So over on TechDrawl Dave Walters has a post that is stirring up the restless yet once again. Toward the end Dave poses a series of questions.
So the real question is: when the revolution happens, will you help push
it forward or will you defend the old school? What side of history will
you be on? I ask the question equally of investors and entrepreneurs
because it will be ours to live day-in and day-out. Will you mentor
younger entrepreneurs? Will you make investments based on passion for an
idea not an actuarial view of the world? Will you lead the community?
Will you become an angel following a successful exit? Will you finally
welcome the consumer Internet with open arms? Will you give away 10%
more of your company to make it 70% larger? And most importantly, are
you willing to celebrate failure enough times to have a real crack at
creating the next Facebook or Google?
While passion is important, investors do not invest on passion alone, they want potential. And I thought this part of the world sometime ago that goading investors is not a really good strategy. They are not going to invest in the consumer Internet unless that is where they came from and they see a deal that they like. There are people that do this, though not a lot. The only way that is going to be solved is a big success in the space.
Sure Sig exiting the game is going to be leaving a big hole. But he is certainly going out with a bang if what I am hearing about term sheets is true. Not only is the money is laying down going to be missed but the organization that he brings to the deals is paramount. While I certainly don't know, I would say that in a typical deal that Imay leads they throw down $250k with the terms and grab another $500k from seven independent angels. Imlay herds all these cats and get the deal closed. It's a lot of work.
And it's a lot of money. Again, I don't know, but let's say that Imlay has $25 million outstanding right now across more then 30 deals. In order to step into this role and maintain the proper asset class balance a person would need to have a net worth of $500 million. I don't know anyway outside of John Imlay that has that type of coin. And I am telling you eight people getting together to do a deal where the big cat can write a $100k check is not going to happen five or ten times a year in this town.
The real questions you need to be asking yourself are how do I make this thing go without taking rather expensive angel financing when the value of my company is so low, how do I get a product, how do I get users.
There are people in Atlanta that are doing this with consumer focused Internet companies. But they are not reading FoG or TechDrawl. They are building a business.
The hordes waiting in line for hours today to get that new iPhone 4 make it hard to believe that Apple is losing share in the smartphone market. But as I wrote last week, they are and they will continue to do so. Those hordes are merely trading up, not increasing iPhone share one bit.
In the comments of that post, Stephen Fleming, my boss, noted this:
I don't disagree that Android, in its many variations, may dominate MARKET share of smartphones a few years from now. But, with all the revenue streams from iTunes, the App Store, the iBooks store, and iAds, I think Apple will continue to dominate the PROFIT share. And that's what Jobs is targeting this time around.
Stephen is right. He's right because it's not really about the phone because the phone is no longer a phone.
Tell you a story.
About eight to ten years ago I was the guy that started and ran EarthLink's mobile business. The Internet was just beginning to move off the desktop into handhelds and there was a big rush to get there. Companies such as AventGo and Everypath promised to get web content into the mobile environment. There was just one problem with this plan. Well maybe two. Back then wireless transit speeds were extremely limited. Viewing any content was painful. Very painful, nobody had the patience. But the bigger issue was that users did not even want content on their mobile devices. They wanted what got them to use the Internet in the first place. Communications. Email. The handheld, that is what we called them back then, needed to morph to a communications device not a content device. So we went out and built that capability, sold it to our installed customer base, and built a nice little business around it.
Fast forward to 2007. The launch of the iPhone 2G. Why they called the 1st generation phone a 2G when all other Apple handhelds use the numeric before the G to designate generation is beyond me. But I digress. The iPhone was not a phone. It was something. A platform. At the time what exactly it was a platform for was unclear. But if you used one a little voice deep inside was telling you "this changes everything."
And what is becoming clear in 2010 is what it changes. The iPhone is not a phone. Yeah it does all that communications stuff like email, talking, texting, and more. But it does something else, and it does it pretty darn well. It delivers content. Hell it creates content. The iPhone has made the jump from being a communications device to being a content device. It's the only thing out there like it, which is why the hordes are waiting in line to upgrade. And even more importantly, delivering content can be a very big and profitable business even if the iPhone becomes a niche player in the smart phone market.
Here in the heart of the New South folks don't talk about Pepsi much. When I first moved to Atlanta from the NYC area I walked into Stone Soup and much to my surprise they did not even stock the stuff. Over on North Ave our KO friends will not mention the company by name. But the good folks from Purchase have put together a program called PepsiCo10 that is worth talking about.
PepsiCo10 is an opportunity for startups to share ideas and gain access to PepsiCo brand experts, media specialists, and venture capital mentors. The program is focused on businesses in one of four subject categories:social media & marketing; mobile marketing; place-based and retail experiential marketing and digital video and gaming. The PepsiCo10 is open to
small media and technology companies with product in market.
Startups may have already publicly launched a solution or may
have a
beta ready for launch, but the product has to have been in market for less than two years. Applicants must have minimum
annual revenue of $250,000 or total funding ranging from $250,000 to $10
million. They will make exceptions companies that have participated in accelerator or
incubator programs (like ATDC).
Out of the field of applicants up to 40 companies will
be invited to present a formal RFP and five minute introduction
video to
PepsiCo and its partners.From there, up
to 20 companies will be selected to present at a two day PepsiCo10 Summit on July 27 and 28 in Purchase, New York. Following the PepsiCo10 Summit, up to 10 companies will be chosen to pursue a pilot project with a PepsiCo brand
team. So if this sounds pretty interesting the first step is
to fill out the online application by June 24.
Last week, in advance of the unveiling of the new iPhone 4G and the iPhone OS4 operating system a little bit later today by Steve Jobs at Apple's World Wide Developer Conference, AT&T announced that it is dropping it's unlimited data plans for iPhones. Of course they did not spin it this way but instead of its current $30 unlimited plan, AT&T is moving to a $15 200MB plan and a $25 2GB plan. The unlimited plan is going away. Buh bye.
Oh the irony. This is AT&T, the company that made $19.95 unlimited Internet pricing the market standard. That $19.95 all you can eat pricing exploded the use of the Internet and was the first shot to the body of AOL which at the time had metered pricing.
I have conducted a good deal of research on this subject. Consumers will pay significantly more per month for a flat rate plan in lieu of having to monitor their usage or getting the big bill one month. Most will pay a 25% premium for a flat rate plan and many will pay a 50% premium. And if you are a smart access provider, you price your services so that the flat rate non use breakage of the lighter users makes up for the heavier user behavior. This enables you to make money by rapidly growing your user base. You have to have the flat rate to remove consumer uncertainty which creates purchase hesitation.
AT&T knows this. They are looking to stop data consumption by heavier prospects/users by getting them to move to other networks, and get lighter data consumers to buy the $25 plan to remove billing uncertainty. The former is the quickest path to improve the overall performance of the AT&T network while the latter will help with margins. And once AT&T spends a little time actually building out a more robust network I expect that AT&T will return with an unlimited plan. And the price will be more than $30 a month.
Last night Abby and I were having a nice little stroll to dinner when the subject of Facebook came up. I mentioned to her Mark Zuckerberg's reported comments via IM about Facebook users. "They trust me. Dumb f***s."
Don't know if the story is true or not. I do know that Facebook has a pretty aggressive attitude about privacy, one that does not sit well with many users including me. Abby was aghast about the Zuck's comment and asked "so what's the next Facebook?" It's a company that will do two thing well.
Performance was one of the main factors that led to the decline of MySpace. Privacy could lead to the decline of Facebook. The next great social network will perform at scale and treat users and their privacy preferences with respect.
"I think people are willing to pay for content. I believe it for music
and video, and I believe it for the media."
Steve Jobs
Steve made the comment at D8 on Tuesday. About the same time I was having an interesting conversation with some smart people about the same subject. And here was the most interesting point of the conversation. Music, video, and whatever the heck media is are very different.
People purchase music for the most part because it is provides very repeatable consumption. The number of times I have listened to Damn The Torpedos is countless. But with the exceptions The Lord of the Rings, T2, and whatever your personal favs happen to be, video is generally rented or subscribed to because you really only need to see it once.
Music, as content, is a little bit ahead of video in terms of consumption via new technology distribution methods. The buying model has held serve. I would surmise that as video becomes more Internet oriented that the traditional model of renting or subscribing and not owning will become the predominant purchase method.
People will indeed pay for content if packaged the right way. The big question is who will figure out the right way to package and deliver these next generation video rental/subscription services. It is going to be an interesting game.
A little bit later today at ad:tech and F8 BLiNQ Media is going to announce the beta launch of BAM (BLiNQ Ad Manager) and an investment of $750,000 in the company by advisors, employees, and management.
BAM is a RoR application built by the expert team of Hashrocket. It is integrated with the Facebook Ads API and offers marketers the ability to hyper-target message and engage Facebook users via rich profile data thus driving Facebook advertising performance in new and innovative ways.
Founded by Dave Williams, who previously founded 360i, BLiNQ is operating in a large and rapidly growing market, has revenue traction via an advertising model, and with the launch of BAM has a solid product in the market.
Like all startups this one has a long way to go but it could turn into a rocket.
David Skok, a five time startup entrepreneur turned venture capitalist at Matrix Partners recently blew into Atlanta for the DLA Venture Pipeline meeting and he blew away the crowd with his talk on "Customer Acquisition & Monetization." The presentation which is embedded below summarizes several key themes on David's blog, "for Entrepreneurs."
I have written briefly about customer acquisitions costs here before. What I have not fully explained, and what David does such a wonderful job of demystifying, is the analytical analysis and math that is a part of building a successful Internet business. Capital light not only applies to product development, it applies to marketing. Entrepreneurs must focus on making it easy for their product to function as a sales force and for customers to sell themselves.
In his presentation and on his blog David has provided a roadmap for not only reducing customer acquisition costs but for building a marketing machine. Entrepreneurs would be wise to follow the path.
I am killing the ATDC marketing circle and Internet circle. These were small monthly gatherings of startup types that were interested in either topic. I will continue to support Brandy Nagel who spearheaded the marketing circle effort.
If anyone wants to engage with me about either subject hit the BookNow button in the right side bar and make yourself an appointment.
Update: The marketing circle lives on. Brandy has moved the event to Friday mornings from 8:30 - 10:30. You can register here.
I have this theory. It's most likely not going to be real popular. But I have this theory. It's a theory about how social media marketing is going to evolve. The theory goes a little bit like this.
Social media is small part of the interactive marketing pie. It's growing fast. But right now it is small. In it's infancy even. A mere $700 million sliver of a $25 billion dollar pie. If you go back and look at Internet ad spending history the entire category was $600 million in 1997. In terms of social media spend it is 1997.
Think about 1997 and interactive marketing. DoubleClick was hot. Yahoo! was hot. Pointcast was hot. So hot that News Corp offered $450 million to buy them.
Google was just a sparkle in Larry's and Sergey's eyes. That $600 in
revenue was nearly all being spent on interactive display advertising. Advertising that was chasing online eyeballs. Social media marketing is a lot like interactive marketing in 1997 from a market development point of view as well. Conversations, engagement, followers, and fans are the eyeballs of yesteryear.
Take a gander at Forrester's interactive advertising spend projections below. Notice anything interesting about it?
I do.
Look at the more mature categories of email marketing, display advertising, and search marketing. It's obvious that search marketing dominates. It dominates because of its direct response nature. What might not be quite so obvious, because you need to dig a little deeper into the underlying numbers, is that a steady state of 70% of interactive marketing spending is being used for direct marketing activities.
My theory on social media marketing is that it is going to mature to a state very similar to other online marketing categories. Most of the growth projected for the social media category is going to be spent on direct response marketing activities. The entire reason interactive marketing has grown is it is more measurable, less expensive, and more revenue focused than traditional media. If CMOs are going to shift their budgets into social they are going to demand the same type of performance.
It's really no surprise that marketers want to invest in activities that are both efficient and measurable. But there is another side of the coin, the side of the social media user. The common wisdom is that social media users don't want to be sold, they want deeper engagement. But no one wants to "be sold" in any medium from mass market advertising to one on one sales. People want to buy.
Regardless, eMarketer recently highlighted a study by Marketing Sherpa that addressed this issue.
Why many users are indeed interested in deeper engagement, the number one motivation why users followed/friended companies was to learn about specials and sales. This supported an earlier study by Razorfish.
Social media users want deals. If marketers are going to be successful they are going to have to give them deals.
Based on their behavior interactive marketers want efficient measurable revenue focused opportunities. Social media users want deals. But them together and you have social media looking a lot like other more mature interactive marketing mediums. Or so my theory goes. But is it just a theory.
Very interested in what the smart marketers and social media users that comprise the readership of FoG have to say about the matter.
The opinions expressed here are mine and mine alone (with the exception of comments by others of course). They do not represent the opinion or position of any other person on entity. All postings adhere to my personal values.
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