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Around The Kitchen Table, a Better Way To Finance “Secondaries” Is Born

By - October 23, 2014

FCCapitalNearly a decade ago I was two years into starting a new company, one that was growing quickly, but at the same time struggling with all the classic problems of a startup. We needed to raise more capital, we needed to hire more of the right people, and we needed to retain and motivate the people we already had brought onboard.

But more than anything, I was personally struggling with whether I could keep up the pace. This was my fourth startup, and I’d been at if for nearly 20 years. At that point in my career, I had serious questions about whether it was worth the time and energy, given that the pay was low (gotta keep burn down) and the hours were insane. I had three young children, all in expensive schools, and a mortgage to worry about. I wasn’t making enough to cover our monthly nut, and I wasn’t certain that the upside of any startup – even one I believed in with all my heart – was worth potentially failing my obligations to my family. After all, I was reasonably established, and I could always go get a higher-paying, more stable job.

So one morning at my kitchen table, I poured out my concerns and dreams to a close friend, Chris Albinson, who just happened to be a venture capitalist. I explained my dilemma – my responsibilities as a father and husband were in direct conflict with my career as a startup founder. I remember Chris asking what I’d need to keep my focus on my startup. At that moment, the reality was, I needed cash. I needed to be able to look my wife in the eye and say “Don’t worry, if this doesn’t work out, we’ll have enough to cover living expenses while I look for another job.”

Chris asked me to tell him more about the business I had started (it was Federated Media), and then right there, over the kitchen table, agreed to lead a financing, but with a twist: A small portion of the proceeds were distributed to me, the founder, in exchange for my personal shares of the company. Chris explained that this was called a secondary stock sale, but I didn’t care. For me, it was a lifeline, and a way to keep doing what I loved to do.

I hadn’t thought much about that story for some years, but today Chris and his partners Mike Jung and Ken Loveless are announcing the birth of a new kind of venture firm, one that has at its heart the “kitchen table ethos” that defined Chris and my partnership nearly ten years ago. It’s called Founders Circle Capital, and you can read all about it here.

FCC was born of the insight that companies are taking longer and longer to get to a traditional “exit” of an IPO or sale. For Federated, that process took nine years, and its spinoff, sovrn Holdings, is now entering its tenth year (it’s doing very well, I’m proud to say). When companies take that long to provide a return on the early invested capital or sweat equity, serious misalignments can develop between the original founding team and later investors and partners. It’s one of the great headaches of any CEO running a late stage startup – figuring out how to please all the different stakeholders who occupy an increasingly tangled cap table.

FCC was created to help align founders, investors, the company’s board, and its management team. I’m proud to say that I will play a part in the new company’s story as Chairman of its “Founder’s Circle,” a group of extraordinary founders who are in one way or another connected to FCC’s mission and community. It’ll be a safe place for founders to talk about their personal and professional journey – a virtual kitchen table of sorts, welcoming and intimate.

Companies with breakaway growth look awfully fun from the outside – but having been on three such journeys (Wired, The Industry Standard, and FM), I can tell you it’s anything but easy. In fact, as I look back on the most stressful years of my life, they map to the times when my companies were growing the fastest. Back then, I felt deeply alone, with almost no one to talk with. It’s my hope that through the Founders Circle, we might be able to change that just a little bit. Congratulations to Chris, Mike, and Ken on the launch, now let’s get to work!

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“Peak Google”? Maybe, But Is “Native” The Reason?

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google3-600x450

From Thompson’s “Peak Google” post.

I love Ben Thompson’s Stratechery site, so much in fact that I’m writing a response to his recent “Peak Google” post, even though these days most of us limit our bloggy commentary to the 140-character windows of Twitter.

I’m responding to Thompson’s post for a couple of reasons. First of all, the headline alone was enough to get me interested, and judging from the retweets, I was not alone. But I try not to retweet stuff I haven’t actually read (which, as Chartbeat has shown us, is not the case with most of us). I waited until this morning to read Ben’s post, which compares Google with IBM and Microsoft, each of which once could claim king of the mountain status in tech, but have since been eclipsed.

But the real reason I’m responding is Thompson’s thesis that Google is at its peak, about to be eclipsed by Facebook or Pinterest or some other advertising-based company. Thompson theorizes that native advertising will carry the day, and because Google lacks the skills necessary to win in native, the company will slowly fade into profitable irrelevance (as have IBM and Microsoft).

I think the story was picked up for the resonance of its headline meme – that Google may be at the peak of its power, poised for decline – rather that the substance of its argument around native advertising. And that’s a shame, because Thompson makes any number of interesting points about Google that bear debate. In no particular order:

– Google isn’t good at native or the more “human” side of advertising. I disagree. As Thompson acknowledges in an update to his original post, Google’s search ads are by definition native – I believe search advertising is the most scaled, profitable, and useful native platform in the world. And while Google has struggled to find its voice as a media company, it’s been near-perfect at creating a platform that lets others express their voice in advertising – millions of customers use AdWords to create authentic ads in real time. And its YouTube platform is poised to be one of the largest brand channels in the world.

– Search isn’t a brand platform, and native is. I also disagree – that search isn’t a brand platform, anyway. Yes, search ads tend to be “down funnel” and direct response driven. But any brand who isn’t playing in search, which includes creation of search-friendly content, is missing a huge part of the role brands must now play as creators of great content.

– No one has yet “won” in native. Totally agree. We’re in the very early innings, though Facebook has been a clear winner to date.

– Search ads will be eclipsed by native. I sort of agree – but I prefer to think that neither native nor search ads will dominate going forward. Instead, we’ll see a blending of the two – what I’ve called programmatic native. And there’s no greater example of programmatic native than search. It’s not clear Google will win here, but it doesn’t hurt to own both search AND YouTube, not to mention Android and Google Maps/Local/Earth/Now, as you work on figuring it out.

Again, I think there’s a reason that “Peak Google” resonates so strongly in this industry – we’ve seen the movie with IBM and Microsoft, and everyone loves a story that fits a common narrative. But I’m not sure native advertising is the reason Google will fade to irrelevance over time.

Else 10.13.14: Smiling Happy Facebook People (Not Teens, Though)

By - October 12, 2014
Facebook Atlas

Now you can buy real, smiling, happy shiny people all over the web, courtesy Facebook.

Today’s summary covers the past two weeks of worthy reads, with a strong dose of the Internet’s twin titans Facebook and Google. I’ve also been busy writing on Searchblog, so you’ll find three of my own pieces highlighted below.

Facebook’s new Atlas is a real threat to Google display dominance — Gigaom

The first such challenge in … forever.

Facebook is unleashing its ads—and surveillance—onto the internet at large – Quartz

And while it took a long time, it’s now real. So what does it mean for publishers? Read on…

A tip for media companies: Facebook isn’t your enemy, but it’s not your friend either — Gigaom

The industry seems to be slowly waking up to the fact that Facebook is more complicated than perhaps we gave it credit for. Sure, BuzzFeed has been winning by leveraging viral content, but now that Facebook is leveraging its data across the web, including the data it picks up from publisher’s sites, those same publishers are starting to do the math and realize that perhaps they aren’t winning after all.

Teens are officially over Facebook – The Washington Post

Until they’re not.

Programmatic Ad Buying to Reach $21 Billion – CMO Today – WSJ

That’s a very large piece of a growing pie – and it’s set to only increase as programmatic underpins nearly all digital advertising, period.

Some pros and cons of Google’s plan to give every “thing” a URL — Gigaom

The phsyical and digital come one step to connection in this Google-led open source schema. Browse the web, browse the world…

End-user computing — The Truant Haruspex — Medium

I love pieces like this. From it: “We increasingly live in a computer-embroidered reality, and the ability to manipulate that reality is empowering. If we can find a way to bring that ability to a wide audience, it could have an impact comparable to the invention of the printing press.”

A Secret of Uber’s Success: Struggling Workers – Bloomberg View

“On-demand has thrived, in part, because the nation has dropped a bedraggled and optionless workforce in its lap — and on-demand’s success depends in part on the idea that our nation won’t change.”

Venture capital and the great big Silicon Valley asshole game | PandoDaily

Any piece that starts with “Silicon Valley has an asshole problem, and it’s high time we owned up to it” is going to get attention, and Sarah Lacy’s piece did exactly that. Lacy deconstructs the forces driving behaviors in the Valley these days, and finds our industry wanting.

Killer Apps in the Gigabit Age | Pew Research Center’s Internet & American Life Project

What might a true gigabit Internet bring? Pew asked the experts.

A Master Class In Google — Backchannel — Medium

Steven Levy is right – to understand the world today, it sure helps to understand Google. Not sure that’s possible, but one can try.

Marc Andreessen on Finance: ‘We Can Reinvent the Entire Thing’ – Bloomberg

This interview lit up the Interwebs big time last week.

You are not your browser history. — Medium

Artist Jer Thorp launches a project to visualize what can be known from browser history.

New Statesman | The most influential tech company you’ve never heard of

Spoiler: It’s Alcatel-Lucent.

The NSA and Me – First Look

Veteran NSA watcher James Bamford tells his story.

The Next Stage of Mobile Quickening: Links Get Intelligent- Searchblog

In which I argue that what Branch Metrics is doing is a good next step toward a true mobile web.

My Picks for NewCo Silicon Valley – Searchblog

NewCo SV is next week!

Living Systems and The Information First Compan- Searchblog

Companies that put information flows at the center of their businesses are winning.

Living Systems and The Information First Company

By - October 11, 2014
uber map

A map tracing the information flows within Uber’s San Francisco market.

One of the great joys of my career is the chance to speak at gatherings of interesting people. Sometimes it’s an unscripted, wide ranging conversation (like during Advertising Week, for example), but other times it’s a formal presentation, which means many hours of preparation and reportage.

These more formal presentations are opportunities to consolidate new thinking and try it out in front of a demanding audience. Last month I was invited to speak in front of group of senior executives at a major bank, including the CEO and all his direct reports. I was asked to focus my remarks on how new kinds of companies were threatening traditional incumbents – with a focus on the financial services industry, as you might imagine.

Now, I’m not an expert in financial services, but I do know how to ask questions, and I’ve been watching as the core assumptions any number of markets, from media to transportation to hospitality, have been upended by Internet upstarts like Buzzfeed, Uber, or Airbnb. So I started preparing for this talk by interviewing half a dozen or so senior executives at the bank. I was prepared for defensive answers, but instead found myself pleasantly surprised – not only did these executives acknowledge a threat, they also spoke eloquently about the self-created barriers which blocked their ability to respond. Some of these barriers were regulatory and therefore out of their direct control, but many were organizational – this bank had been in business more than 100 years, and its DNA was pretty deeply set.

There’s no dearth of literature and leaders with strong points of view about corporate change – Clayton Christensen’s Innovator’s Dilemma  is the classic, and there are plenty of others – Downes’ Big Bang Disruption and Moore’s Crossing the Chasm come to mind. But I’ve not made my living writing about corporate disruption, nor do I expect I ever will. As much as these kinds of books lay out specific and intelligent management lessons, I didn’t want to dole out second hand advice – after all, if the banks wanted to hear that, they could have asked Christensen, Downes, or Moore.

So preparing for this talk forced me to do exactly the kind of hard work any writer both fears and relishes – coming up with something original to say.

So I started to think about why it is that large enterprises fail to innovate. What was it about new, digital companies – which I’ve come to call “NewCos” – that allows them to so quickly pose significant threats to the incumbents in their respective markets?

It struck me that corporations – which by US law enjoy the status of personhood – act much like organisms in biological systems. Some are fitter than others, and every so often you see punctuated equilibrium – a quick reset of the ecological landscape. Further, it struck me that we’re in the midst of such a phase shift as we become information – a theme I’ve written about quite a bit (and the core thesis of my long-unfinished book).

That got me pondering the role of information in companies. I wondered, what is the role of information in biological systems? A bit of Googling reminded me of living systems theory, which I last encountered reading Kevin Kelly‘s What Technology Wants, which posits that technology itself is a living system. But I found myself pursuing a narrower path: What if we understood corporations as living systems? Might there be an insight or two to gain?

Living systems theory is the work of biologist James Grier Miller. From the wikipedia entry: “Living systems are open self-organizing living things that interact with their environment. These systems are maintained by flows of information, energy and matter.”

Bingo – there it was, right in front of me – a new way to think about corporations. The first thing that struck me in this definition was the use of the word “open” – most large enterprises are not open in most senses of the world. But most interesting was the framework of understanding flows of information, energy, and matter in a corporation. Immediately, I came up with a hypothesis: most corporations are organized to maximize their use of energy and matter, because those are the most expensive parts of their businesses. NewCos, on the other hand,  place information at the center of their business.

Put another way, NewCos are “information first” companies.  They map the flows of information in a market, and organize themselves so as to exploit or leverage those information flows, even if the flows are “potential information” – information used in a new way, a manner which may be more efficient, productive, or valuable. Put information first, and let that determine how best to organize energy and matter. Industrial era-companies, on the other hand, value their hard assets first (energy, matter), and only view  information  as a way to organize or protect those assets.

I’ve been wandering the halls of theory for a while here, so some examples are in order. I’ll start with everyone’s favorite disruptor, Uber. What has Uber done? Well, it’s stared long and hard at the information flows of the transportation business, and it’s created a service that re-imagines how, by leveraging information flows, it might go about more efficiently organizing the energy (people, gasoline) and matter (automobiles, roads) in that market. Uber is an information first business, whereas taxi commissions, rental car agencies, and even automobile manufacturers are energy and matter-first businesses.

Or let’s look at another market: hospitality. Hotel companies are energy and matter-first businesses – they look at the world as a collection of places where expensive hotels might be built, and they then spend a lot of energy and money convincing the market to come to their hotels. Airbnb focused on information flows first, and created a new approach to organizing the energy and matter of the hospitality market: it uses information to organize people (energy) and matter (people’s homes).

Once I started thinking about companies as either “information first” or “energy and matter first,” I began to see information first companies all over the place. This wasn’t hard, because I’ve been spending the past year looking at applicants for NewCo festivals around the world. GrubHub, for example, takes an information first approach to take out dining. Casper takes an information first approach to the design, manufacturing, sales and delivery of mattresses. DocuSign is obliterating paper with it’s information-first approach to trusted signatures. Hampton Creek is a classic information first company in food. On and on and on – the theory is perhaps too neat, but neat it was nevertheless.

Then I wondered – what are the information first companies in financial services? After all, I needed to bring this theory home with a strong example native to the folks who I’d be speaking to. And that’s when I remembered Earnest, a NewCo I had visited during our San Francisco festival.

Earnest

And man, does Earnest bring the point home in spades. In my talk to the bank, I laid out how Earnest’s “information first” approach allows it to entirely rethink the lending landscape. First, I explained how Earnest works: It builds an information-rich profile of a prospective lending client, using APIs from LinkedIn and the client’s own bank account. In his NewCo presentation, Earnest CEO Louis Beryl explained that the company uses more than 100 parameters of information to make a lending decision, and models that information against ever-more intelligent algorithms. It’s a process that is familiar to every information-first company, from Google to Uber, GrubHub to NetFlix.
Earnest 1

Let’s compare Earnest’s information-first approach to the traditional lending practices of most US firms. These companies lend money based largely on an outsourced information source called the FICO score.

earnest2

As you can see, these businesses are built on a relatively thin information flow – and most of it is outsourced to another company (FICO). Lenders tend to organize around three things: Lead generation (marketing cost), conversion (to a loan), and collections. Defaults are a cost of doing business. But Earnest’s approach focuses on identifying qualified clients, then servicing them in an information first manner. While still new, Earnest’s approach radically changes the game – it charges 50% less for a loan, and has no defaults to date. Time will tell if Earnest executes its game plan well enough to become a major disruptor in the financial services sector, but the company’s already convinced Andreessen Horowitz and several other major VCs to invest $15mm in its first round of financing.

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This post represents my first “thinking out loud” about what it means to be an information-first company, and it’s in no way complete. The concept isn’t original per se, but I think might add some structure to the terminology that has bedeviled our industry for years. So often we talk about “tech companies” who “leverage big data” to  “disrupt” incumbent players. I like the idea of calling these businesses “information first” companies – because in the end, any company can put information flows first. Get that right, and the energy and matter will follow.

My Picks for NewCo Silicon Valley

By - October 09, 2014

We’re more than halfway through the NewCo festival season, with Amsterdam, San Francisco, Detroit, New York, and London/UK behind us, and Silicon Valley, Boulder, and Los Angeles coming up.

Next up is Silicon Valley, which goes off Oct. 21 – 23, centered on the axis of Palo Alto. This year’s Silicon Valley festival is a pilot – Silicon Valley is more of an idea than an actual *place* per se – and NewCo tends to thrive in city centers. But we’ve found a great partner this year in the city of Palo Alto, which really is as close to the beating heart of the Valley as any city in the south Bay. After all, it’s where Google, Facebook, and hundreds of other game-changing companies started. So this year we’re piloting NewCo Silicon Valley in two parts – first with visits to a small number of legendary Valley company campuses, and second, with a full day of 30 or so companies based in downtown Palo Alto. Here are the companies I plan to visit this year, and why, along with my “runners up” – companies I wish I could also visit, were there two of me.

Day One – October 21

tesla10 am session: Tesla Motors – Who doesn’t want to get inside this company? Tesla is an exemplar NewCo – using an information-first approach to rethinking a huge market, mission driven, and an inspirational working environment. Runner up: eBay. I visited eBay early this year and was struck by how much its headquarters had changed, from a cube-driven IT farm feel to an open, information-sharing design that mirrored some of the best offices I’ve ever been in.

google1 pm session: Google – I’ll admit, I’ve been to Google a few times already, but every visit is fun, this one will be about the driverless car project.  Both of these sessions are already full, but there’s a waitlist, and past history shows that the waitlist does clear more often than not.

Evening: The VIP Kickoff. This is an invitation only event, but readers of this site can get in by purchasing a VIP ticket here.  The kickoff is a celebration of NewCos (we’ll have five or six presenting quick overviews of their sessions), and in each city we pick a speaker who is emblematic of the region. In Silicon Valley, I’ll be interviewing Ro Khanna, candidate for the Silicon Valley’s congressional seat. Read more about Ro here. Also speaking will be the mayor of Palo Alto. The event will be held in the offices of Survey Monkey, a fixture in Palo Alto with an awesome rooftop deck.

Day Two – October 2

xapo10 am – Xapo. I’m fascinated by the bitcoin story, and the impact many smart folks claim is coming thanks to the blockchain. Xapo founder’s and CEO promises a “bit coin deep dive” in his NewCo session, and I’m all in to learn more. Runner up:  HealthTap, Science Exchange, and Survey Monkey. Oh, and City of Palo Alto. What a time slot!

citi12 pm – Citi Ventures. Very large companies have been coming to the Valley for decades, eager to figure out how to learn and invest in innovation. Citi has embraced this idea for some time, but I’ve never seen how it’s Venture arm works, and I’m eager to learn. Runners Up: Mightybell and Cloudera.

medallia2 pm – Medallia. I am a sucker for any company that has at its core a promise of making customer service and experience better through data and UX. The Sequoia-backed Medallia does both. Runners Up: EAT Club and Fundly.

houzz4 pm – Houzz. I knew that Houzz was a NewCo when I asked my wife if she’d ever been on the site, and she responded “I live on that site. How did you find out about it?” – it was as if I had discovered a secret passion of hers. Runners up: Piazza and WePay.

Day Three – October 23

LI10 am – LinkedIn. I just love this company and it’s been a while since I’ve visited. To me, LinkedIn is the ultimate NewCo when it comes to how work is done. It’s almost full, so sign up now!

scanadu12.30 pm – Scanadu. This innovative health device company is all about the patient revolution – putting power back to teh patient. Oh, and the company is at Nasa Ames, how cool is that? Runners up: Duarte and Polyvore.

yahoo2.30 pm – Yahoo! This Valley legend has so much going on. How will it spend its Alibaba billions? Is Mayer’s turnaround working? Who wouldn’t want to get inside and see how the sausage is made?

If you haven’t experienced a NewCo yet, registration is free, and the experience is extraordinary. More than 10,000 people have experienced NewCo so far – it’s just plain fun to go and, to my mind, a far better use of time than sitting in a dull ballroom all day.

The Next Stage of Mobile Quickening: Links Get Intelligent

By - October 05, 2014
HowItWorks

How Branch Metrics works…click to enlarge.

Early in a conversation with Alex Austin, CEO of mobile startup Branch Metrics, I had to interrupt and ask what seemed like a really dumb question. “So, wait, Alex, you’re telling me that the essence of your company’s solution is that it….makes sure a link works?”

Alex had heard the question before. But yes, in truth, what his company specializes in is making sure that a link works in a very particular kind of mobile use case. And doing so is a lot harder than it might seem, he added. Branch Metrics, a three-year old startup that began as a way to create and share photo albums from your iPhone, is now devoted entirely to solving what should be a dead easy problem, but thanks to the way the mobile ecosystem has played out, it’s just not. (Alex has written up a great overview of his journey at Branch, worth reading here).

A month or so I wrote Early Lessons From My Mobile Deep Dive: The Quickening Is Nigh, an overview of my initial learnings as I explored today’s mobile landscape. A major conclusion: the emergence of deep linking is leading to entirely new opportunities in mobile, and the mobile marketing machine is a key place to explore if you want to understand the implications.

Since then, I’ve spent more time talking to folks like Alex, and I’ve come to another conclusion: the next step in the mobile quickening will be intelligent links.

Now, before you go Googling “intelligent links” – I’ll admit there is no clear nomenclature per se, because in the past we’ve not had a need for such a distinction. After all, on the open web, all links can be intelligent, because they can pass information from site to site via cookies, redirects, and various increasingly sophisticated hacks.

Not so in mobile.

In his wonderful post outlining Branch’s initial failures and eventual pivot, Alex notes: “The biggest growth issue we faced in our mobile app was the fact that Apple doesn’t let you track users and pass context through the install process. …To break down this barrier would mean making the mobile app ecosystem more like the functionality we’re used to on the web.”

So that’s what Branch set out to do – in essence, to make mobile work more like the web. Branch’s initial photo book product may have failed for any number of reasons, but what stood out for Alex was how hard it was for the product to self-replicate across a customer base. A customer would create a cool photo book, and then want to share it with a friend. Of course, the best way to share is via a link to the photo book – that’s the viral calling card. But when a friend clicks on the link, Branch ran into the limits of mobile apps. It gets kind of convoluted, so let me break it down in steps:

1. Customer downloads Branch and uses it to create a cool photo book.

2. Customer wants to share the photo book with her friends, which she does using Branch’s internal sharing features.

3. Branch’s sharing features generate a deep link that is sent via email (or a Tweet, or Facebook, etc).

4. Friend receives invitation via email to check out a cool photo book.

5. Friend clicks on Branch’s deep link.

6. Friend does NOT have Branch’s app installed, so is linked to the Branch app download landing page in the iTunes store.

**THIS IS FRICTION POINT #1. In an ideal world, a potential customer should not have to go through the Apple app store just to view a cool media object that’s been shared (this wouldn’t happen on the web). **

7. Friend decides to download the app, tells Apple OK, accepts the app’s terms and services, fires up the app, and….

8. Sees the generic welcome screen that the app brings up for every new user. Now he has to create a new account, set a password, etc. Confused, he wonders whatever happened to the photo book he was looking for.

**THIS IS FRICTION POINT #2. The friend just wanted to check out the cool photo book, but the information of the original URL, which pointed to the actual media object, has been lost.**

9. Friend is confused as how to actually use the Branch app to see his friend’s cool photo book. He pokes around a bit, but quickly loses interest when he sees a new notification from SnapChat, or Facebook, or whatever.

10. Friend never becomes a new customer of Branch, nor ever actually sees the photo book.

This is a deeply lame experience, and one that seriously limits any app developer’s business. “You can’t have someone have to type their password in, and go through a long install and configuration to start using the app,” Alex told me.

So Branch pivoted, and created a lightweight SDK (software development kit) that, when installed by the app maker, allows the media object in question to appear once the app is installed.

Sounds super simple, but according to Alex, it was quite complicated, not least because getting app makers to install SDKs is non-trivial. However, Branch is finding traction with scores of app makers because the company solves a major marketing problem in mobile – how to create more fluid conversion and engagement paths which ultimately lead to more customers.

This is the evolution of the intelligent mobile link – something that’s sorely needed in the mobile ecosystem. It all starts with the ability to pass data through a link – something that Apple has not allowed in the past. But Branch’s elegant hack around Apple’s shortsighted policy is one more important step toward creating a truly mobile web, one that combines the richness and device-specific capabilities of an app with the universality of an open web architecture.

“It’s like 1995″ in mobile apps, Alex concluded. “We are just figuring out how to turn on the Internet on the phone.”

When I start to think about where this goes from here, I start to get very excited – intelligent links are the beginning of a whole new mobile experience. The next step is to break down the hegemony of the app store itself – why should we have to go through an authentication, download, and configuration process just to see what’s behind a link? We shouldn’t, and soon, I imagine we won’t. Of course this has serious implications for the hegemonies of Apple and Google’s app store choke points, but in the end, both companies are all about creating great experiences for their users, right?

Take it one step beyond erasing the app store friction, and we can imagine a world where apps work like always on-call services, at the ready to execute their portion of a fluid user experience. Explaining that experience will be the subject of a future post. But for now,  amen for folks like Alex and companies like Branch Metrics. Keep up the good work.

Else 9.29.14: Google snorts milk through its nose; Food, Things, and Marketing

By - September 28, 2014

i.chzbgr

(image) This past week’s links are rife with people asking hard questions of Google and Facebook, and so much the better, I’d warrant. You don’t get to the lead position without raising questions. In fact, that seems to be the theme of the week – asking interesting questions – of our online services, our marketing, and our food (yes, our food). To the links:

How Facebook and Google are taking over your online identity – Quartz

Look, it’s not like we don’t realize that these two companies are tracking everything we do. We are inured, we are banner blind, we are…well, we are about to realize we have a lot more power than we thought. But this piece doesn’t make that point, unfortunately.

Websites Are Wary of Facebook Tracking Software – WSJ

Wary, but not stopping themselves from using it.

Google’s Schmidt: Tim Cook, what are you talking about? - CNBC

Put another way: Apple, you are so damn precious, so damn arrogant, STFU.

Google Responds to News Corp’s EU Antitrust Case Criticisms – TNW

Another way of looking at this might be “Google snorts milk through its nose when asked about the EU.”

Facebook Demetricator – benjamin grosser

Ah, I love a good hack. Alas, not many others do. Ever wish you could use a service like Facebook without the constant numeration? Check this out, a worthy addition to the debate. And code to boot.

The tyranny of digital advertising  (Medium)

A relatively new participant in digital advertising takes stock, and has more questions than answers. But I liked his perspective and his questions.

Every Company Is An Experience Company – Searchblog

A dude who’s been in the media business longer than not (really, I’ve been in this game more years than not, which is rather stoney) has a few ideas about where “content marketing” and “native advertising” has to go next.

Copy-Remix-Profit: How YouTube & Shapeways Are Inventing the Future of Copyright – Hunter Walk

First, make it possible for everyone to ignore dumb laws. Next, profit from it. No wonder Google is the largest investor in Uber.

Inside Solid: who will build the god platform for the Internet of Things? - O’Reilly Radar

Well, there you have it. The race is on to create the next platform we never thought we would use (but will).

Forget GMOs. The Future of Food Is Data—Mountains of It – WIRED

I had a chance to go to Hampton Creek last week. Super inspiring. I hope to write it up soon (but I’m in New York for NewCo NewYork and Advertising Week. GAH.)

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Every Company Is An Experience Company

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Illustration by Craig Swanson and idea by James Cennamo

Some years ago while attempting to explain the thinking behind my then-startup Federated Media, I wrote that all brands are publishers (it was over on the FM blog, which the new owners apparently have taken down – a summary of my thinking can be found here). I’d been speechifying on this theme for years, since well before FM or even the Industry Standard – after all, great brands always created great content (think TV ads or the spreads in early editions of Wired), we just didn’t call it that until our recent obsession with “native advertising” and “content marketing,” an obsession I certainly helped stoke during my FM years.

Today, there is an entire industry committed to helping brands become publishers, and the idea that brands need to “join the conversation” and “think like media companies” is pretty widely held. But I think the metaphor of brands as media creators has some uneasy limitations. We are all wary of what might be called contextual dissonance – when we consume media, we want to do so in proper context. I’ve seen a lot of branded content that feels contextually dissonant to me – easily shareable stories distributed through Outbrain, Buzzfeed, and Sharethrough, for example, or highly shareable videos distributed through YouTube and Facebook.

So why is this content dissonant? I’m thinking out loud here, but it has to do with our expectations. When a significant percentage of the content that gets pushed into my social streams is branded content, I’m likely to presume that my content streams have a commercial agenda. But when I’m in content consumption mode, I’m not usually in a commercial mode.  To be clear, I’m not hopping on the “brands are trying to trick us into their corporate agendas” bandwagon, I think there’s something more fundamental at work here. There are plenty of times during any given day when I *am* in commercial context – wandering through a mall, researching purchases online, running errands in my car – but when I’m consuming content, I’m usually not in commercial context. Hence the disassociation. When clearly commercial content is offered during a time when I’m not in commercial mode, it just feels off.

I think this largely has to do with a lack of signaling in media formats these days. Much has been made of how native advertising takes on the look and feel of the content around it, and most of the complaint has to do with how that corporate speech is somehow disingenuous, sly, or deceitful. But I don’t think that’s the issue. What we have here is a problem of context, plain and simple.

Any company with money can get smart content creators to create, well, smart content, content that has as good a chance as any to be part of a conversation. In essence, branded content is something of a commodity these days – just like a 30 second spot of a display ad is a commodity. We’re just not accustomed to commercial content in the context of our social reading habits. In time, as formats and signaling get better, we will be. As that occurs, “content marketing” becomes table stakes – essential, but not what will set a brand apart.

Reflecting on my earlier work on brands as media companies, I realize that the word “media” was really a placeholder for “experience.” It’s not that every company should be a media company per se – but rather, that every company must become an experience company. Media is one kind of experience – but for many companies, the right kind of experience is not media, at least if we understand “media” to mean content.

But let’s start with a successful experience that is media – American Express’ Open Forum. If I as a consumer chose to engage with Open Forum, I do so in the clear context that it’s an American Express property, a service created by the brand. There’s no potential for deceit – the context is understood. This is a platform owned and operated by Amex, and I’ll engage with it knowing that fact. Over the years Amex has earned a solid reputation for creating valuable content and advice on that platform – it has built a media experience that has low contextual dissonance.

But not every experience is a media experience, unless you interpret the word “media” in a far more catholic sense. If you begin to imagine every possible touchpoint that a customer might have with your brand as a highly interactive media experience – mediated by the equivalent of a software- and rules-driven UX – well now we’re talking about something far larger.

To illustrate what I mean I think back to my original “Gap Scenario” from nearly five years ago. I imagined what it might be like to visit a retail outlet like Gap a few years from now. I paint a picture where the experience that any given shopper might have in a Gap store (or any other retail outlet) is distinct and seamless, because Gap has woven together a tapestry of data, technology platforms, and delivery channels that turns a pedestrian trip to the mall into a pleasurable experience that makes me feel like the company understands and values me. I’m a forty-something Dad, I don’t want to spend more than 45 seconds in Gap if I don’t have to. My daughter, on the other hand, may want to wander around and engage with the retail clerks for 45 minutes or more. Different people, different experiences. It’s Gap’s job to understand these experience flows and design around them. That takes programmatic platforms, online CRM, well-trained retail clerks, new approaches to information flows, and a lot of partners.

I believe that every brand needs to get good at experience design and delivery. Those that are great at it tend to grow by exponential word of mouth – think of Google, Facebook, Uber, Airbnb, or Earnest (a new lending company). When marketing becomes experience design, brands win.

There’s far more to say about this, including my thesis that “information first” companies win at experience-based marketing. All fodder for far more posts. For now, I think I’ll retire the maxim “all companies are media companies” and replace it with “every company is an experience company.” Feels more on key.

Else 9.22.14: Good Design Trumps Good Code

By - September 21, 2014

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This week’s Else is brought to you by good design, which trumps good code any day. And by the Alibaba IPO, which kind of pissed me off (see below). Enjoy the links!

The UX App That’s Driving Design Everywhere, From Airbnb to Zappos – WIRED

When I read this I thought – “Of course there’s an app for that.” And then I thought – “I gotta use this app!”

Pranking My Roommate With Eerily Targeted Facebook Ads  – My Social Sherpa

This is just so good, so rich, so fun. If you work in media or marketing, a must read.

Why Is Our Sci-Fi So Glum About A.I.? - NYTimes.com

Yes, my point exactly when I wrote my review of Her, which does not hew to the Hollywood narrative of AI Will Kill Us All.

Apple will no longer unlock most iPhones, iPads for police, even with search warrants – The Washington Post

Bravo, Apple, a huge play to push the data control off platform and into the hands of everyone. BRAVO.

Tim Cook Interview: The iPhone 6, the Apple Watch, and Being Nice – Businessweek

If you want to understand the new guy running Apple, this is the place to start.

Amazon Tops List of Google’s 25 Biggest Search Advertisers – Advertising Age

I wonder why? Hmmmmmmmmmm.

The $3.2 Billion Man: Can Google’s Newest Star Outsmart Apple? | Co.Design

I don’t think Tony Fadell thinks his job is to “outsmart Apple” but then again, it makes for a good headline. And the profile is good too.

Yahoo Stock Crashes As Alibaba IPOs – Business Insider

Ah yes – Alibaba. It’s not that Yahoo! exactly crashed (down 5%), but that it’s really worth very little were it not for the Alibaba holdings. That simply doesn’t make any sense.

Thoughts On Alibaba (Searchblog)

In which I think out loud about Alibaba. I am pretty sure I will piss a few folks off with this one. Sorry.

Venture Capitalist Sounds Alarm on Silicon Valley Risk – WSJ

Bill Gurley may well also have pissed some folks off, but in the end, I think he’s right in the thesis that too many companies are burning too much cash.

 

 

Thoughts On Alibaba

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(image WSJ)

A caveat before I think out loud, quite possibly getting myself into a running battle I know I can’t win: I’m not a public market stock investor, I’ve never been one, and take the following ruminations at the price they’re offered: IE, free.

But this Alibaba stock debut doesn’t smell right to me, and it’s not the company- which is certainly a huge success story inside China, driven by a scrappy founder with a laudable (if manicured) personal narrative.

That said, Alibaba’s star turn smells of collective greed, with a hefty side of whistling past the graveyard.

I wouldn’t be writing this post if I didn’t have some knowledge around the deal, at least as it relates to the culture of access enjoyed by those with relationships to investment firms. I’ve missed a TON of great deals over my career, mainly due to my being a journalist (or acting like one, as it relates to holding stock) for a large percentage of my working life. But over the past few years I’ve carefully gotten into investing, mainly in early stage startups. I don’t look to invest in IPOs, but every so often, about twice a year, they get offered to me.

This is what happened with Alibaba. I was given the opportunity to – possibly – invest a small sum in Alibaba about a month ago. I figured it was a no-lose deal, so I said “sure” and I didn’t give it much more thought.

But as the IPO drew near, I reconsidered that decision. Not because I thought the stock was going to tank right after the IPO  – I knew there was far too much money at stake, at least in the short term, for that to happen. No, I second guessed myself because I realized I honestly don’t understand the company, or the powers that control it. I pinged the fellow who had offered me the chance to invest, so as to recant my investment. But in the end, it didn’t matter. His fund didn’t end up getting an allocation of precious “at the open” stock anyway.

I can only imagine what it must have been like running that allocation, deciding who amongst all the wealthy, connected individuals and firms would get Alibaba stock at the opening price. It’d be like doling out rigged lottery tickets – everyone’s a winner! One thing I am sure of – it wasn’t a fair process, and I almost ended up benefitting from it by happenstance. So here’s why I am concerned about Alibaba, in no particular order:

1. Greed. The company was considered, by everyone I’ve spoken to, a “sure bet” that would “pop at the open” just like the Internet stocks of old (and it did!).  And yet, everyone that I have spoken with also believes that Alibaba is an offering that encourages the kind of negative Wall Street behavior none of us really want to see happen again. The book closed early. The stock priced above its initial range and moved up by nearly 40% on its first day of trading. Financial institutions, uncertain if they were going to get the allocations they wanted, started currying favor and hustling and pleading and whining. There was a frenzy of money making activity going on, and it felt like…pure greed. Alibaba is the ultimate insider’s stock – pedestrian retail investors did not get access to shares at the opening price, and most likely they will be the sheep to whom the wolves of Wall Street quickly sell (if they haven’t already). Insiders – wealthy people with access to early distribution of IPO shares at the open, have already made their fast buck. And the ultimate insiders have made a huge killing: a consortium of big banks poured $8 billion into Alibaba this June at a $50 price, a quid pro quo if ever there was one for giving a Chinese company access to the US markets. This kind of behavior adds questionable value to our society. I don’t doubt that everyone who held pre-IPO or at-the-IPO shares will make money, in fact, I’m sure of it. And that smells of a rigged game.

2. Shallow understanding. If you’re reading this, and you bought the stock at $93 (roughly the price of its first public trade, up from $68), tell me – have you ever used Alibaba’s services? Do you really understand the company? I doubt it, because Alibaba is a Chinese company. Most of us here in the US don’t speak Chinese, or have a reason to use Alibaba’s services. But for some reason we all seem willing to buy into the “Chinese eBay,” or the “Chinese Facebook,” as if throwing those successful public companies’ reputation over Alibaba’s frame somehow equates to quality. It’s a “bet on China,” as most of the press puts it. Certainly that sounds good, given the country’s growth and early stages, but it leads me to wonder… will most analysts who are covering the stock have done core due diligence on Alibaba – the kind where you go to the market in question and talk to customers, suppliers, and regulators? That would mean they have access and understanding of the culture that controls Alibaba, and I’m pretty sure that culture will not ever allow such diligence to occur (more on that below). What bankers and analysts will tell you is they’ve run the numbers that Alibaba has given them, and they are fantastic. Then again, so are the numbers on Chinese GDP growth – and most well informed people I’ve spoken to say those numbers are unreliable. (Oh, and by the way, if you think the $81 billion China just injected into its own economy was a shrug, I guess you should buy Alibaba without concern). Which leads to…

3. Controlled by a corrupt government. Do you know how China works? I don’t, but I’ve talked to enough folks who have lived and worked in China to get a pretty clear picture: The economic and government culture does not hew to US standards, to put it mildly. And like every other company in China, Alibaba is ultimately controlled by the whims of the Chinese government. It’s something of an open secret that Chinese corporate culture is definitionally corrupt by US standards. So…does listing it on the US stock markets change this fact? I could be wrong (see my caveat at the top), but I don’t believe it does. At least when companies are corrupt in the United States, we have a free and open press, and a democratic rule of law, to keep them in check.  One could reasonably argue that it’s a supreme proof of our capitalist system that now Alibaba is public in the US, so it will now have to play by US regulations. I wish I could buy into that narrative, but I sense all we’ll really get is a company well versed at playing our game, rather than a company that is an active builder of value in our society and in other free markets.

Let me put this another way: Here are a list of Internet leaders who decided to forego China, because the government has made it nearly impossible for them to do business in the way that built our capital markets: eBay, Yelp, Twitter, Google, Facebook….and that’s just off the top of my head. So by buying into Alibaba, we’re buying into a system that has, through government fiat, denied innovative US companies growth in the world’s largest market, then capitalized that fiat into a stock it’s now selling back to us. Again, that just seems wrong.

4. Hazy growth outside core markets. Many observers are expecting Alibaba to come into the US and other large markets, and either buy or compete its way in, so as to fuel its long term growth. This I find to be difficult to believe, on many levels. Sure, Alibaba could try to buy…Yahoo!, Yelp, Twitter, hell, maybe even Box or Square or one of the other heavily funded “unicorns.” But…does anyone really believe it can *manage* those companies to success post transaction? To get a sense of how odd that sounds, imagine Google or Facebook buying a slate of Chinese companies and then managing them well. Sounds pretty risky to me.

Anyway, I’ve gone on long enough, and undoubtedly I’ve managed to piss off any number of friends and colleagues across multiple industries. So let me repeat: I’m no expert in Chinese markets, nor am I a professional public market stock investor. I’m just an industry observer, making industry observations. Caveat emptor.