Charm as a leadership currency seems to change with every wave of silicon valley engineering companies.
In the old days of the early semiconductor firms the CEOs were often gruff white men. Most came up through the ranks of real products, dirty products, chemicals in the manufacturing process, union labor forces… and charm was not a necessary part of the job. Like the famously paranoid Andy Grove of Intel and the crusty Wilf Corrigan of LSI Logic. They didn’t have to be charming — they had to be in with their boards and drive global market growth for their products. They barely even worked the customers after the first few because it was an engineering and distribution driven business.
Then we had the wave of computer companies like Sun Microsystems and HP and large enterprise software firms like Oracle. Now the CEO’s had a bit more charm but it was B2B charm of the likes of Scott McNealy and John Chambers. Stay focused on the major customers and charm the sell-side analysts that covered them. Build a world class team, set high goals for your sales team (give rousing speeches at Quota Club meetings in Hawaii), pay well and drive global growth to large customers.
But now we have the wave of internet and media companies where charm on a global scale matters. This new wave of leadership focuses on accessibility, charming the media, long on user-experience and number of users, shorter on hard engineering. Old school style back fires as Carol Bartz found out at Yahoo. Open communications like Larry Page’s recent letter, mea culpa as Reed Hastings did at Netflix, charm on a global scale as Arianna Huffington did for the HuffPo and the relentless visibility of the very charming Sheryl Sandberg of Facebook fame are part of the global marketing machine.
The first group of CEOs were often engineering based and visible only in print — rough was OK. The second group was often sales based — smoother but customer focused and sometime visible on CNBC. Now we live in the era of the media-savvy CEO who is visible everywhere, all the time. Still technical, but the darlings of the tech press are the ones who know how to work the media, and social media, to their advantage.
But wait. Even today charm only goes so far. You still have to produce top line and net income growth for your investors. Charm and modern communication skills are essential in the media and internet world which is so over covered today, but they are a necessary but not sufficient condition for B2B success (unless, of course, you can get bought for technology before you figure out your revenue model).
So if you are in a B2B engineering-based product business focus on the fundamentals of your technology and your customers, but don’t forget to hone your charm skills for this new era.
I had hoped that my second blog post for FirstRain wouldn’t, once again, be about Google (you’d think that we’d all be sick of hearing about Google 24×7? And we may be, but sick in that ‘I-still-must-tune-in-and-see-what-is-happening-kind of way’ …). Still, I found myself captivated by their announcement this summer that they would phase out a major program called Google Labs by the end of September. And as we’re now approaching that shutdown date, it’s gotten me thinking again about this interesting decision.
For the most part, I’ve always been quite impressed by Google. I am a long term Gmail user (Gmail has its own Labs, as does Google Maps) and I am still a firm advocate that Google+ will eventually be big (especially after seeing all the complaints of Facebook’s new design on my Facebook newsfeed the past two weeks). Google has launched so many winning products over the years that I was shocked to hear that such a successful and interesting part of Google was to be phased out.
For those unfamiliar with Google Labs, it was a playground for users who are interested in trying Google prototypes and providing feedback directly to Google Engineers. It allowed the public to freely experiment with pre-released Android apps, Google Maps experiments, Google Search betas and much more. Although, not all of these prototypes prove to be effective, it is still a nice way to get the public involved in ‘designing’ and evaluating some of Google’s most popular ideas.
So exactly why has Google decided to pull the plug on this program, when it seemed so many people (albeit, adventurous tech people) were benefiting from it? According to Bill Coughran, Google’s Senior VP for Research and Systems Infrastructure, Google is now beginning to prioritize their product efforts more strictly. And although some of their biggest products had started in Google Labs, they’re now focusing much more of their efforts into dominating the products already in progress, such as Google+. Google has decided that ultimately there are too many ‘small’ projects and they want to channel the company’s focus on the larger and, *cough*, more lucrative options. By simplifying and focusing Google’s product line, Coughran said, more “extraordinary opportunities are ahead”.
The Google Labs decision is more than just phasing out a neat program, however. The last few years were spent testing potential golden projects. And they did this successfully. Google beat out competitors like AOL and Yahoo in numerous departments such as search, smartphones and Email (does anyone use AOL for email anymore?). And Google Labs has significantly helped develop some of these platforms. But the need is no longer necessary as the trial period is officially over. What’s interesting is what a signpost this is for where Google is in their lifecycle as a company. Instead of the fun, pioneering tech startup playing in many sandboxes, looking for ideas and doing no evil, they’ve now evolved into a focused and mature company that—for the most part—knows its market, where the money is, and is coalescing around key products like Search, Gmail and Google+.
Now that the deadline is upon us, I was curious to check out the status of Google Labs, especially since I haven’t come across much recent news about the Google Labs termination. If you go to GoogeLabs.com, they inform users directly (no sugarcoating) that the Google Lab’s program is being phased out. Also, it is obvious that many of the experiments have been visibly shut down.
Not all of Google Labs’ programs will completely disappear. Google claims that they will be integrating some of their better prototypes into many of their already existing experiments but the actual “Labs” name will be retired. The real question for Google now, is how they can retain the spirit of Google labs—that open sense of valued community feedback in a beat environment, now that their flagship vehicle for those values has been lost.
Recently, my colleague Ryan Warren made some astute comments about the emerging importance that algorithms are now playing in our economy, society and daily lives. Like Ryan, I believe that smart people writing creative algorithms are the guts and magic that glue together much of the wonder and advancement in modern life. Algorithms are tools, and in the end, it’s the use of tools that make us fundamentally human.
I am often surprised how when reading articles, technical papers and reading the news, how a particular phrase pops out and hits me. The human mind is an amazing thing: It’s ability to take in, digest and synthesize information is magic. It’s like an “ah-ha” moment when out of all the text, information and perspective, a particular phrase catches the eye, stimulates the old grey matter and in a split-instant a new connection is made.
As I read Jane Wakefield’s recent article on BBC News, I had one such moment. As I was reading, the following quote caught my eye:
“Increasingly … we are knowing where information can be found rather than retaining knowledge itself.”
Suddenly, I found myself thinking about watching Donald Trump in an episode of the Apprentice, and then being involved in yearly business strategy meetings at several companies I have had the pleasure to work at, and then on to the several years consulting with Companies related to branding and marketing challenges.
And thus, new connections were made. In each of these situations, people were being asked to work on projects where they had to rapidly become experts in a subject area, enough to make and execute on business plans. And today, this is far from uncommon. With the pace and demands on today’s knowledge workers—business professionals who need information on which to base their daily decisions—and the inexorable drive towards higher efficiency and productivity, major changes in how we work are occurring. For example:
• Knowledge workers now move from project to project, with few jobs remain static in their responsibilities. A Marketing Professional may be writing an op-ed article one day, and the next working on the company’s strategic plan.
• Self-service is now the way of working. Why ask a researcher or admin to get information, when there are tools out there like the Web where information can be at hand in a matter of minutes or even seconds?
• Just-in-time information delivery is now expected, with no tolerance for waiting days for information to be delivered, and thus …
• The speed of work is increasing. The ability to rapidly understand a project’s business requirements, be able to do essential subject matter research, and get up to speed fast is essential, as successful professionals are those who are viewed as having a track record of working on fast, high-impact projects.
And a thread common to all these developments is that success is now often determined by a person or team’s ability to rapidly acquire information and data upon which to base implementation and operational decisions.
In this kind of environment, the need for a tool like FirstRain was perhaps inevitable. With FirstRain Monitors, business professionals can easily track the markets, companies and business-related topics that are of interest to them. They are easy to setup and provide current, daily or weekly updates. In today’s business world, business monitoring needs to be useful quickly and have value only for the duration of the project being worked on now. FirstRain’s display engine responds to this by preferentially displaying a user’s most recently active Monitors.
But our new just-in-time paradigm has risks. Our understanding of the meaning of content requires context and interpretation, and this can take time we’re often unwilling to wait for. Viewed in isolation, a piece of news may seem to have a very different meaning than it does when combined with the right historical context.
YHOO: Previous 7 Days
YHOO: Previous 1 Year
For example, an examination of Yahoo!’s results over the last week tells a very different picture than would see once you step back and look at that firm’s performance over the last year. The human mind is a great tool for synthesizing perspective based on long-term acquired knowledge—we call this learning. And it is the connection between news items and other pieces of information that provides context and the tools for critical discernment—as professionals we call this experience. Our individual ability to make smart decisions is based on the information at hand, processed through all the biases and filters represented by our past experiences and personal beliefs. To succeed and make smart decisions, we need a mixture of the right data, the right tools, the right context and the right experience. Algorithms, and tools like FirstRain, can help by providing not just the news, but timelines of related significant events and topics of further interest.
In the end, it’s the man-machine combination that creates a unique ability to assimilate information, synthesize pertinent results and make sound business decisions. In other words, it’s a continuation of that amazing innovation that’s helped us succeed as a species: the ability to make and use tools—tools that feed us, that shelter us, that move us, and that deliver us the information we need to shape our world.
An interesting commentary this week by BBC News’ Jane Wakefield commenting on the increasing influence of algorithms in our daily life has gotten a fair amount of play. And indeed, it’s a useful and thought-provoking piece, if for no other reason that we probably can’t emphasize enough the emerging importance that algorithms are now playing in our economy, society and daily lives.
But where Wakefield’s article falls short is in its vaguely menacing tone, patching together random examples of algorithms at use and the trial and error process of putting them to work effectively—all while implying that the extensive use of these algorithms will lead us to some unfortunate yet unspecified problem (my favorite part was her concern over an algorithm being used to determine a potential movie’s marketability in advance of making the movie—because Hollywood movie producers never made such cynical greenlight decisions before they were corrupted by algorithms …). And even more unfortunate, she completely fails to acknowledge the truly amazing things we can now accomplish because of our ability to employ algorithms.
For every example of an algorithm that has wreaked havoc due to the unforeseen effects of it’s implementation, there have got to be at least 100 examples of the application of algorithms that are making our world tick more effectively every day, like the encryptions needed for secure daily electronic transactions, the design of advanced composite materials and improved aerodynamics for more fuel-efficient cars, optimized telecommunications routing, the analysis of disease genetics, molecular drug design, trip, traffic and shipment routing, computer game design, even the algorithm that apportions the number of U.S. Representatives based on census data.
In other words, smart people writing creative algorithms are the guts and magic that glue together much of the wonder and advancement in our modern life. And while it’s relatively easy to find and get freaked out by isolated examples of algorithms gone haywire, it’s also just as easy to overlook the vast numbers of unseen algorithms powering our world.
And yet, Wakefield somehow makes this seem like a sinister conspiracy, as if algorithms were secretly sentient beings slowly insinuating themselves into our lives in anticipation of the day they rise up and throw down their human overlords. Instead, algorithms are the application of great math in modern technology to help solve problems we wouldn’t otherwise be able to solve. When an algorithm goes wrong in some unanticipated way, it might be amusing, it might be quite serious (e.g. the Flash Crash), but it’s not really a signifier of anything more significant than a program with a bug. Of course, the higher the stakes (e.g., algorithmic trading systems that interact with one another and can move the market as a whole) the more important it is that we’re thoroughly testing and deeply thinking through the algorithms we implement. No systems, human or technological, ever operate without error, and there’s probably a strong argument that our algorithmically based systems operate with many fewer errors than human-controlled systems do.
The challenge, however, is that as humans we’re much more tolerant of human-based errors than we ever are of machine-based ones, even if those machines make far fewer errors. For example, take Google’s driverless car project. These prototypes are now out and running with astounding levels safety and accuracy. And indeed, this is actually the point of the program itself, to avoid the huge number of human-caused auto deaths and save millions of lives every year (this is the number one cause of death of young people) by relying on machines who can react and make these types of decisions much more quickly and accurately than any human. But just one human death by a failure of one algorithm in one car could kill the whole program. Is this logical if the program is saving many more net lives per year? No, but the illusion of human control and superiority is a powerful one.
In reality, however, where we get the most benefit is not from either human or algorithmic control—it’s in the combination of the two. It’s humans figuring out how and when and where and what algorithms to apply in new and creative ways to better our lives. It’s humans acting as a backstop to ensure algorithms are doing their jobs accurately, and catching the instances that require a lifetime of human experience, context and subtlety to truly understand. It’s why there will always be stock trades made by humans as well as machines. In fact, we employ these algorithmic backstops everyday at FirstRain. For example, we have incredibly sophisticated text analytics algorithms that analyze the Business Web content we find, look for a category in our taxonomy to apply to a given article, and if it doesn’t find one sufficiently descriptive, then suggests a new category to create. On the whole, this works incredibly well, and it’s why our taxonomy is so unbelievably granular. But even still, we need to have a team in place that reviews these algorithmic suggestions and can do a human sanity check, lest a “#CharlieSheen” occasionally slips in unnoticed.
Algorithms are tools, and in the end, it’s the use of tools that make us fundamentally human. This is probably why I’m not overly worried about the implications of humans now using the Web to supplement our memories. From the beginning of time, our bodies have evolved along with the technologies we’ve developed to survive and thrive. I’m sure there was handwringing about the loss of body hair as we began to wear clothes, and doomsday projections as our jaw muscles shrank thanks to our use of fire to cook meat. We’re the animals that use tools more than any other, and those tools change us the more we use them. And so as we employ these newest tools, these algorithms, into our daily life in a million new and groundbreaking ways, let’s be sure we’re thoughtful about those implementations, and creative, and far-sighted, and humble, and maybe even a little grateful.
[Stay tuned for Part 2 next week, by my colleague David Cooke, on the big implications of algorithms in enabling ‘just-in-time’ content delivery]
Living in Silicon Valley, running a software company with big ambitions I hear the question a lot. Is this another tech bubble? Isn’t is going to burst again?
The short answer is no.
Pundits covering tech tend to confuse valuation with long term value. We may well be in a valuation bubble but unlike the 2000 tech bubble the companies in question have deep, sustainable revenue models.
There are certainly some high valuations – per Fred Wilson’s view of frothy valuations in April – and these are driven by investor demand. As Father Guido Sarducci so wisely said in the 5 minute university, Economics is about supply and demand. When a few companies have sky high valuations in the public and private markets VCs are chasing good ideas with too much money again and so the early stage and later stage valuations may be getting silly for most companies, but some will be worth it.
Valuation is very different than long term value. Technology, and in particular software, is where long term sustainable value is being built. And when I say long term I am thinking hundreds of years. Marc Andreesen wrote very eloquently about this in the WSJ on Saturday in his essay Why Software Is Eating the World. We are at the beginning of a long era in which technology will reshape every aspect of our lives in ways we are just now beginning to see.
Just as the Industrial Revolution developed over more than 150 years in the 18th and 19th centuries and reshaped machines, industry, transport and the very nature of where people chose to live and work, technology is now reshaping the way we communicate, are entertained, where we live and work and shop and it is rewiring our kids brains for a new world. I’ve believed this for 20 years and the ups and downs of the tech world over that period have done nothing to dissuade me from that belief because technology is steadily, consistently and dramatically changing our lives. (Want to get some perspective on the 150 year change last time around – spend a day in Ironbridge in Shropshire, England.)
It’s happening right now because the pieces are now in place. As Marc writes “Six decades into the computer revolution, four decades since the invention of the microprocessor, and two decades into the rise of the modern Internet, all of the technology required to transform industries through software finally works and can be widely delivered at global scale.”
The cost structure is right, the technology base is ready. In FirstRain’s case we have built a highly disruptive technology that changes the way business people use the web for their critical decision making. As Roger McNamee says in his thought provoking talk “Everything is Changing”, Google’s approach to indexing has peaked. People want apps designed for their specific need (he cites his investments like Facebook and Yelp), not one app for all needs, and they want it on their device of choice – which is a smartphone or an iPad. In our case the business need is even more specific than that. Our users want a business web app so they can tap into the breadth, currency and power of the web as a data source, but they want it tailored to their specific business and role, and they want it in a cost effective way.
Marc and Roger are just two rockstars in Silicon Valley but most people here agree with them (and not just because we are all drinking the same Kool-Aid). Yes we are dealing with some higher valuations, maybe that is a bubble, but the long term value being built in technology is real, and software is where it’s at. And what makes it even better is it a continuously exciting place to build a career, or even a company.
Like many folks I have a Facebook account. I check Facebook on the iPad daily – it is great to keep up to date with the whereabouts of my friends, follow various interests, and to occasionally share notable events with my social circle as well. And these are all common ways in which social media adds value to many of our lives as individuals. But at the FirstRain lunch table the other day we also did some grousing about some of the shared pet peeves in our social media lives as well: the over-posters (5-10 posts an hour, do these people do anything else?), the way-too-personal posters (did I need to know about the re-appearance of your lunch?), the aggressive-posters (would you make that sarcastic comment at a podium in front of 300 of your friends, family and associates? Well you just did), and the simple fact that keeping connected via Social Media can eat significantly into your day, pushing out time spent watching news, or other methods for keeping up to date.
But after thinking about how time consuming these platforms can be, I also started to wonder if something counter-logical is going on. Social Media sites like Facebook and Twitter make it easy to connect with friends and co-workers. It also makes it really easy to reach out and make friends with like-minded people across the country and the globe. At face value, they seem to be great tools to associate with people interested in the same things you are. My sister, for instance knits socks (very fancy socks!) and she uses the Web to be part of a community of sock knitters, to share patterns, post pictures and discuss types of yarn, which significantly enhances her enjoyment.
Thinking more broadly, however, even the best of intentions can result in undesirable outcomes. The Web—and Social Media in particular— can make it easy to cocoon oneself in a warm environment of like-minded people. If I do not like what a person is saying I can easily tune-them out. The posts I see on my Facebook newsfeed are filtered based on who I have looked at or commented on in the past. Over time it is all too easy to unconsciously create an environment of like-minded people, who have similar views, and reinforce each other’s behavior. In a circle of fancy sock knitters, this is great, but when mapping this to politics, demographics or any political agenda item, such as gay marriage, the results are less wholesome. On the political front, if Democrats only hang out with other Democrats, and Republicans only hang out with other Republicans, each reading the news from their respective biased sources, each reinforcing their own perspective on events, the result is polarization.
In the past, before the time of the Web and social media platforms, we had to co-exist with the people living around us, or working with us. News outlets were fewer and had to be broad-based. Now we can choose from a multitude of channels, and create our own custom filters. We now have the luxury to only hear what we want to hear. Sharing this with my co-worker, Ash, it turns out that we’re not the only people questioning the impacts of the web. Eli Pariser, in his book The Filter Bubble, articulates this problem (he also did a great Ted talk on this subject: http://on.ted.com/9BwR). Rather than having to live in the physical community with people around us, we unconsciously end up “opting-out” of reality and “opting-in” to a narrow view of the world defined by our friends and filters.
Many years ago a group of like-minded people came together in Jonestown. They isolated themselves from a diversity of views, associated solely with each other, self-reinforced each other views and allowed their worldview to become dominated by a loud and extreme fringe. Eventually, when their leader told them to drink the cyanide-laden Kool-Aid, 918 people died. Clearly, this is an extreme example, but it really is illustrative of how philosophical isolation and the filtering out other views and interactions can lead to extremely unfortunate choices.
What does this mean in the context of the business world? Obviously, mass suicide is a little extreme. But, the cautionary message still applies. Are people obtaining the necessary information they need to make the right business decisions? It’s very possible that valuable information is not being received due to filtering. The beauty of social media is that it allows access to business intelligence that was not accessible years ago. In order to make the best business choices, professionals must look beyond the people and news they WANT to follow, and direct their focus to the channels they NEED to follow.
Are we entering an era of extreme polarization? Working in the Bay Area, I hope not. The wide diverse backgrounds, ideology and experience of the people in this region are something I value greatly. To travel, and experience how different people live is a great privilege. It’s important that we as Web users take the initiative to expand our bubble beyond our closest circles. Use social media to track areas you wouldn’t have initially thought you’d be interested in. Follow the newscasters and politicians you disagree with, and maybe even hate. Seek out opinions from smart people different than yourself. I see richness in diversity and believe it creates stronger solutions for everyone over the long term.
Yesterday’s news about Google buying Motorola Mobility has set the twittersphere on fire – and generated humor at the same time. Case in point this morning’s tweet from nikcub “If you are a motorola employee and do not want to lose your job, I suggest you show up to work dressed as a patent”
This tweet speaks to the core question about what Google’s acquisition really means. Google paid a 60% premium for a hardware business, purportedly to get access to their patent portfolio. Anyone who lives in the IP licensing and litigation world (as I do as a board member of Rambus), especially in the US software patent world (as I do as CEO of FirstRain) knows that the US patent system is pretty badly broken and it is very hard and extremely expensive to defend and protect your inventions from the idea thieves.
Google was feeling extreme IP licensing pressure from Apple – even going so far as to accuse Apple and Microsoft of a “hostile, organized campaign” against Android – and buying up their own defensive patents was the only way to go. They are just too young a company, and too newly into the mobile phone world to build up enough of an arsenal to defend themselves in court – and Motorola Mobility has 17,000 patents.
Google may simply not have had any other choice than to buy the patent portfolio to fight with – and so they brought the alien onto their ship.
They paid $12.5B for a hardware business and that is so very different than a software business. A hardware business takes a very different kind of DNA. It takes discipline, cost management and high precision supply chain management. It takes strong controls of inventory turns and the cash conversion cycle. All things Google is not known for.
Larry Page has stated that Android will stay open and free, and the cell phone companies, for now, are supporting Google’s move, but for how long? How long until Google realizes that to get a return on their $12.5B (which is a big purchase even for Google) they need to develop a deep integration of OS and phone to compete with Apple and Microsoft? How long until Larry’s promise that “Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers” leads to a move to give Google a product advantage over HTC and Samsung, causing them to develop their own operating systems as Samsung is now doing with Bada?
Remember Google’s snafu with the Nexus phone, when they demonstrated very publicly how little they understood the business of selling hardware products (especially to consumers). While I am sure the Google management team has thought about all the possible outcomes I wonder if arrogance and the lack of hardware DNA will lead them into the world of unforseen consequences?
How long will it be until Google either a) creates a proprietary version of Android for their own phones – while protesting vociferously that they will take care of their Android partners or b) shut down the phone business, ending thousands of engineering and production jobs while creating more work for IP litigators? (and those jobs were going to be on the chopping block anyway with the decline of Motorola’s market share).
Like the crew of the Nostromo who allowed their crewmate Kane back onto their ship to save him from the alien attached to his face, only to find it killed all the crew except Ripley, who then blew up the ship, has Google taken on an alien business that can eat into it’s market position and profitability. Will they, in the end, chose option (b) and blast it out of their ship?
If you had the chance to sell your tech company for a great price would you – or would you play the long game?
This is a decision successful entrepreneurs end up facing and is a question for some tech entrepreneurs right now as we go through what is arguably another bubble – and there are some very interesting cases to think about – and think what would you have done?
Consider the Huffington Post: A success story to most people – purchased by AOL for $315M in February at a 6.3X multiple of $50M in revenue and very small profits. The last investor, Oak Investment Partners, tripled their money in just over 2 years which is a great result for a late stage investment decision. And yet, as Jeff Bercovici of Forbes writes in his somewhat damning review of the HuffPo/AOL honeymoon, the difference in interests that can appear between investor and entrepreneur in very visible in this case.
Fred Harman, the Oak partner who made the HuffPo investment, told Forbes “Our goal was an IPO rather than building up the company to be acquired by another media company” and that he and the HuffPo CEO Eric Hippeau “were still inclined to roll forward as an independent company out of the belief that The Huffington Post could continue to rapidly scale and be the dominant social news company on the Web”. But for Arianna, AOL meant personal liquidity and a much larger stage and budget to build her dream with.
(full disclosure: my current company FirstRain is funded by Oak. They like to swing for the fences – as do I)
In contrast look at Zillow, which went public last week and, on 2010 revenue of $30.5M, now commands a valuation of greater than $1B. Is this valuation a surefire sign of a tech bubble? On Seeking Alpha screener.co writes that “The vast difference in valuation between a recent tech IPO and similar publicly traded competitors is not limited to Zillow” – Pandora’s valuation is almost as shocking as Zillow’s and outrageous in comparison to their comp RealNetworks. So long term public valuation (and so the team’s return) is at risk here.
In the enterprise social media space, Radian6 decided to sell to Salesforce instead of taking the long road. At a valuation of $326M and 10X revenue Techcrunch thinks SFDC overpaid but 10X trailing revenue is a terrific valuation for an enterprise software company and being integrated into Salesforce takes all the return risk out for the founders – plus SFDC smartly put additional options on as an earnout over 2 years (not unusual when a public company buys a private company and wants to keep the founders around). But also consider that maybe Salesforce creates a larger platform with deeper pockets for the Radian6 team to execute their vision on.
And waiting in the wings we have Groupon. They did not sell to Google last Fall for $6B and, if they can get over the questions about their business model and profitability, hope to IPO for $20B – and are lining up enough banks to make it happen.
All this leads to questions of timing – are today’s valuations fashion driven because tech IPOs are hot now? – and what would you do if it was you? I’ve been there, it’s a gut-wrenching decision.
If you sell:
+ You get secured liquidity and wealth for you and your team (especially if you are bought for cash)
+ You play on a larger stage, often with a larger budget
+ You may get access to many more customers on a larger platform
+ You create long term job security for your core tech team
- You lose final authority on strategy and budget
- Many members of your team (non tech) may lose their jobs
- You lose the essential joy of building your own venture
If you go public:
+ You get significant capital to grow your business with
+ You stay in charge (for now…)
+ Your investors get a great return in 6 months (after the lockup comes off)
+ You may get a significantly higher return over a longer time period
+ You continue to drive the strategy and M&A to execute you and your team’s vision
- Limited liquidity for you or your team for the foreseeable future
- You are running a public company (no picnic!)
- Your return is not secure, you are subject to volatile markets
… and there are many more pros and cons…
One of the best pieces of advice I got was to, in the end, focus on how my management team is successful and makes money from their hard work. Not my ego or my net worth. Not my investor’s return. My team, the ones who built the company with me. If they make money, everyone else will make enough.
Let’s start with everyone’s favorite pastime in our current age of agile developed, game changing, paradigm shifts: remembering how things used to be.
In this case let’s remember those days of when most people consumed news via one medium: Newspapers. Newspapers, which have existed to serve various objectives (news reporting, editorializing, political agitation), all had three, seemingly inextricable attributes: the content (the news or opinion you created), the medium (content printed on paper and distributed to readers) and the container (or format, such as pamphlets, newsletters, tabloids or broadsheets). For any given publication, these three attributes were all of a piece. One couldn’t imagine extricating the news from the method of delivering it. Why produce news if you don’t have a way to get that news to people? And attempting to separate your content into multiple, simultaneous containers was unheard of.
But as broadcasting emerged as a new medium naturally suited to news distribution, people began looking to multiple mediums to suit their news consumption needs. And while some would only select one preferred medium for news consumption, most would leverage both mediums for various aspects of their day (e.g., reading the paper in the morning, hearing radio news in the car or during their workday, watching the evening TV news. Still, most producers of news content would specialize in just one medium and container (apart from an occasional marketing partnership, or vestigial business, e.g. CBS radio news) and only really competed with other content producers within their medium.
Fast-forwarding to today, a new medium has emerged (Internet) and become dominant, multiple consumption containers now exist, ranging from devices (PCs, smartphones, tablets) to programs within those devices (browsers, content-specific apps) to services within those programs within those devices (news Web sites, Twitter, social networks, aggregators). And as traditional content producers from print and broadcast mediums rush to find sustainable plays in the Internet medium, the traditional competitive landscape has exploded: The New York Times now competes with The Huffington Post who competes with Fox News Channel who competes with the Associated Press.
And in my opinion, this is a great development. In one sense, medium and container are fundamentally artificial. One should create great content that serves a need and provides value, and then offer it via whatever medium suits your target consumers best. But at the same time, this also implies how much the container does matter. Various containers help us consume the content we care about when we want it (on your smartphone during some down-time), where we want it (in our social network, where we may spend a substantial amount of our online time) and how we want it (through innovative readers like Flipboard, which allow you to consume your real-time news and social media feeds on a tablet in a magazine-like format). And just as importantly, these use-cases are usually not mutually exclusive.
And that’s what makes the latest discussion about the threat Flipboard represents to publishers so interesting. Although this analysis by Frederic Filloux is a good one, I think its problem is that it makes the same fundamental assumption that everyone seems to be making: that controlling the containers, as well as the content, is an attainable goal for a content brand.
Today, there are simply too many platforms, technologies, formats and use cases to expect anyone—much less a firm who’s specialty is content creation—to be able to own and control every outlet. To seriously expect to do so is naiveté at best, ignorance and hubris at worst. And worst of all, it seriously limits your ability to effectively execute on the thing you actually do best: create content that lots of people want and are willing to let you monetize in some way (monetization is actually the 4th fundamental attribute here that I haven’t yet mentioned, but as oceans of ink have already been spilled on the changing nature of content monetization, I’m going to steer around it while acknowledging that it’s a fundamentally related issue).
This doesn’t mean that content brands won’t be really effective at owning or creating certain containers. A content producer’s Web site is by definition their own space, and they’ll offer different ways to offer and monetize their content in that space (free, ad-supported, subscription, metering). And some will come up with a kick-ass smartphone or tablet app here and there. And for some users, just that one content site or app may be the only news source they use in their daily life. But for most of us (and here’s the point of that history lesson …) we’ll continue to want a variety of content sources, mediums and containers to fill different use cases within our lives. As content sources that were once separated by differing mediums now compete with each other across mediums, they often seem to forget that they were always part of a content ecosystem in our lives.
Implying that content or news sources should have invented Flipboard misses the point because they not only would have been highly unlikely to do so (i.e., the Innovator’s Dilemma), but even if so, would have more likely to have been a costly distraction or outright failure to in the end. The NYT isn’t going to want to be pumped into Huff Po’s consumption tool, and WSJ won’t have any interest in ceding that space to MSNBC. Instead, Flipboard succeeds BECAUSE it’s not a content creator. It’s only about giving consumers a great consumption experience. And conversely, technology companies (are you hearing me @Google?) fall flat when they try to own content creation (anyone remember Microsoft’s attempts to become an original content creator in the late-90s?).
None of this is to say that content companies have to cede all control of their destinies. They have every right to try and set the terms of use around their content so as to maximize alignment with their own monetization(e.g. requiring links that drive traffic back to ad supported pages, or pay-walled/metered news sites), and to block access to their content to those containers they feel are at odds with their strategy. But to fume because *gasp* Flipboard or others may claim some ad dollars around links back to their content feels pretty short-sighted.
‘Interrelators’ like FirstRain also play an important role in this ecosystem. We’re creating real added value for thousands of business users around the globe by connecting them with original business content that, too often, they would not otherwise find—and then driving those users back to those content producers for monetization. And we’re doing it through multiple containers as well (Web, mobile apps, intranet widgets).
Overall, it’s an incredible playground in which we’re all now playing, and our content lives are much richer for it, as long as we can remember that it’s been the emerging diversity of containers—not the attempt by any one content creator to fully control their own distribution—that has made it all possible.
Guest author Ryan Warren, FirstRain VP of Marketing
Do you create, or do you aggregate? That, it seems, is the pressing content question of the day. Penny posted on Tuesday about the seismic shift happening in the media space as news aggregators like The Huffington Post begin to assume market pre-eiminence over more traditional content creator/distributors like The New York Times. Even NYT Executive Editor Bill Keller‘s expressions of aggravation, have now had to be moderated as I’m sure his somewhat snarky commentary triggered a wave of exasperation and irritation amongst the New Media community.
In reality, of course, a forced choice between content creation and aggregation is a false dichotomy. The explosion of innovative content consumption platforms has simultaneously sharpened people’s hunger for more quality content and for technology to improve the efficiency and efficacy of consumption. Content creation and aggregation are like conjoined twins with a passive-aggressive relationship. They may share the same heart, lungs and kidney, but that doesn’t mean they have to like each other.
In addition to the NYT/HuffPo challenge that Penny points out, this shift is also well represented by LinkedIn’s recent entry into news aggregation space. In fact, their new feature LinkedIn Today is a great example of several emergent forces coming together, including Web news aggregation, social networking and real-time news. It allows business-focused users to consume an aggregated feed of linked and posted news stories that people within your identified LinkedIn industry are sharing on Twitter or LinkedIn, and lets you further customize by identifying additional industries or incorporating the twitter feeds of a range of news sources from Ad Age to Bloomberg News to Harvard Business Review.
It’s a smart play, because despite Twitter’s protestations, to date they haven’t provided a very robust platform for business users to consume an aggregated real-time news experience (a la TweetDeck). LinkedIn’s move steps in and intercepts that need by leveraging an existing social network that many of us in the business world are increasingly invested in, while also providing a whole new entrée into real-time news for those who haven’t yet jumped onto the Twitter bandwagon.
But with all this focus on the schism between the forces that ‘Create’ and ‘Aggregate’, there’s another critical element out there that’s just as powerful but sometimes is overlooked: let’s call it ‘Interrelate’. It means the unique and powerful value that business monitoring applications like FirstRain bring to the table. Although we do bring together vast amounts of news and other business content from the Web, what we can do that others can’t is interrelate that content through our (unique and patented) semantic categorization, deliver you some really targeted results, and then show you emerging trends through some pretty nice visualization analytics. What this means to business users in practical terms is quite effectively filtering out Web noise. It makes the time they spend getting up to speed on, or monitoring on an ongoing basis, an industry, market, company or subject, much for efficient and effective.
And not only is this more efficient, but through this type of interrelating of content a new kind value is generated (one that should be of great interest to content creators): the ability to make useful connections between content that may not have been anticipated by the creators themselves. This allows solutions like FirstRain to drive even more high-value traffic back to content creators than conventional news aggregators (or more general-purpose search engines), since we’re making connections for users that others simply can’t.
So as we look at the evolving relationship between content creators and aggregators, let’s resist the temptation to think of this relationship as twin poles between which we must navigate. The key role that ‘interrelators’, like FirstRain, play may emerge as an equally significant link in that chain.
