brinking - nabeel hyatt

This week Kent Quirk and I put together a little event for some of the local leaders in gaming around Boston. I had little agenda, just some trust in what happens when you get highly motivated executives, entrepreneurs, and vcs in a small enough group (25 or so) that they feel like they can speak their mind. It was great to hear the variety of concerns and excitement from different folks.

Paul Neurath (Floodgate) talked about whether VCs have the tools to evaluate a game. I think Will Kohler from Prism VentureWorks did a good job summing up that investing in games is no different than any other media. That said, 90% of VCs don't invest in media plays, and 90% of media plays don't fit the model of venture capital. As evidenced by the decade-plus run of Harmonix before the VCs who put in $11m got to see their $275m exit -- consumer-facing properties often take patience.

But the biggest topic seemed to be questions about Boston's gaming identity. They reminded me a lot of the conversations I hear about anything consumer in Boston, from consumer products (Ambient, iRobot, Mimoco), to mobile software (Jumptap, Everypoint), to social networking companies (HeyLetsGo) in the area. Bussgang, Beisel and other likeminded folks have blogged about it before as well.

The tipping point (overboard) of user generated content

I was about to write a piece about user generated content, since Time Magazine's announcement of You as the person of the year.

Then I realized everyone else had already written about it. So I'll skip it and just point to David Edery's blog today. Of course, there is nothing new about user generated content. It's at least 36 months old as a current meme, and one can point to plenty of examples of earlier user gen explosions (yahoo groups, geocities, usenet).

Seriously, can't you already smell a follow-up story in a year about original content making a comeback?

My guess is that at least in the current wave we are a little done on user generated content. Part of my reasoning is that a big exit like YouTube will bring out the last of the bottom-feaders, completely saturating the market and making it pretty difficult to rise to the top even with a decent product.

Of course, there is always room for exceptions -- just like Flickr re-invented a market that everyone thought was saturated ("photos? didn't shutterfly do that like four years ago?"). I love MyBlogLog (which is passive UGC -- brilliant) and I like ExpoTV (not a new company, but a newly VC-funded one).

Now, let the chatter about what is the "next big thing" begin.


Technorati Tags: ugc, startups, social, user-generated content

Three signs that your "free" service isn't going to work out

I've been meaning to write about the outrageous email I got from Ofoto/Kodak EasyShare Gallery recently. If it wasn't already abundantly clear, we all need to be very careful of the free services we decide to invest our time in using.

I thought I heard Ofoto clearly when I joined:
"We help you share photos with your friends, and get them printed too."
only what they meant was,
"We help you get digital prints from you and your friends."

They thought they were creating a web-to-print photo site, and didn't realize they were establishing a object-based social network, what Actor-Network theorists would call a "socio-material network."

Flickr, which had the benefit of hindsight by starting later, got it right by realizing where the value was, and charging for it. That made me start to think about how to spot clear problems in business models that rely on a free/premium split of usage.

1- Your value as perceived by your users, and what you are trying to charge for, are two different things. This is what makes me trust Flickr to protect my photos. Their free/paid split is right along the value that I percieve in their service. Whereas with Ofoto, it always felt like they were charging for something that was nice to have -- but kind of beside the point for me.

2- You charge people for creating the content that makes your site valuable in the first place. Meetup made this fundamental mistake in charging people who organize Meetups -- which is like charging me to write a story for the Washington Post, or charging me to create a profile on MySpace.

3- You have no way to charge people in a utility/usage-based way without breaking the experience. The old free-web email model is a perfect example. They give you a tiny sliver of storage and hope you upgrade when you are happy with the service. The problem is I have no control over how many people email me. So one day emails start bouncing to my friends and the service breaks down -- and that is supposed to leave me with the happy glowy feeling that makes me want to send Yahoo money?

This is like cutting off a cable show halfway through and then asking for money to watch the rest. Bastards.

Ultimately Ofoto/Kodak has deleted my photos (which I had backed up), and is in the process of deleting my friends (which I have lost forever). I would liken this to the horrific debacle after AOL purchased Netscape and then simply shut down Netscape communities -- leave tons of people stranded trying to reconnect with social relationships that had been solely conducted through Netscape communities.

With the continuing rise of web-based services, it's worth spending a moment of time evaluating a free service, whether the latest office 2.0 product or a free-to-play MMORPG, before spending too much of your time there.

Technorati Tags: kodak, ofoto, flickr, photo sharing, social, free, web-based

The next big trend -- original content

Cory over at Online Spin is thinking that everyone (including him) has been talking user generated content (UGC) for at least 36 months now. VCs funded UGC startups like crazy, and now we are starting to see some clear exits in the category (YouTube, anyone?). Therefore, it might just mean that whatever big exits are left in user generated content space -- the companies already exist.

So, where to put the money next?

I think investors will acknowledge the lead YouTube has in UGC and focus attention on the kinds of companies where no clear winner has emerged. The market for quality, highly produced, original content is high–and the audience is clamoring for it.

VCMike agrees:

I more or less agree with Cory’s underlying point that folks are beginning to demonstrate the value of original programming in various niches, and our investments in Heavy, JibJab and World Championship Sports Network certainly represent a belief in the value of good content.

I would say that greatly depends on the kind of content, and in particular in the cost of production to get quality. I don't think there are a whole lot of amazing original content plays in "text" (online articles, blogs, etc) that are VC investable with the appropriate return. But in areas like video, cable, and gaming, where production costs can be quite high and enabling technology has a part to play -- that's furtile ground.

I wonder if these new stars of original content will look more like studios of content (jib jab), publishers (youtube), enablers (brightcove) or some hybrid?

The Next Trend: Original Programming (Imagine That)! (via VCMike)

Technorati Tags: user generated content, content, media, studio, publisher

If you had read this blog you'd be a millionaire

Tomi T Ahonen over at the Communities Dominate Brands blog has claimed, with no shortage of self-appreciation, that he was right all along and social networking and communities are not only the next big thing in mobile -- they are the biggest thing today!

With wonderfully self reflective quotes like, "if you were reading our blog a year ago and just copied some of the ideas...you'd be a millionaire today" they proudly proclaim that mobile social networking is worth $3.45 billion dollars, this year. For some comparison of this size:

All of iTunes revenues last year were about 400 million dollars. TV-interactivity (voting for Big Brother, Survivor Island, Pop Idol etc) were worth 900 million dollars. Internet gaming revenues, were worth 1.9 billion dollars. All internet adult site revenues were worth 2.5 billion dollars in 2005. Two years ago - when we were researching our book, the total value of mobile digital community services was well below 200 million dollars. Today in 2006, the total value of mobile digital community services is $3.45 billion dollars.

If your spidey-sense tells you this is bull, it is. At least, it is all about how you define "mobile social network." To justify this size is not fake, Tomi uses examples like the MMO-ish virtual world Cyworld (which 90% of Korean teenagers use, fully 30% of the Korean population, and just launched in the US). The more appropriate example is SMS traffic.

After looking at the report, I would characterize the $3.45B as "all mobile data revenue" not "mobile social network." Does sending an SMS to a friend count as a "mobile social network" -- I guess you could say that it does, but of course then why not count voice minutes?

That doesn't mean that creating social networks on mobile isn't worth doing, it is a growing business for sure. But the hurdles to adoption are real. Social networks on the web are built around browsing, expressing creativity, and competitively creating more connections.

With mobile social networks, none of those can be the core value proposition because each goes against the mobile experience (you hate browsing, it's hard to express creativity with the exception of the cameraphone, and creating competitive connections are undermined by how intrusive SMS is). Instead they will need to built around availability, finding events, and doubtless a few things we haven't thought of yet.

In the meantime, spare the hype.

Communities Dominate Brands: Told You So: Social Networking on mobile EXPLODING, worth 3.45 B dollars in 2006

 

Technorati Tags: mobile, social networking, mobile social networking, market size, cyworld

why is the MIT Media Lab hitless?

A partner at a local venture capital firm last week was lamenting why the Media Lab hasn't created more great companies worth investing in.

Having gone through fundraising for Ambient, I can say this is a fairly familiar refrain. I even had one VC, admittadely at a fairly conservative firm, suggest that he would be more likely to invest if I didn't mention the Media Lab.

So on this occasion, as I am no longer soliticing money on behalf of a Media Lab spin-off, I felt free to ask him pleasant questions like, "where did that ridiculous idea get started? and even if that is now common VC-sense, why the hell would you be so sheep-like as to ding something just because it was Media Lab?"

He riffed off the typical reasoning, that the standard practice of IP-sharing amungst sponsors of the Media Lab makes VCs quesy about defensibility. But I just don't buy it, especially in a world of new media companies that keep getting funded with great ideas, no IP, and no traffic. And with the rash of "incubations" I've been noticing around Boston lately, some don't even have a good idea - just a "proprietary enabling technology platform for ajax-based wireless social-ness" or some such thing.

And then, of course, exactly one day later MIT Media Lab spin-off Harmonix sells to MTV for $175m.

So, today I took a little look back some lists (1, 2) of Media Lab spin-offs, and although there are some obvious duds and some lifestyle businesses not appropriate to VC investment, it's a picture that I think most would find much rosier than they imagine.

Just this year, for instance:
- Frictionless Commerce was acq. by SAP AG in May 2006, with investors including Polaris, Intel, and RRE
- OpenRatings was acq. by D&B in April 2006
- Wireless 5th Dimensional Networking, Inc - a new type of "hybrid" search company, was sold to an undisclosed buyer for an undisclosed amount
and Harmonix of course.

And in the past there have been some decent IPOs that have come out of the Media Lab: Razorfish, ATG, Color Kinetics, and Alias/Wavefront to name a few that immediately popped to mind.

All this from an institution that, after all, is not in existance just to spawn entrepreneurial enterprises. Which begs one to ask, why all the negativity about the Media Lab?

I think it's a combination of backlash from a lot of 90s hype about the Media Lab, and a clash of cultures between the Media Lab's vision and the Boston tech scene. While the Media Lab is focused on new media, Boston has traditionally tacked to the more "conservative" enterprise software, biotech, and deep IP plays.

What could Flat Back Films or Pantheon Informatics have achieved if embraced by the VC culture in Boston? If they never needed outside capital, all the better, but the idea that the VC community wouldn't embrace and support good entrepreneurs is unfortunate. While the Media Lab is not what it once was, is there another Harmonix in their midst?