Perception and Reality: Why It Makes Sense For Google To Pay $3.1B For DoubleClick

Posted on April 13, 2007 by Simeon Simeonov

Perception and reality sometimes have a twisted relationship. That’s particularly true in cases where being perceived as the leader makes you the leader. We tend to see these types of self-fulfilling prophecies in aggregator / market maker and other critical mass businesses. Markets that have these characteristics tend to exhibit spending and bidding wars to reach/maintain dominance.

Using Occam’s Razor as a guide, this naïve explanation may just be why it made sense for Google to outbid Microsoft for DoubleClick. I discount the economics that DoubleClick can bring to Google for two reasons: (a) some of DoubleClick’s current customers/partners will look for alternatives and (b) Google is still learning how to handle large acquisitions. Also, from an economic standpoint, Google would not have been threatened in the short or medium run by DoubleClick going to Yahoo! or Microsoft. However, the opportunity cost of losing DoubleClick from a perception standpoint was huge. It would have exposed a crack in the armor.

Posted in Advertising, Google, Microsoft | Tagged , , , | 5 Comments

SavaJe Goes to Sun

Posted on April 13, 2007 by Simeon Simeonov

In a smart move, Sun bought SavaJe, which had built a complete mobile software stack using Java.

I hope Sun embraces Linux as the phone OS layer and opens up the SavaJe stack to multiple presentation technologies by integrating an AJAX-enabled browser and perhaps even Flash Lite. A Java-only mobile strategy would be sure to backfire. Why? Read my post at OpenGardens.

Posted in Mobile, startups | Tagged , , | Leave a comment

ILB / RNLI

Posted on April 11, 2007 by Simeon Simeonov

At dinner last night I was having a bit of a hard time describing the boats that the Royal National Lifeboat Institution (RNLI, which is somewhat like UK’s version of the US Coast Guard Service) uses.

Since a picture is worth a thousand words, here are some. The bigger rigid hull inflatables are Atlantic class rescue lifeboats equipped with GPS navigation and self-righting capabilities. They are named after Atlantic College on the north coast of the Bristol Channel, where these pictures were taken during a reunion visit. Nowadays, they launch and land the boats with a special-purpose tractor/trailer/net. Back in the old days, we did everything by hand.

The smaller boats are built by students at the school for training. S4, the boat I trained on, was still around.

DSCN0180 DSCN0161 DSCN0160 DSCN0152 DSCN0151

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Impedance Mismatch: Technology Outpaces The Law (Yet Again)

Posted on March 25, 2007 by Simeon Simeonov

Impedance mismatch is defined as a term “which describes an inadequate or excessive ability of one system to accommodate input from another.” With the pace of change in technology exceeding that of many other areas in society, there is plenty of opportunity for impedance mismatch between what technology enables and how the rest of the world is prepared to accept it. The legal system is particularly prone to having interface issues with technology.

The recent federal ruling against Cablevision’s network DVR is a good example. Jason Fry has a somewhat scathing analysis in the WSJ.

U.S. District Court Judge Denny Chin’s decision is remarkable for hitting the trifecta of digital-age frustrations: It fetishizes technology at the expense of common sense; points out, once again, how out of step copyright law is with our digital world; and raises the question of who, if anybody, will speak for consumers.

…

So let’s break this down. If the bits that make up your recording of “The Sopranos” go to a hard drive in your living room, everything is (presumably) legal. But if the bits that make up your recording of “The Sopranos” go to a hard drive in a Cablevision data center somewhere, that’s illegal. Got that?

Jason continues to outline a trend of using legal means to promote the rights of content owners and restrict fair use. He uses lots of examples from the NFL to YouTube. Worth reading.

Posted in Digital Media | Tagged , | 1 Comment

Heading to ETech

Posted on March 23, 2007 by Simeon Simeonov

ETech in San Diego is on the schedule for next week. I’ll be at there Mon evening-Wed. If you are around, give a shout.

Posted in Uncategorized | Tagged , | 1 Comment

Widget Convergence: Web-to-Desktop

Posted on March 21, 2007 by Simeon Simeonov

The guys at Goowy and yourminis blog that you can now put your widgets on your desktop, all thanks to Adobe Apollo. I tried it and it’s pretty neat, despite the fact that it is alpha tech running on alpha tech.

I’m excited to see a broader migration of Web content to the desktop, blurring the divide between hosting containers (desktop, browser, Flash runtime, etc.). If we can do that, then there is also the hope that getting widgets on mobile devices will become easier.

Posted in Adobe, Digital Media, startups, Web 2.0 | Tagged , , , , , | 1 Comment

Widgets, Widgets, Everywhere

Posted on March 14, 2007 by Simeon Simeonov

Widgets are the new cool. Everyone agrees they are a big phenomenon that’s here to stay.

No, widgets are not new. They’ve been around for a very long time in multiple technology implementations. Some prior examples are in Brad Feld’s post. As for Web-based implementations, in 2001, I was on an OASIS technical committee for Web Service Interactive Applications (WSIA), which more or less was trying to build standard (unnecessarily complicated ones) about how widgets powered by Web services could interoperate on the browser page. That work eventually led to Web Services for Remote Portlets (WSRP). And what about Kevin Werbach’s 1999 Release 1.0 issue on syndication?

In their current form, widgets are the next step in the trend towards disaggregation of content at the production end and aggregation of content by the consumer. This is why they are here to stay. They will also go mobile, partly because the form factor is a fit for small screens. Most in the mobile space, from Nokia (Widsets) to Opera (Opera Widgets) are exploring the concept. There is even a W3C TR for Widgets 1.0. (I’m surprised they didn’t start with Widgets 2.0, just to stay on part with the rest of the 2.0 vintage nomenclature.) On top of this Vista, Mac OS, Google and Yahoo have their own version of widgets. Widgetbox’s directory has about 7,000 widgets. And, yes, there is volume. RockYou is pushing 100M/day.

So, in all of this, where is the money? David Cohen thinks there is money to the made. Brad Feld is skeptical. Jeremy Liew is pondering how RockYou will make money despite its volume. Fred Wilson relates widgets to feeds. Mypartner, Mike Hirshland, pushes the debate forward.

Let’s first consider some of the models for monetizing widgets:

  • Several widgets can be packaged with an ad unit next to them.
  • Widgets can embed advertising in their content.
  • They can show promotional campaigns, competitions or other pay-for-placement content.
  • Widgets can tie into affiliate networks, e.g., buy this product on Amazon.
  • They can collect valuable data, e.g., MyBlogLog.

To analyze how monetization might work we have to look at the content value chain. There are widget builders. There are the page owners (think bloggers and folks who own a profile on a soc networking site). There are the publishers (site owners). There may or may not be a widget distribution/syndication network in the middle.

Widgets are content and widgets builders can extract value based on whether that content is unique, valuable and relevant. Nothing new here but the form factor. Content owners can let widgets spread in order to drive traffic back to their sites or they can decide to monetize valuable content. What’s new with widgets is the need/opportunity to syndicate at the level of the Net as opposed to through a small set of pre-negotiated relationships. This poses some distribution and measurement challenges.

For site owners, widgets offer a way to create new inventory. They also offer some very interesting targeting opportunities. Widgets let you take several bites at the same page. Managing this and targeting for maximum impact are not trivial. Certainly, most site owners won’t let others make a ton of money off of their real-estate without wanting a cut.

For most page owners, widgets are bling. Direct monetization doesn’t make sense. The average casual blogger gets 150-250 hits/month. The average “pro” blogger gets 800-1000 hits/month. The average social network profile gets less than 100 hits/month. There is no meaningful eCPM that makes direct monetization relevant for the average page owner. That’s a BIG problem for monetizing widgets–how do you make the long tail of users put monetizable widgets on their pages? Some solutions are to (a) focus on content relevant for the page owner and (b) indirect monetization, e.g., lotteries, etc.

The opportunity for widget distribution/syndication/management platforms is to help address the abovementioned problems that arise when you try to match N widget builders with M site owners and their Q millions of users, namely:

  • Discovery of widgets (content) that is relevant for people with specific interests. This is not trivial as it involves not just search but also recommendation. How else can you help widget developers “move” new widgets onto pages? As the number of widgets on the Net grows, the value of these services will increase.
  • Easy distribution of the widgets, from putting them on pages to enabling actions (say, working around MySpace’s Flash linking restrictions) to making sure that content is served fast. As widgets become commonplace and some standards (formal or de facto) emerge, the value-add here will decrease.
  • Measurement, measurement, measurement. And analytics, which are not easy to do in a broad syndication environment. There is a lot of value in this for two reasons. First, from the standpoint of traffic rating agencies, widgets count as page views. That won’t last. Eventually, someone will realize that serving 4 square inches of content is not the same as serving 100 square inches. Second, widgets will penetrate real estate that’s not monetizable. For example, I don’t want to make money from my blog but I may put some widgets on it. From a behavioral targeting standpoint, widget distribution networks may get better data than even some of the very large ad networks.
  • Monetization enablement + audit. No rocket science here but someone needs to make money move through the content value chain.
  • Widget marketing services, from SEO to SEM to viral distribution enablement. A widget syndication network may have the best data to optimize these. Some type of fee or pay-for-placement structure has to be put in place amongst widget developers to address prioritization conflicts.

This is a classic aggregator/middleman play. The main reason why these types of businesses succeed is that there are economies of scale in aggregation. The two patterns of failure involve top line collapse due to big producers cutting direct distribution deals with publishers and margin collapse due to (a) the commoditization of the aggregator value or (b) the bargaining power of large producers and publishers. There are many examples of these aggregator plays succeeding (ad networks are a prime example) and many more examples of them failing.

Who knows how this will play out with widget management systems? Ideas/opinions welcome.

Posted in Digital Media, Mobile, MySpace, startups, Web 2.0 | Tagged , , , , , , , , , , , | 12 Comments

DST Change, Cars, Sensor Networks and Software-as-a-Service

Posted on March 12, 2007 by Simeon Simeonov

Sunday came and went and all’s well, more or less. The ticking bomb called the Energy Policy Act of 2005 made a polite pop! but didn’t cause too much trouble when DST came into effect earlier this year than usual. Strangely enough, PCs were mostly unaffected, in large due to Microsoft’s success moving consumers to auto-update their PCs.

There were reports of a few problems with other types of devices. For example, George Ou @ ZDNet reports problems with his and his wife’s Sprint phones. I heard of similar problems for some Cingular models. Verizon made me patch my Blackberry but after I installed that I had no problems.

My car, which gets its time from the GPS signal feeding the nav system, had a problem. It’s a 2007 model, which is a shame. Acura wasn’t able to squeeze in a software patch between July 2005, when the Act was signed into law, and November 2006, when I got the car. In addition, Acura hadn’t thought about telling their customers (or their service centers for that matter) to expect a problem and so I (and many others, I presume) had the pleasure of making a few calls this morning to discover the buried “turn auto-DST off” feature. (If you’re thinking RTFM, my excuse is that I don’t even recall where I put the nav system manual.)

The broader story here is about the changing nature of software delivery in a world with lots of devices. The experience with Windows PCs and OTA-updatable cell phones this time around suggests that it is easy to deliver updates to many networked devices, which are configured to auto-update. If the devices are not networked, as in the case of my car, there are problems. If the updating mechanism is not automatic, as in the case of some cell phones, there also can be problems (over-reliance on user action). In short, the DST change has been a classic example of the benefits of software-as-a-service delivery models. (Just as a clarification, SaaS doesn’t have to mean everything happens on the server and runs in a browser. More here.)

Another story here is about the need to interconnect devices that don’t have direct access to the Net. The best example is everything in your home that has a processor and a clock but no network connectivity–from your car to your stereo to the clocks on your microwave and bedside table to the climate control panels. How long did it take you to change all these clocks? How many did you miss the first time around? DST clock changes are such a common use case that some climate control panels have specialized DST change buttons.

ZWave and Zigbee are the two competing standards offering the best hope for resolving these problems. (Polaris has invested in Ember, a leading Zigbee proponent.) When your climate control panel is connected to the rest of your home, not only can it automatically change to DST but it can also tell you when it’s time to change its battery or the house air filter. The fridge can tell you when it detected a leak or when its water filter should be changed or when the ice tray is empty because you forgot to turn the ice maker on. This is far short of the near sci-fi image of the fridge contributing to your shopping list and a lot more useful IMO.

Posted in Microsoft, SaaS | Tagged , , | 2 Comments

Killer Consumer Applications for RFID

Posted on March 11, 2007 by Simeon Simeonov

Mention RFID a couple of years ago and most would think about pallets of goods moving through warehouses. When the cost of RFID tags was high, it made little sense to do item-level tagging so goods were tagged at the container, pallet and carton levels. That was RFID 1.0, if you will. The leading company at that time was Matrics–an investment of ours, which we sold to Symbol (now part of Motorola). RFID 2.0, for lack of a better name, is built around UHF Gen 2, an ISO standard which is better suited for item-level tagging. The transition from RFID 1.0 to RFID 2.0 is well under way, partly enabled by the technology of another Polaris portfolio company–Impinj.

This post is not about Polaris’s investments in RFID, however. It’s about how the wider spread of various types of RFID technology, and the corresponding drop in cost of readers and tags enables new consumer applications beyond the typical supply chain scenarios. I’m just starting to track the evolution of this space.

Here is one great example–configuring your WiFi network and associated device. This is a major problem for consumers and one of the biggest revenue generators for IT services that target homeowners, such as BestBuy’s GeekSquad. To end the pain, comes news of an Apple patent that uses RFID tags for setting up wireless networks. You just bring your WiFi-enabled device close to the bay station and the configuration is done.

apple-rfid-network-arrangement.jpg

RFID tags also solve the problem of how to connect various “dumb” devices that don’t have appropriate user interface (like screen or keypad) for easy configuration:

  • This may be the final piece in the puzzle to make Wi-Fi iPod a reality. Put WI-Fi chip inside, add RFID tag and that’s it. You take your iPod to your base station and then turn it on. Your iPod is another device on the network. Of course, passing Wi-Fi synchronization data to the iPod was already technically possible. But RFID tags make the process so much easier.
  • One of applications mentioned in the patent is Apple Wi-Fi Remote for […] “controlling the operation of the iTunes music software” […]
  • Extending your WI-Fi network. You can have RFID transceiver on Airport Extreme and RFID tags on Airport Express. Then you just sync them and plug Airport Express where you need extended Wi-Fi coverage.
  • Wi-Fi enabled network printer and any other peripheral. Again, put Wi-Fi chip in it, slap RFID tag on, sync. Your printer is another device on the wireless network

The fundamental enabler of these types of auto-configuration scenarios is the unique identity of items with read/write RFID tags. Unique identity allows the association of unique state with a device, either within the device or on the network. The unique ID and state combined with a handshake protocol enable the synchronization of information between devices and allow for the beginning of meaningful interactions.

Apple is likely thinking about this problem as a closed system–Apple devices talking to Apple devices. It’s more interesting, however, to address the problem in a global manner. IMO, two standards are required.

First, a logical ID/state handshake protocol that can be mapped to various physical (wireless) transports and radios. We need this so that the master (configurator) device can send the slave (configured) device data about how it should configure itself. This may or may not be always necessary. Sometimes, it’s enough to just get the ID of the device and from that you can determine what type of device it is and how to talk to it but that requires the second protocol: a DNS-style hierarchical, federated protocol for getting access to the meta-data associated with devices with particular IDs. For example, it’s a way to tell a laptop that device X is a Brother MFC-8860DN networked multi-function printer/fax/scanner/copier.

There is a kink here. The default device configuration and the actual device configuration may be quite different. For example, consider the case of static vs. dynamic IP addresses on networked devices. Often devices come factory-configured with static IPs and then get switched to having dynamic IPs. Therefore, a local network should ideally run a service (just like local DNS servers) that can resolve the actual device configuration as opposed to the default (factory-provided) configuration.

Who’s going to run the master repository? Is there even a need for a master repository or can major manufacturers’ services federate the data? There are no easy answers here. EPCglobal, the industry association pushing RFID into trading networks, has given Verisign the national RFID directory rights. Here we are not talking about trading networks and item labels but consumer devices and the associated configuration information. I’m not sure that the EPCglobal requirements and Verisign’s directory are a good fit. Some lessons for building more advanced directories come from the SOA space and, in particular, UDDI, which in version 3.0 handled federation.

This space will evolve in interesting ways. If you are thinking about the consumer applications of RFID, give me a shout.

Posted in Apple, startups | Tagged , , , , , | 4 Comments

Founders at Work: The Truth And Myth Of Entrepreneurship

Posted on March 8, 2007 by Simeon Simeonov

My wife ordered Founders at Work from Amazon a while back and then we forgot all about it. The book still hasn’t shown up, so I’m glad Guy Kawasaki did a post to remind us to check what happened with the order. Guy blogs about his favorite stories in the book. Fun reading.

The major lesson: Entrepreneurship is all about tactics, hootspah, not knowing that things are not done “this way,” and making do with not enough money. You’ll LOL at points and wonder if a better title would not have been Flounders at Work.

Posted in startups, VC, Venture Capital | Tagged , , | 1 Comment