Category Archives: internet

Google & China: An Operator’s View

Google’s announcement Tuesday that it was mad as hell and not going to take it anymore was its second bombshell in a new 2010.  (I count the first being the announcement of the Nexus One, which I think is very possibly a hugely important step for Google as a company.)

Instapundits leapt on the announcement.  Some–TechCrunch notably–stating that it was all about Google finding a graceful exit.  Others—Robert Scoble, SearchEngine Land Sullivan, and others, defending the move as a principled stand.  As someone who’s worked internationally on building businesses, I’m firmly in the Scoble camp.

The idea that this is some cynical move to enable Google to exit China gracefully is ridiculous.  Google is a massive public company, seeking a growth trajectory that goes for decades.  Aside from all the great points Scoble makes on his post on this–which I agree with entirely–the simple math states that Google can’t not be in China long-term.  Later this year, China will become the world’s largest economy that is not the United States, etc.  Huge potential market. 

The second piece to this equation is that its not as though Google’s pouring so much money down a hole with China that earnings are hurting.  Indeed, Google’s trajectory on cash flow, earnings, etc., all are moving in the right direction.  Earnings calls don’t lead Google’s CFO to fend off nervous investors, anxious at the out of control spend in China.  Huge potential market without materially impactful investment—sounds like something Google would want to do. 

So that cost/benefit analysis is straightforward.  The other element to this though that’s been missed is simply that international business is hard.  In Silicon Valley, we like the narrative of overnight success.   And to be sure, Google has achieved unprecedented things in its 11-12 year existence.  Still, Google has been in China for 4 years.  The time between Olympics; the length of most people’s undergraduate career.  That Google has not convincingly “won” in that timeframe is not at all a sign that the race is over.  At least it wouldn’t be to anyone who’s ever built or worked on a business overseas.  With international businesses, you have a whole set of issues around who to hire, how to implement a culture that retains the specific elements to the native culture while still being connected to the headquarters, there’s often differences in business models or price sensitivities of customers, etc., etc., etc.  4 years is the blink of an eye for this type of thing.  The idea that Google’s crying uncle at the end of 4 years because China is just too hard a market to win is quite naive and nonsense to anyone who’s been a manager in an international business. 

Given that view, I’ve found Google’s stance really extraordinary.  It will be fascinating to watch the dialogue between China and Google as this conversation progreses. 

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Startup Revenue: Moats & Models

I’m giving a speech tomorrow at the Founder Showcase in Santa Clara.  The topic is around building revenue for startups.  The slides are here:

These build on a prior talk I gave in 2009 on this topic, and I’m looking forward to it.

To give my cliff notes here of the speech, it’s basically:

Revenue is the lifeblood, getting to revenue is nice, very nice. 

Some advise not to think about revenue too early on in the life of a startup.  The thinking goes: focus entirely on building something great, get an audience, then the revenue pieces will start to work themselves out.  I disagree with this philosophy in part. 

I totally agree with the idea that 100% of your focus needs to be on building something people want and driving to iterate, iterate, iterate.  At the same time, I advocate thinking about revenue–at least a little bit–early in the lifecycle of starting a company. Don’t get derailed, but at the same time, don’t avoid the topic entirely.  My rationale is simple—you never know what small thing will someday be the determiner of success or failure, so thinking about something important like revenue is a good thing to at least wrap your head around. 

The talk then goes into two parts.  Part 1 is about building out a business to think about how you’ll establish moats and drive traction.  This is about defensibility in part; its also, however about driving distribution (at least in internet businesses).  I argue that any founder should likely try to draw out the model that I’m advocating here—may not be relevant to you, but I’d think you’d at least want to try. 

Then Part II is about models.  I’ll talk about my thoughts on types of revenue models, a sort of revenue model 101.  Nothing too revolutionary here, but hopefully a useful primer if you’ve not thought through a business model before.  I then finish off with a brief description of how to think about your market as a whole.  An industry or market model, i.e., the macro picture of the environment in which you operate is something that entrepreneurs will very likely need to be able to grasp and exercise their minds about. I’ll provide some quick thoughts on how I view that as working well and not well. 

Hope to see you there!

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Channel marketing: What all marketing people can learn from social media

Founder’s Fund’s, Internet Mastermind, and friend, Dave McClure posted one of his periodic rants over on his blog.  Good read, great font colors. 😉

When I read it, it got me reflecting on the value I’ve seen as a marketing professional around social media, though not in the manner that most people talk about this. 

Here’s what I mean.  Many people who talk about social media will talk kind of breathlessly about all the channels that are out there, how to do things like SEO, etc.  These tools are out there and free.  The tools and concepts like SEO are easy to figure out.  And these are all new, lower cost media channels: ones in which marketing people really need to embrace and understand in order to be on top of their jobs, really in almost any industry. 

And this is all spot on—as a marketer anywhere, understanding blogging, twittering, youtubeing, facebooking, blah de blah de blah is IMHO vitally important.  Some though will sort of hesitate and say this is all too egocentric, with too little privacy, and with too high a techy dork quotient to be that important.  Or they’ll just say they’re too busy and blow it off.

My counter to that is to frame these social media outlets in a more traditional context.  A marketer’s job is to figure out how to frame a winning value proposition and to get the word out in order that sales people’s jobs become very very easy.  Social media—broadly—is a free, experimental petri dish that any marketing person can use to learn about this exact process.  All sorts of channels exist in the social media realm, with more coming all the time.  What makes this stuff both fun and useful for marketing people is that now there are free channels for you to try stuff out to see what draws and engages and audience.  Indeed, with nothing more than having something useful to say (your product) and with experimenting in where you say it (your channel), you can create a community.  For a marketer, what could be more golden? 

Dave’s rant goes off principally on VCs who don’t understand design, user experience and internet marketing.  And right on, Dave.  I would extend the points on internet marketing, and specifically social media marketing, to anyone who calls themself a marketer.  This stuff is out there and free.  Use it.  It’ll sharpen your skills for free.

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The Google Phone: The Empire Strikes Back

This week, with much ballyho, Google announced its new superduperphone, the Nexus One.  The product reviews are favorable, broadly speaking.  This is particularly notable when one considers that it will invariably get compared with the iPhone (“have you friggin heard of it?”). 

I’ve used and watched closely the Iphone and its ecosystem for some time and I think this could turn out to be a massive strategic strike by Google against Apple.  Surely the smartphone market remains small as a percentage of the total mobile market, and it will grow.  Both and others like Palm and Windows Mobile will likely find healthy niches.  Still I think there are major elements Google has put into place that make it potentially very advantaged over the medium and long-term against Apple’s Iphone strategy.  Here’s what I mean…

To have done so much in a v1 hardware product, purely on a design and functionality perspective, is an audacious achievement for Google.  Few would have predicted that v1 would have reviewed as potentially competitive on a design front to the iPhone.  For example, just recently, Paul Graham predicted that no one would have a chance to touch Apple in terms of mobile device design, that:

It’s unlikely you could make something better designed. Apple leaves no room there.

I’m not arguing that the Nexus One would win hands-down on a design side-by-side, but it is has enough to likely hold its own on this vector of competition.

So now Apple’s advantages are:

  • a clear (though slim) advantage on design
  • a strong integration with media (mostly music)
  • a strong lead in terms of applications and current application developer mindshare
  • tight integration particularly with MacOS computers
  • maybe its customer loyalty.  obviously many are quite loyal to Apple, but Google also has world-class customer loyalty.  I’m not sure I’d give Apple much of a lead on this front.

The relative advantages that Google brings to the table include:

  • a strong advantage in business model—this was discussed very well by Benchmark’s Bill Gurley here.  Google will pay carriers to carry their phone; Apple gets a fee from AT&T.  This is a very significant difference, and it will have an impact.
  • an model for handset diversity. this will basically enable handset makers to pick off other segments of the smartphone market. 
  • a vastly more favorable approach to application developers. 

How will this net out?  My early prediction is that Google has a chance to do to the IPhone what Microsoft Windows did to the Mac—it’s the Return of the Empire. 

Why will it play out this way?  Two key reasons will drive this. 

First, the business model advantage that Mr. Gurley talks about in his posting is one that has an impact.  Apple is strong, for certain, but putting a business model that’s cheaper than free in front of their carrier customers is one that will have a result. 

Second, if the business model is the tops-down strategy to win against Apple, the friendliness to application developers is one that works from the bottoms up.  Apple’s attitude and approach to developers is a clear opening to Google, and Google’s approach to date is clearly going to exploit this. 

So most everyone knows that billions and billions of apps have been downloaded for the Iphone.  (3B at latest count.)  Apple created an ecosystem with a speed and breadth of distribution that the world has never before seen.  It is geek magic.  Application developers *love* having the opportunity to develop apps for mobile smartphones like the IPhone.  Small teams of really smart developers can build apps for little money.  There’s distribution through the Apple ITunes App Store, and they can even make money.  It’s a hacker’s paradise, a wet dream, the land of milk and honey….  except when it’s not. 

Apple’s approval process is one that is byzantine and lengthy.  For serious developers, used to working at web speed where they can do daily, hourly, or by the minute updates to their products, resubmitting to Apple for a lengthy review every time they update their app is ridiculous.  It’s boooogus, and everyone knows it.  Great developers won’t stand for it for long, *if* Google can get traction. 

Despite its 3B applications that have been downloaded, Apple’s approach puts its at strong risk of losing developers’ hearts, minds, and their coding fingers.  All these developers figured out how to start building apps—remember, basically no one was building apps for Iphone even 3 years ago—and they realize it just doesn’t cost that much.  (Interestingly as a side note, no one seems to care that Apple takes like 30% of the revenue—a king’s ransom.  No one really complains about this—what is complained about are all the restrictions in shipping an app on the Apple Iphone.)

Developers want a platform that has no hassles—let’em build and ship code and get customers our latest work.  Apple’s choice to impose its will is holding back a community that can and will move quickly to an alternative.

In my view, this is a dangerous approach for Apple at this time.  If they maintain the stance and if Google can get any kind of traction in the next 6 months, I look to Google to gain a vast uptick in developer apps, likely at the medium term detriment of Apple.  As with the early innings in the PC/Mac wars, Mac showed the way, and the PC built the ecosystem and rode the 90’s to glory.  We may see the same thing on a smartphone, 20 years later.  The Empire, this time Google, is well positioned to strike back. 

 

 

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My Founder’s Institute Talk on Branding & Naming Your Startup

Last week, I had the pleasure of speaking as a Mentor at Adeo Ressi’s TheFunded’s Founder’s Institute with entrepreneurial superstars James Hong and Bryan Thatcher.   image

First off, before I get into the topic, let me say that I think the TheFunded Founder’s Institute is innovating the approach to startups in an important way.  The approach is a mix of company building philosophies.  It’s one part bigger hammer–that is bring in lots of smart people as founders.  It’s also another part strong social networks, connect those founders to each other and to experienced, proven entrepreneurs.  Add top-tier, discounted, startup services (legal, accounting, etc.) and that gets at crux of the approach.  The new stock class—F-Class—which Ressi’s introduced is also super interesting.

There are a lot more unique details to how Ressi’s going about this, which I’ll not go into here.  But suffice to say, it is both empowering for entrepreneurs and it has a bunch of detailed thought behind it.  Ressi’s vision is big and broad.  It is exciting to be a part of, and I’m eager to help it succeed.   More concretely, I wish I had had access to such a thing when I was trying to start out as an entrepreneur.

Ok, so that’s the Founder’s Institute, now onto what I was talking about when James, Bryan and I spoke last week.  Our topic was Naming—as in, you’ve now figured out what customer problem you think you’re solving and what you want to do, now what do you call this thing?

This is a fantastically rich and interesting topic.  It’s also, IMHO, super super important.  When you’re a startup, your name is about the only marketing you really have at first.  Also, everyone—customers, potential employees, and potential investors—will ask you about your company’s name.  So whatever you name and brand your company had better be good.

My slides from the presentation are embedded here (hat tip to the folks at Igor International, who’s free naming guide was very influential):

(Shared with permission from TheFunded Founder’s Institute.)

It was a good discussion, and my sense is that this provides a useful prescription for startups thinking about what to name their company and how to approach their brands.  Some key points for reinforcement.

Having a process for naming helps.  What I think is particularly useful about this approach is that you can put numerical scores next to how you think about names.  This enables you and your team to have a concrete discussion about why someone likes versus dislikes a certain name.  This is important, as it enables your team to come to a more objective decision, as opposed to just who yells loudest.

Think BIG picture first, then worry about finding the .com or URL that’ll work. Following my talk, one common theme in speaking with people afterwards is that I think many people get hung up on the challenge of finding a good .COM URL that’s not already been picked up.  While certainly a challenge, I think that worrying about this tends to drive entrepreneurs to small thinking.  You’ll have to work through it, but that’s an end point, not the beginning.

As I’ve said in other posts—as an entrepreneur, my advice to other entrepreneurs is to think big in everything you do.  So when it comes to naming and branding your company, think big.  Go for a big name, figure out what that makes sense and helps position you strongly relative to your potential competitors.  Figure out a name that really delivers on the strategy that you’ve put in place.  Get that strategy right and solid.  Then you can go and figure out the more tactical issues of what the URL hunting strategy needs to be.

Commit to going through the process.  The other thing that I’d encourage people to do is really commit to going through the process that I’ve described in the PPT deck.  I’ve met with several companies over the past year who’ve listened to this process, ignored it, and then have ended up hiring a naming consultant to basically help them go through the same thing.

Acknowledgments to the folks at Igor International. Igor International have open sourced their naming guide, which is a great thing.  My deck basically walks through how I used that free information to secure Moonshoot, an awesome brand name, IMHO ;).  The tool Igor’s provided is for frugal founders like us a tool to go figure this out on our own.  Invest the time to commit to doing it.

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I still think this is a goofy debate re: Twitter & retaining users

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I wrote about this recently here, but just saw this as I was eating lunch: Twitter is retaining more users than Nielsen thinks » VentureBeat.

I agree with the conclusion—Twitter shouldn’t worry—but I find the logic goofy.

Sure retention is important, but it really doesn’t matter as much for Twitter as it does for FBK or MYSpace if a Twitter joiner is an active “Tweeter.”  This is because, as with YouTube or Flickr, a Twitter account holder gets access to the search of the ‘real time web’ or whatever it is we’re calling the sum of all the tweets the user can search. 

In other words, the consuming non-tweeter gets value from the size of the twitter network.  If he or she never tweets, he’s still getting value.  So long as the total audience of twitter continues to grow its account size, and so long as a non-zero percentage of that audience is tweeting and adding to the unique content asset Twitter has, then Twitter is in stellar shape.

The right metrics are not about retention or number of tweets, IMHO.  I think its about # of total tweets, # of accounts, and in time, # of searches in short-term.  Over time, the retention number will go up as more people figure out how to tweet. 

 

 

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Who I’d bet against if Twitter were sold

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This post is inspired by Warren Buffett.  Buffett often talks about how with new technology it’s impossible to pick the winners, but it’s obvious who to short.  He uses the example of the thousands of automobile companies formed in the US over a century ago, fewer than 4 remained a few decades later.  At the start of the auto industry you’d have no idea which 4 car companies to bet on, but you probably should have known to short horses.  Same thing here. 

Speculation continues to mount that Twitter is in acquisition talks with tech analysts and journalists writing about what firms as Apple, Google, Microsoft, and News Corp should or must do.

I wouldn’t put money on who might win or even if Twitter wants to do a deal—there are too many moving parts to read this, as I mentioned yesterday.  If I had to bet, I’d probably say that the most likely 2 scenarios are that that Twitter doesn’t sell or that MSFT acquires them.  The second most likely would be for News to buy them.

If Twitter does indeed sell to MSFT (or rather, anyone but News), then I think there are some obvious bet against that I’d make.  Namely, Twitter clients—e.g., Tweetdeck and Seesmic.  Perhaps others, but those two in particular would I think have a very hard to reach mainstream distribution against someone like MSFT or Google.  One of the challenges with building desktop apps I suppose. 

 

 

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