Technik

Marketing to Millennials

Boomers:        Just Do It
Gen Xers:        Why Do It?
Millennials:      Just Did It

We Boomers have ruled to roost since the '60s.  For 40 years, style, fashion, products, politics have been Boomer led.  Youth culture in the '60s; sexual revolution in the '70s; 'greed is good' in the '80s; and Soccer Moms in the '90s.  Yet MySpace, Facebook, YouTube and Skype are not Boomer phenomenon.  Boomers are in power in venture capital, technology, media; and for many years have reaped benefits of marketing to themselves.  Now they must market to their kids.  Do they see this?  Has the mantle been passed to a new generation?

Springtime for Venture - Are IPOs Back?

Paul Kedrosky at the blog Infectious Greed has been expounding a thesis that the tech IPO is about to return.  Today he notes that three recent IPOs have done well:

Company	Pricing	First-day close
DivX	Above range	+16.0%
Riverbed	Above range	+47%
CommVault	Above range	+6.0%

 

MySpace Math Does Not Compute

The New York Times ran a piece on MySpace generating $200M revenues this year (an estimate from an outside analyst) with 1B page views a day at a "slightly over" 10c CPM.  Now, 10c CPM * 1B page views * 365 days = $36.5M, not $200M.  So a better current estimate of MySpace revenues is $40M annualized, based on 'slightly over' 10c CPM.   Ross Levinsohn thinks he may be able to double the CPM, and MySpace looks to double over the year in members, and page views may grow faster than members, so perhaps at year-end they could be at a $200M run rate.  No way would their year be $200M.  And even the $200M run rate seems a stretch.  The 10c CPM is a lot lower than even the normal remnant ad rates of 50c on the web, and as members increase there may be more a regression to the mean (fewer page views per member) than the other way around.  A phenomenal success, certainly, but not yet the money engine of Google. 

The Flickrs For Video - Why YouTube?

YouTube has been in the press recently.  It has taken off in the last three months to take a commanding lead in the Flickr For Video sites, including catching up to Google Video.  Flickr itself set off the Web 2.0 craze, encouraging a legion of other Flippr companies, designed to get bought.  YouTube was able to grab Web 2.0 frothy values in its funding.   It has spawned its own legions of video Flipprs.   And they keep coming.  What was it about YouTube that led it to take off?

Web 2.0 Is Over - Did You Miss It?

For many of you, Web 2.0 never really hit your awareness, but out here in Silicon Valley, it has been all the rage.  As reported six months ago, it led to frothy valuations from eager investors.  The dream was that a few engineers, a set of cheap servers, a viral customer-acquisition model, and a clever use of mashing together web services, could lead to rapid riches!  Sounds like the dot-com bubble?  This was even better, since it required so little capital to get going! 

The poster child was Flickr, which got sold to Yahoo for $25M plus an earnout of another 50% on around $1M invested capital. Soon dozens then hundreds of Flipprs got started.  Their model: advertising!

Flickr as a flip was followed by Fox buying MySpace for $580M, and (although not part of Web 2.0) Skype selling to eBay for $2.6B with a $1.5B earn out. Now we're talking real money!  With a deal-or-no-deal mentality, and visions of Skype dancing in their heads, Facebook.com turned down $750M, and is holding out for $2B exit, even in the face of flattening traffic.   Check out the chart: is Facebook worth more than MySpace?

But now the hangover is setting in.  The problem:  the ad models don't hold together.  These little frothy companies are in the bargain basement of remnant ads, and the numbers don't work.  Venture capitalists are pulling back from a momentary irrational enthusiasm.  Now they are investing in either traffic or technology.  Sic transit gloria 2.0.

(Of course, hope springs eternal.  The latest phenom is YouTube, a Flickr for Video. which popped into popular awareness in the last three months, and now has a MySpacian trajectory of growth.  Watch this space for developments .. video at 11 pm.)

Web 2.0 Podcast

For those of you who would like to experience the new phenomenon of podcasting (broadcasting to an iPod - actually download and play, but the name stuck), here is an interview I did with a Web 2.0 maven, on venture investing in Web 2.0.  The reporter (repoder?) is Chris Law, former head of product marketing at Tribe, one of the first social networks; and now working on his next Web 2.0 venture.  In between he is podcasting for fun and profit.  Enjoy!

More on Disintermediation of Venture Capital

MIT's Technology Reviewe weighed in on Web 2.0 companies disdaining venture capital. They note that "through trial and error ... it's possible to build and launch a Web-based product for a fraction of what it would have cost only a few years ago. Open-source software, virtual work environments (i.e., no rent or overhead), and cheap and plentiful server capacity have helped keep down costs." They think this to will pass. ... As a result, many Web 2.0 entrepreneurs have been able to roll out compelling services without becoming involved in the culture of venture funding." They think this too will pass, once Web 2.0 companies begin to find sustainable business models. Getting launched should not be confused with having a business. Then again, they did not deal with the threat to VCs from Google and Yahoo.

Is Google Disintermediating Venture Capital?

Google is going through that glorious period where It Can Do No Wrong. Sergey and Larry can buy a 767 and still do no evil.  Google can take on the phone companies with free WiFi.  It can take out the libraries by digitizing books.  It can align with Sun and take on Microsoft!  Fear of Google is causing odd business mashups like Yahoo IM + MSN IM, or MSN + AOL.  So maybe Google can also overturn the venture business? 

'Froth' in the Venture Market

Web 2.0 has re-energized the entrepreneurial community.  (Whatever Web 2.0 means.)  Stories are coming in of competition for deals and a surge in A round valuations. Here is a flavor. A couple of Stanford sophomores got $5M on $8M pre-money. A deal turned down by one name partner got picked up by another at a leading fund. One of the hot deals from DemoMobile claims to have three term sheets, ranging from $7-10M on $12-15M pre-money. The list goes on.  What gives? Have the VCs once again lost their good sense?  And so soon after the last bubble?

The Cellphone as the Next PC

Or maybe not.

There has been a search for the Next PC since the first PC. In the late '80s, John Doerr thought it was pen-based computing, and invested in Eo and Go, later merged into what a long-forgotten wit called Ego. Now Ego is long forgotten. In the early '90s, John Sculley thought it was PDAs, and he began his long slide from tech fame after his infamous proclamation that the Newton would win a major part of a "Trillion Dollar Market." In the mid-'90s, Jeff Hawkins said handwriting recognition was not possible on a small device, and then he went on to prove himself wrong a year later by founding Palm. He left Palm and innovated a second time by adding cellphone capability to a PDA , calling it the Treo; but by then was destined to lose out to the RIM and its addictive Blackberry, called the Crackberry among the Digerati. Why he lost is very instructive - more on this below.

In the 'Oughts we now believe that the Cellphone is the Next PC. And what a PC it is! The PC is a mature product with annual sales around 200M units, while the cellphone has rocketed past those volumes towards 1B units per year. Features in the cellphone either get adopted at massive scale, or dropped. Cellcams made the cut. Music is now being tried. Microdrives may be next. And keyboards. And so on.  Is it the next PC?  Let's take a closer look.