Author: elias (Page 7 of 27)

Why blogs are turning into newspapers and Quora is the future of journalism

December 28, 2010 / elias

MG Siegler wrote a post following our exchange on Twitter. I called him out because for the second time that day, I had logged into Quora only to see minutes later a TechCrunch post being Tweeted that was rehashing the original Quora discussion. Is this the future of journalism?

Blogging 3.0
Siegler wrote an eloquent post expanding on my original jibe that he was practicing blogging 3.0 (I called it that as over the years Marshall Kirkpatrick would constantly joke Twitter is what paid his rent). Now don’t get me wrong: Quora is one of my favourite websites right now, and Siegler (as well as Kirkpatrick) are two of the more talented writers in the blogosphere. But it made me wonder: what’s the role of the journalist in the world, and by implication, the news blogger?

For the bloggers out there who receive bonuses by getting headlines on Techmeme — what’s stopping Gabe Rivera (Techmeme’s founder) from simply importing the RSS feed of Quora posts and having its human editors headline the best answer? As Siegler points out, he (worryingly) already has. Given Quora responses are like blog posts and get aggregated into a community wiki-like answer summary, I can’t see why this won’t become a new input source for Techmeme, completely bypassing the traditional blogs.

And while we are on the topic: Julian Assange of Wikileaks argues that they are pioneering a new form of journalism, which he recently argued in an editorial for The Australian, as “Scientific journalism“. Scientific because you can read the source of the material in its naked form or accompanying an article that discusses the source.

Source material is democratised
Journalists, it is said, are becoming curators of information. Siegler claims he has retrieved information from an obscure source, amplified it, which in turn will be broadcasted by a bigger publisher like CNN. But if Quora democratices the source gathering — it’s so obscure that everyone in Silicon Valley is on it, include billionaires like Steve Chase who founded AOL and Mark Zuckerberg of Facebook — what’s stopping me from “breaking” the apparent news? Or Rivera from doing a direct RSS import of the top answers, direct to his audience of thousands?

If the big blogs are traffic hungry that have them reliant on the aggregators like Techmeme to feed their pageviews….And if this trend to scientific journalism is being promoted, where journalistic bias adds colour to a source only if you want (rather then the bias being the source of your information consumption) — then one has to ponder. That the evolution of journalism will come not from changes in journalistic style, but by changes in technology — an evolution where every single one of us can talk openly about the world and in an applied way.

Siegler says this is business as usual for the bloggers, but I think it’s business as usual for the disruption technology is generating for the news making business. Disruption that will continue to favour those who tease out the source of news (like Quora, Twitter and Wikileaks has) and those who curate it into an efficient way to consume (like aggregators such as Techmeme, Google News and Digg).

The future of journalism resides with those that create the originating value: traffic or content
Before the Internet, newspapers were the sole source of information and so had an elevated role in society. Now they are being relegated to just one of the many sources of news; once considered a horror if they disappeared, they would not impact the world if they went bankrupt today (as there are plenty of online mastheads to replace their value). As social media technologies continue to be refined — where the participants curate the source material themselves — blogs will not disappear like how newspapers won’t disappear. But their position in the world is far from guaranteed, as the audience curation is being done better by the aggregators and the source material is now no longer proprietary to a journalist.

The new magazine

December 22, 2010 / elias

The Facebook homescreen is a remarkable thing. I just saw a video of a friend throwing food at birds; relatives taking pictures of themselves in a hot tub; a link to a mind-expanding article; and a status message that made me laugh. It made me think: the homescreen is the new magazine.

Sure, we can be simplistic with this and say lots of pictures and content makes thee a magazine. But what strikes me as fascinating is how much personal content is shared. People’s thoughts, insight into their lives, and the real-time autobiographical dictation by our “friends”. It makes me think of the fascination people have with celebrities, and how gossip magazines are some of the highest grossing of their kind. The same phenomenon is being exploited here — which is people want to know more about people they know. While with celebrities you could potentially say people do it due to a fixation on celebrity status and looks, I would argue the reason gossip magazines are so popular is due to the curiousity into the lives of people who are familiar. People would be equally fascinated with a magazine about celebrities as a magazine of their neighbours, if it was practical.

It’s almost like Facebook’s homescreen is the new media version of a publication. But of your friends. And like a glossy magazine. Of original content from otherwise hard-to-obtain situations.

Or more practically speaking, like a gossip magazine of your neighbours.

Delicious will go down as one of the great tragedies

December 17, 2010 / elias

As Marshall Kirkpatrick eloquently wrote, I’m also another person disappointed that Yahoo! is shutting down Delicious, the social bookmarking site that helped generate the Web 2.0 trend. But this reflects a deeper problem at Yahoo.

How Yahoo’s spreadsheets miss the point
As a “heavy” user myself, it may be ironic to say that I never visit the site; I often will not bookmark a site for month’s. And yet, it hits me like a shot to the heart to hear that it will be shut down. Why? Because it’s so valuable to me. The amount of times I’ve been able to rediscover content I’ve previously read has alone made it valuable — the tagging innovation that Del.icio.us pioneered makes my search for hard-to-recall content much more efficient. But there was even a time, where the most popular links of delicious were my homepage: the quality of the content being shared justified my daily attention in the same way other aggregators have to me like how techmeme.com have.

In fact, I’ve recently rediscovered this as I experiment with the Rockmelt browser, and I check the most popular links via the widget on the side of my browser.

But notice how I don’t visit the website? I might see what links are popular, but that doesn’t mean I will click on them. I don’t visit the actual delicious website and so the metrics the Yahoo management are reviewing are skewed. If advertising is on the site (the only type of revenue model attempted), it would not convert much. They believe no one is using the service, but the truth is, they are.

I never thought the “network” operating model could suffer due to the fact metrics measuring value can’t be quantified. So it’s completely reasonable why a Yahoo management team thinks it time to shut down this service: low on traffic, low on revenue. Numbers in the spreadsheet say this is a loss: let’s kill it, says the MBA.

What we have here though is a management team who not only are out of touch with how people use delicious (potentially because they don’t get the vision that only the founder truly gets — and he’s long gone), but more important, completely misunderstand how to capture the value of this valuable asset (not property). As a point in comparison, Yahoo acquired the other Web2.0 darling Flickr, which is a service I also have been using for over 5 years. And when I say using, I mean a paying customer that has paid his subscription without hesitation every year (which I will note, there are not many services I pay for which makes this even more impressive). Like Delicious, I store data with Flickr that I may not use for a while — but the way it manages my data has become an invaluable tool for my life.

I worry more about Yahoo and any company it acquires
Yahoo’s management should have implemented a subscription model like Flickr, because it’s obvious that a “book marking” site will never get a lot of a traffic (you can book mark sites without having to need to visit delicious.com). Tools like this don’t make money from traffic; and network business models like this generate value beyond the confines of the web property.
With the news breaking, it will now force an action. Either sell it to people who have now seen their cards (in fact, I’ve had friends of mine not in tech ask me how can they put an offer for this!), open-source it (like how Google reacted when etherpad was going to be shut down), or shut it down as they said they want to and lose the opportunity to capture its value. Of course, they could publicly announce they won’t shut it down, but everyone now knows what they think and it will kill the service due to new users being paranoid about their data. Yahoo! gains nothing with this.

But the sad thing about this, is that it’s forced them to ignore the opportunity of potentially being more innovative with the revenue model. And because they failed to do this, this impacts the company more generally — monetisation is key to sustainability and if you have a management that can’t do that (which presumably, is the reason it’s being shut down), then there’s something even more wrong with this new age media company that as Jeff Jarvis has called, has become the last old-media company.

Yahoo is an amazing company, and companies need to make tough decisions sometimes to grow the company. But not understanding the potential of Delicious will go down in web history as one of the great tragedies — and if Yahoo sells it, one of its biggest blunders.

Update: And just as I clicked “save” on this post, the Delicious blog posted saying they are now going to “sell” it as it’s not a strategic fit, which as I mentioned in my post was one of the likely outcomes. So if it’s not a strategic fit, it begs the question again, what is Yahoo?

Another scandal about data breaches shows the unrealised potential of the Internet as a network

December 13, 2010 / elias

The headlines today show a data breach of the Gawker media group.

Separately, I today received an email from a web service that I once signed up to but don’t use. The notice says my data has been compromised.

In this case, a partner of deviantART.COM had been shared information of users and it was compromised. Thankfully, I used one of my disposable email addresses so I will not be affected by the spammers. (I create unique email addresses for sites I don’t know or trust, so that I can shut them off if need be.)

But this once again raises the question: why did this happen? Or rather, how did we let this happen?

Delegated authentication and identity management
What was interesting about the Gawker incident was this comment that “if you logged in via Facebook Connect, in which case you’ll be safe.”

Why safe? For the simple reason that when you connect with Facebook Connect, your password details are not exchanged and used as a login. Instead, Facebook will authenticate you and notify the site of your identity. This is the basis of the OpenID innovation, and related to what I said nearly two years ago that it’s time to criminalise the password anti-pattern. You trust one company to store your identity, and you reuse your identity in other companies who provide value if they have access to your identity.

It’s scandals like this remind us for the need of data interoperability and building out the information value chain. I should be able to store certain data with certain companies; have certain companies access certains types of my data; and have the ability to control the usage of my data should I decide so. Gawker and deviantART don’t need my email: they need the ability to communicate with me. They are media companies wanting to market themselves, not technology companies that can innovate on how they protect my data. And they are especially not entitled for some things, like “sharing” data with a partner who I don’t know or can trust, and that subsequently puts me at risk.

Facebook connect is not perfect. But it’s a step in the right direction and we need to propel the thinking of OpenID and its cousin oAuth. That’s it, simple. (At least, until the next scandal.)

Why the angel bubble is not a bubble but actually the missing link

December 1, 2010 / elias

Naval Ravikant has written a thought-provoking post on the growing “angel bubble”. His thesis is that there is no bubble because the total money amount of money being invested in venture hasn’t increased. What’s changed he claims, is simply that instead of bigger Venture Capital (VC) rounds that are fewer in number, we’re seeing smaller but many more Angel investments occurring. In other words, the VC industry — not the Federal Reserve — are the ones that should be worried about this “bubble”.

I actually think what’s happening is that the market is now more resistent to bubbles. Contrary to a previous post of mine where I hypothesised the seed investment bubble (which I’ve since reconsidered and I’ll explain later in this post), the Angel “bubble” is a externality of one simple fact: it’s now a lot cheaper to build a startup. To understand this, watch the presentation Naval gave a few month’s ago which is the best I’ve seen to date in this trend.

So as a consequence, angel investment has now becoming (and rightfully so) the dominant way for a company to fund a startup company, with the existing VC model being relegated to more of a latter stage role.

Why is this a good thing? Well first of all, a lot more startups are being funded — but with the same amount of money in the economy. Statistical theory will claim that this alone will be good thing for the economy, as there is a higher probability of home runs. By spreading risk among more bases, there’s a better opportunity to generate returns.

But something more important is happening. VC’s now have a better qualification of a business to invest in. The huge amounts of capital they can invest into a business, are now going to be done after having seen a more advanced startup’s potential future, pushed to that stage by the seed accelerators or angels that cover their startup cost.

What I mean, is that by the time a company gets to VC, they will no longer be a startup — which is a business searching for a business model — but instead a high-growth business that’s now executing on their newly discovered and high potential business model. The VC firms are no longer needed in the business of starting something in information technology; they are instead now purely in the business of growing a business (where already some of the larger funds exclusively focus on). And the capital they are putting at risk on behalf of the endowments and pension funds that gave them that money, now have a lower risk of achieving higher returns.

Better still, the VC’s funds can focus on the future of technology like clean energy, biotechnology, and nano technology — industries that were what information technology was in the 1970s: high startup cost, low chance of return.

And while that’s all well and good for the VC’s, this new funding lifecyle actually opens up opportunities for returns for everyone (which is why this isn’t a bubble). The seed accelerators and angels have the ability to pass the baton and exit their investments to better capitalised groups like the VC’s, allowing them to focus on the earlier stage of the market. With the IPO market dead since the introduction of the Sarbanes-Oxley legislation, tech has relied on acquisitions as the sole form of return. But with earlier stage investors like the Angels getting exits to VC’s, and the VC’s having better qualified businesses that they can grow to a large IPO, this is actually going to see the IPO market reopen due to this focus.

All in all, that’s not a bubble: that’s called efficiency and a rejuvenation. The Angel bubble isn’t a bubble but a maturity and evolution of the technology ecosystem. This is actually the missing link in efficient information technology being built — the link which now connects the super-highways of the economy to sustainable growth and value, not bubble.

On Google and Facebook

November 12, 2010 / elias

Mike Melanson interviewed me today over the whole Facebook vs Google standoff. He wrote a nice piece that I recommend you read, but I thought I would expand on what I was quoted on to give my full perspective.

To me, there is a bigger picture battle here, and it’s for us to see true data interoperability on the Internet, of which this is but a minor battle in the bigger war.

I see a strong parallel to global trade and data portability on the web. Like in the days of restrictive trade tariffs that have been progressively demolished with globalisation, the ‘protectionism’ being cried out by each party of protecting their users is but a hollow attempt to satisfy their voters in the short-term, which are the shareholders of each company. This tit-for-tat approach is what governments still practice with trade and people-travel restrictions, but which at the end of the day hurts individuals in the short-term but society as a whole in the longer term. It doesn’t help anyone but give companies (and as we’ve seen historically, governments) a short term sigh of relief.

You only have to look at Australia, which went from having some of the highest trade tariffs in the world in the ’70s to being one of the most open economies in the world by the ’90s. The effect of this is that it made it one of the most competitive economies in the world, which is part of the reason that of all the OECD countries during the recent financial crisis, it managed to be the only economy not to fall into recession. Companies, like the economies governments try to protect, need to be able to react to their market to survive, and they can only do that successfully in the long term by being truly competitive.

The reality is, Facebook and Google are hurting the global information network, as true value unlocks when we have a peered privacy-respecting interoperability network. The belief that value is interpreted as who holds the most data, is a mere attempt to buy time for their true competitive threat — the broader battle for interoperability — which will expose them to compete not on the data they acquired but on their core value as a web service to use that data. These companies need to recognise what their true comparative advantage is and what they can do with that data.

Google and Facebook have improved a lot over the years with regards to data portability, but they continue to make the mistake (if not in words, but in actions) — that locking in the data is the value. Personal information acquired by companies loses value with time — people’s jobs, locations, and even email accounts — change over time and are no longer relevant. What a site really wants is persistent access to a person so they can tap into the more recently updated data, for whatever they need. What Google and Facebook are doing is really hurting them as they would benefit by working together. Having a uniform way of transferring data between their information network silo’s ensures privacy-respecting ways that minimise the risk for the consumer (which they claim to be protecting) and the liberalisation of the data economy means they can in the long term focus on their comparative advantage with the same data.

Billion dollar brainwaves

October 8, 2010 / elias

My Small Business | Tips & Advice For Small Business in Australia

David Wilson, a journalist for Fairfax, approached me the other month to give him my thoughts of Silicon Valley. The resulting interview appeared on Fairfax’s online mastheads (which include The Age, the Sydney Morning Herald, and the Brisbane Times). The article had more focus on me than I expected, but Wilson still captures some important lessons I’ve learned since moving here.

One that is mentioned is the importance of not planning. I’m a big believer that you can’t plan your life (or your business). To put it simply, using yesterday’s information to make decisions about tomorrow is just not as effective as using the most recent information and reacting. Check out the very successful and intelligent Jason Fried of 37 Signals who says something similar:

So it’s not about the big plan, it’s about a day by day by day by day and seeing where things go and just kind of making decisions as we go.

And the main reason why I think this is important is because people often make decisions with the wrong information. So they make decisions far into the future, based on information they have today. You’re better off making decisions today based on information you have today because that’s when you make your best decisions. You make your best decisions when you have the best information. That’s always right now.

Another lesson I’m learning but which I didn’t mention, is that capitalism — effective capitalism — is brutal. It’s something I’ve observed with successful business people in Australia and America and I’m still trying to collect my thoughts about it. For example, employees and their termination — I’ve had several people explain to me the difficulty they’ve experienced doing it, which is for the better of the business.

To put this in context, loyalty and personality should not be confused as performance (which really, is the point of the employment). And if you’re not performing (or the broader function you are a part of), there’s the door. Brutal, I know — but what’s more brutal is a business collapsing and everyone losing their jobs. Effective capitalism isn’t about protecting an individuals ‘entitlement’ to a job; it’s about evolving the entitlement of an enterprise so that it can continue to sustain itself.

The secret to effective people management

October 8, 2010 / elias

I’ve been doing a lot of thinking, talking and reflecting these last few months on a broad cross section of things. One of them is people management, which actually has been a competency I’ve spent years trying to understand: whether it was managing volunteers at non-profits, coaching junior staff in a work environment, or observing how other people interact with others and the impact it had. Today I came across something on Quora that Ben Pieratt wrote and which I think is very wise. He reflects on the work ethic:

I think it comes down to the fact that, for some people, work is personal. Personal in the same way that singing or playing the piano or painting is personal.

As a creative person, you’ve been given the ability to build things from nothing by way of hard work over long periods of time. Creation is a deeply personal and rewarding activity, which means that your Work should also be deeply personal and rewarding. If it’s not, then something is amiss.

Creation is entirely dependent on ownership.

Ownership not as a percentage of equity, but as a measure of your ability to change things for the better. To build and grow and fail and learn. This is no small thing. Creativity is the manifestation of lateral thinking, and without tangible results, it becomes stunted. We have to see the fruits of our labors, good or bad, or there’s no motivation to proceed, nothing to learn from to inform the next decision. States of approval and decisions-by-committee and constant compromises are third-party interruptions of an internal dialog that needs to come to its own conclusions.

Worth reading is also this interview with the CEO of Zynga (one of the fastest growing companies in Silicon Valley). He says what he does to motivate staff, which put words to what I’ve seen in my own observations of effective (and ineffective management).

You can manage 50 people through the strength of your personality and lack of sleep. You can touch them all in a week and make sure they’re all pointed in the right direction. By 150, it’s clear that that’s not going to scale, and you’ve got to find some way to keep everybody going in productive directions when you’re not in the room…

…I’d turn people into C.E.O.’s. One thing I did at my second company was to put white sticky sheets on the wall, and I put everyone’s name on one of the sheets, and I said, “By the end of the week, everybody needs to write what you’re C.E.O. of, and it needs to be something really meaningful.” And that way, everyone knows who’s C.E.O. of what and they know whom to ask instead of me. And it was really effective. People liked it. And there was nowhere to hide.

In case you miss the point, this is it: giving ownership is a powerful emotional state that can literally transform the perception someone has of their work.

Update 11 October 2010: My good friend Alisdair Faulkner — an experienced technology entrepreneur and executive — explains the spirit of the term “ownership” better with a clarification. Alisdair says it’s less so about ‘ownership’ than it is ‘creative control’, which he says means “Authority and Accountability vested in the same individual”.

Why the seed investment bubble is exactly that

August 28, 2010 / elias

Jed Christiansen wrote a thesis on the rise of Y-combinator and other seed-accelerators. He also released the data behind his research, which gives an insight into the success of the seed-accelerators. It’s fascinating to look at these numbers, because Silicon Valley is seeing a bubble emerge — and unlike the previous ones like the Dot Com boom when people realised the potential of websites, or the Web2.0 bubble where shiny AJAX and social was the new black — now we are seeing a bubble emerge on the ‘backend’ through the capital investors.

Why is it a bubble? Well first of all, the hype. Last March at SxSW, I met Mark Nathan who told me he was helping yet another seed accelerator. He told me that 44 of them had been created to date in the US. That and the recent success of Angel List by the Venture Hacks crew — which is effectively commoditising the seed market — is seeing a mini revolution occur in the tech sector.

But as I sit here with my buddy Stephen Weir: a serial entrepreneur who’s invented the spoon-less yoghurt cup, licenced super model of the world for a reality TV show, tried the tech startup thing (like launching the biggest online invitation website in Japan and a reward based mobile gambling application on all three carriers in Japan) but now works in property — we asked, are the returns actually supporting this hype?

How good a business is it

Christiansen says the following:

Y Combinator and TechStars are two of the oldest seed accelerators, and are the only two to have had substantial exits. The TechStars exits have likely already generated a profit, and there are several companies that may still exit at some point in the future. The Y Combinator company exits have likely already brought Y Combinator to break-even, even after having funded over 100 companies. More impressive is that there are a good number of companies in the portfolio that could reach substantial exits at some point in the future. (And potentially a handful that could reach the vaunted $1billion+ exit.)

Y Combinator for example has funded 206 companies to date. At an average $10k in capital as well as $600 in travel costs (applicant companies can get up to $600 in reimbursement costs), they’ve put at least $2m in seed capital and assuming 10-20% of companies get accepted (an assumption by us), then reimbursed travel costs are between $450-900k. (Note: this is extremely conservative to the point of unrealistic, as companies receives $10k per person so the cost is actually closer to double or $4m in seed investment — but we’re doing this to prove a point.)

And what’s the return? According to Christiansen, of the 206 companies invested in Y Combinator there has been $89,008,000 in exist value generated. Y Combinator claims the average stake in each company is 6-7%, so the group made $5,340,480 on a 6% return. But we think the companies that actually exited would have been able to negotiate a lower rate, as well as the fact Y Combinator would have got diluted by some of the companies that took additional funding. If we use 4%, then the return is $3,560, 320.

After five years, that’s a gross profit of between anywhere between 500k (assuming 900k travel costs, and 4% return) to $3m (assuming 450k travel costs and 6% return). That means on a conservative back-of-envelope guess, the operational side of Y-Combinator gets about $600k a year, which is what a fund manager would make.

Our conclusion

When paying out salary costs and other admin expenses, break-even seems very likely. Or at least, the profits are very ordinary right now. Put a more realistic capital base of 20k per startup, and you’ve got a terrible loss making business in the medium term. Now to be fair, this is doing it over only a few years. For this analysis to be really accurate, it needs to take into account that the window for a return is ten years – you can’t do dollars-in dollars-out in just three years. Otherwise, how would firms like Sequoia have existed so long. And Y Combinator has got some super-star startups that are the talk of the town now, like Dropbox and Airbnb — an exit on either of those will make a huge difference.

But that said, looking at this at a high level, we’re not sure if the hype is justified. Paul Graham may emerge a wealthy man, but we don’t know how the other 43 seed accelerators will.

How the super angels are saving Silicon Valley

August 15, 2010 / elias

Michael Arrington has written about the current bubble in Silicon Valley: the angel investor. He suggests a war is occurring with this new class of investor, and that entrepreneurs need to pick their faction. I don’t doubt the politics is real, and I’m sure it exists between the angels themselves – let’s hope they realise that united they stand, but divided they will all fall.

But I think this “conflict” is really about a change in times. Much like how the traditional gatekeepers of information – the newspaper industry – are battling the process-journalism innovators that we call ‘bloggers’. (Like, ahem, TechCrunch.) No one appointed the Venture Capital industry as the gatekeeper for technology innovation, which is similar to the arrogance of the newspapers that think they ‘own’ the news and deserve special protection because of it. Maybe these over-sized funds should take a lesson from the newspapers and realise the times have changed and their model needs to change as well.

But where I differ with Arrington’s perspective is his prognosis that this is bad for innovation. Conflating this with ‘bigger ideas not getting funded’ is wrong. The point is, is that more innovation can get funded, more veterans are being developed, and more value is being created in the long run. This should be analysed not by the growth of a single tree, but the overall development of the entire forest.

We need more seed-accelerators, more super-angels, and more incubators – because inevitably, it will lead to more startups. And whilst not all will hit a home run, the odds of ‘the next big idea’ happening will improve dramatically.

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