with a game changing technology, I think Kevin Rose has come closest to seeing what social search could be, but the question is whether they can execute it.

Timing is everything

The feeling I got when reading about Digg is that Rose and Adelson have this ‘let’s just dump it and take the cash’ air to them. Google have got burnt with this already on YouTube for which they foot large bills but are now realising that advertisers prefer the safe, clean, controlled environment of Hulu. Now Digg and YouTube are by no means similar but the experience could have made them more wary of buying startups with big audiences but no revenue model – ‘We bought YouTube and still haven’t worked out how to monetise that. Why repeat it with Digg?’

As CEO the buck for all this stops with Jay Adelson. His track record suggests that he does not know when to sell or at what price, at one point his Equinix stock was worth $55m at the peak of the boom but he clung on long enough to see it all rendered worthless. It’s going to be hard to climb down from the $200m valuation without sending buyers bad signals. He is already in the mire because everyone will be wondering what Google found in due diligence that made them go cold. The best acquisitions are the ones you hear about after the deal is done and the ones that aren’t done you should never hear about.

Pic: Laughing Squid

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On video

The BBC’s iPlayer goes from strength to strength hitting 21 million requests in April. During the same month on the other side of the Atlantic Venturebeat reports Hulu is thriving with 63 million videos served which led me to wonder whether the wag at Google who dubbed the service Clown Co is still laughing. YouTube is as popular as ever but apparently struggling to turn all those eyeballs into cash whilst coming under increasing pressure from content owners who want a slice of the pie.

In the UK, BSkyB Chairman James Murdoch has been complaining that the BBC’s access to its own content and free money in the shape of the license fee represents unfair competition for commercial broadcasters. Speaking as a consumer I like the streamed service and as TV is increasingly delivered over the web, demanding the BBC be prevented from streaming its content online is effectively asking it to be shut down.

I think the BBC’s position is justifiable so long as it behaves differently from commercial broadcasters and makes its content freely available to others. So far it appears to have done so, being one of the first major media conglomerates to enter a non-exclusive deal with YouTube. To me this approach encourages competition rather than stifling it. So long as the BBC continues with this open approach then good luck to them, maybe someone over there should get in touch with the Myka people.

All content owners are under considerable pressure from the dominant distribution system at the moment: piracy. There needs to be an answer as no company which makes a living from selling music and video to consumers and advertisers can move from an offline world which was 95% legitimate consumption against 5% piracy to an online world where the reverse is true.

For too long there has been a conflict between media and technology companies. Neither group has been completely in the right, the former having been too conservative in the face of the threat from piracy and the latter expecting swathes of content to be given up with little prospect of payment. Fortunately things are moving in the right direction, content owners are warming to new ideas and startups like ours are showing a clear way of monetising the traffic.