Rational Exuberance | Digital Media and Online Advertising | Brian Goffman

Facebook Beacons Its Apology

Obviously my post on Beaconization of the Web was wrong. I stand by the idea that people want to share what they do on the web, but they clearly want more control than Facebook gave them.

Here's what I got today in email from Facebook:

Facebook is sending you this notice of a proposed class action settlement that may affect your legal rights as a Facebook member who may have used the Beacon program. This summary notice is being sent to you by Court Order so that you may understand your rights and remedies before the Court considers final approval of the proposed settlement on February 26, 2010.

This is not an advertisement or attorney solicitation.

This is not a settlement in which class members file claims to receive compensation. Under the proposed settlement, Facebook will terminate the Beacon program. In addition, Facebook will provide $9.5 million to establish an independent non-profit foundation that will identify and fund projects and initiatives that promote the cause of online privacy, safety, and security.

For full details on the settlement and further instructions on what to do to opt out of, object to, or otherwise comment upon the proposed settlement, please go to http://www.BeaconClassSettlement.com .

Please do not reply to this email.

I admire Facebook for taking the risk here. Sometimes you go too far, but not going far enough is a bigger risk.

Congratulations to Scott Jacobson and Tim Porter at Madrona

 
Scott Jacobson and Tim Porter were promoted to partner at Madrona Venture Group. I worked with Tim and Scott over several years at companies including AdReady, Mixpo, SmartSheet and too many deals to count. Along with Matt McIlwain, Scott has been a key advisor for us at Optify.

Congratulations Tim and Scott!

Craig Johnson and VLG Legacy

I read the sad news in the WSJ today about Craig Johnson's death. I met Craig in the 1990s when he was running VLG and my wife was working there. VLG created a unique culture for a law firm: open, equity oriented, tech savvy.

The lawyers I met at VLG were truly passionate about what they were doing. Admittedly this was the 90s, and things were pretty distorted from a lot of angles, but the VLG team seemed to have created something special.

When we founded Optify we decided to work with John Robertson, an attorney who came to Heller Ehrman through their acquisition of VLG. Heller Ehrman then dissolved, on the day we were closing our Series A. John stuck with us and we continue to work together now that he's with Cooley Godward.  

It's often hard to know how to measure a legacy in business. Wealth created? Jobs? Innovation? Law firms come and go. VLG is gone, but its legacy continues long after its corporate structure.

RedBeacon: Congrats and What's New Again!

Congratulations to RedBeacon on their win at TC50!

Back in 1999...ok it's been more than 10 years...I was at Austin Ventures and we invested in ServiceLane. Lee Blaylock, Ven Kumar and the team had the great idea at ServiceLane to build a network of local service providers that could be accessed by consumers through the web. I still believe it was a great idea, but if so clearly it was just too early. We didn't enable scheduling, since most of the local guys at that time didn't even have a website, but we did send out leads by phone and email and had scheduling on the roadmap.

As the VC adage goes: "Being early is the same as being wrong."

Good luck to RedBeacon. The timing seems right by now. I hope they follow in the footsteps of Mint, who set the bar for innovating in a mature market.

Lee Blaylock is at it again with WhoDoYouKnowAt and launching at DEMOfall 09. Another learning: stay at the table!

Why Twitter is a Disruptive Innovation

It's hard to escape the Twitter publicity storm.  Celebrities are now coming in droves to what was a geek-driven network. One question worth asking is...why now?  What's different? Aren't email, IM, chat, Skype, blogging, social networking (now with email) and other the other forms of rapid fire communication enough?

In short, no. I had a chance to look again at the Innovators Dilemma by Clayton Christensen.  He describes a Disruptive Innovation as a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves ‘up market', eventually displacing established competitors.

An innovation that is disruptive allows a whole new population of consumers access to a product or service that was historically only accessible to consumers with a lot of money or a lot of skill. Characteristics of disruptive businesses, at least in their initial stages, can include: lower gross margins, smaller target markets, and simpler products and services that may not appear as attractive as existing solutions when compared against traditional performance metrics.

Why didn't blogging companies (like SixApart) develop Twitter?  Because they were busy serving ever growing needs of bloggers who right long form entries.

How about IM vendors? Chat? Facebook? Facebook was building its app platform at the same time Twitter was building a seemingly bare bones system for sharing a stream of short messages. Now Facebook has to respond to Twitter's incredible success with developers.

Because companies tend to innovate faster than their customers' lives change, most organizations eventually end up producing products or services that are too good, too expensive, and too inconvenient for many customers. By only pursuing “sustaining innovations” that perpetuate what has historically helped them succeed, companies unwittingly open the door to “disruptive innovations”.

It may be that incumbents...themselves in many cases only a few years old...will respond with innovation of their own and catch up to Twitter's momentum.  I'm not betting on it.

Warren Buffett and the Three I's

I heard a great quote from Warren Buffett today via Theodore Forstmann of Forstmann Little & Company:

"Buffett once told me there are three 'I's in every cycle. The 'innovator,' that's the first 'I.' After the innovator comes the 'imitator.' And after the imitator in the cycle comes the idiot."

If you're building a new product or investing in one, which "I" are you?

Financial.com

In 2002, in the darkest days of the .com nuclear winter, after many companies collapsed loads of software engineers were left hanging out at Starbucks.  Big company executives who imagined immense riches as part of the next Netscape packed their bags and left the Bay Area.  Some made it back to the East Coast and become mortgage brokers.

Around the same time, the glory days of financial engineering started heading to new highs.

How times have changed.  In 2008, the start-up world is humming again, fueled by venture capital funds raised on liquidity events of 2006.  Meanwhile, the financial system that created massive bonuses for traders, bankers and hedge fund managers, seems on the brink of collapse.

Why the dichotomy here?  Conventional wisdom is that venture capital investing lags the real economy by 6 months or so.  This is because VCs typically don't directly feel how bad things are until results start showing in their portfolios.  At that point, they have to increase reserves for follow-on investments and plan to sit longer on boards of companies that can't sell or go public. 

If you're planning to raise money, do it now.

The current financial crisis is much bigger than the .com fallout.  It affects every corner of the economy.  Banks rely on the trust of consumers to keep their money safe.  Banks also rely on the trust of other financial institutions to maintain liquidity.  There were lots of charlatans who thrived in the .com boom, but it's becoming clear that the scale of the mortgage-backed house of cards is larger than anything Enron invented.

How low will we go nobody knows.

Some Good Things about a Recession

Back in January I had the chance to get together with a group of my business school friends on the East Coast.  The mood among the bankers and hedge fund managers was apocalyptic  The financial system, according to almost all of them, was coming to a crashing halt. From the looks of the stock prices of Fannie Mae and Lehman Brothers, and the demise of Bear Stearns, they were at least directionally correct.

Those of us in the technology business were pretty shocked at how bad the bankers thought things were. We didn't even know anyone who had been laid off! And what about that new iPhone? This time, in contrast to 2001, it's Wall Street that's on the downside of a bubble.  And this one is beyond anything seen in the lifetime of the Internet. 

For tech, it may be only beginning. Wall Street banks buy a lot of software and hardware (see that Cisco warning this week?). Investment bankers do a lot of traveling (Expedia?). Mortgage lenders do a lot of advertising (IAC?) Hedge fund managers...well, they're still making money.

But there's no question that the melt down on Wall Street, combined with the skyward rise of oil and commodity prices, will cycle through online media and technology. Some projects will do really well - enterprise software that saves money, for example. But the stupid discretionary projects may be axed.

Is there anything good about this? Back in 2001, several people told me that "a downturn is a great time to start a business." This may make sense once you've lived through it and look back, but it's painful at the time. So for those of you starting or running a startup during this downturn, I thought I'd share some good things about a recession.

 

I remember reading the Wired article in 2006 on The New Boom that argued that "it's different this time!" since we're in a boom (sustainable growth), not a bubble (crazy stupidity).

I don't think anyone in Silicon Valley praying in 2002 for "Please, God, just one more bubble," meant for one in commodities and housing. But that's what we got.  So boom, bust, or bubble, stay focused on the opportunity.

Widgets and SEO

For me, one of the most intriguing areas of online marketing is search engine optimization or SEO.  Though there are a number of reputable software and consulting firms like SEOMoz, I haven't found a world-class software-based solution to managing and monitoring SEO in conjunction with a broader online marketing strategy.

With the advent of universal search there's also a lot of buzz around digital asset optimization, described in this TopRank blog post.  As far as I know, outside of Mixpo very few companies are actively incorporating universal search into marketing.

One of the best SEO-focused companies  I know is BuddyTV.  BuddyTV has taken an approach to SEO that fully aligns with search engine goals: great content, a deep link structure, multiple media types, and engaging services for user self-expression.  One of my favorite features of BuddyTV is the personality quiz that compares me to TV characters.  I can put the results on my blog, MySpace page, etc. 

If you're interested, here's my result from the quiz about The Office:

Which Character From The Office Are You?

More on The Office. Created by BuddyTV

Note to NBC: why don't you have a separate site for The Office? How about fixing the broken links on the John Krasinski page on NBC.com? Are you behind Jim Halpert's page on MySpace?

Not coincidentally, this widget links to BuddyTV.

Mark Goffman makes the WSJ for "Figures of Speech"

I'm really excited about Mark Goffman's upcoming documentary on ventriloquists, "Figures of Speech." I admit lots of bias on this but Mark's a super talented guy (West Wing, Law & Order SVU) and he's picked a great topic. Early footage from the film is very, very funny.

Since this is a limited budget movie, it will be interesting to see what we can do to generate interest in the movie from the web and how that translates into demand for distribution.

If you're interested in more click below or I've attached the link to the page on WSJ article on Terry Fator and background on the movie.

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