August 9, 2011
I met with a young venture capitalist today who has been investing aggressively in consumer internet over the past 18 months. We discussed investment philosophies and it got me thinking about my own. I began making angel investments in 1999 through Bayview Partners, the Robertson Stephens partner fund. Some went well. Most did not. After leaving Robbie Stephens, I made a few investments on my own. A higher percentage of these went well (Wayport, Cars Direct), but several went to zero or returned less than my invested capital. Over the past two years, as startup fever has consumed New York City, with a front row seat, I’ve resumed angel investing on a selective basis and feel as though my chances for success continue to improve with each successive investment made. Much has been written about venture investing theory, pattern recognition and the like, and I agree with most of it, but I think it takes some actual investing experience over several years to establish a sound approach and philosophy, including a few mistakes along the way. As James Joyce famously said: A man’s mistakes are his portals of discovery. Sadly (for their LPs), some of the new players in venture capital are diving in head first, learning as they go and most likely losing gobs of money in the process.
Roger Ehrenberg, one of the smartest investors in New York City, has written extensively about his investing philosophy More…
May 12, 2011
This post originally appeared on the Outbrain blog.
One of the most common questions we get from publishers evaluating our products — both on the distribution and traffic acquisition sides — is “are we SEO positive?” While the true answer is “maybe” (I’ll explain in a minute), our party line on this is “No, SEO isn’t one of our selling points.” Every once in a while, a publisher will get hung up on the issue of SEO (search engine optimization), believing “SEO juice” should be baked into every product decision they make.
May 3, 2011
The blogs have been aflutter recently with renewed discussion of “in-stream advertising”. Mark Suster wrote an eloquent piece in TechCrunch last week proclaiming “the future of advertising will be integrated”. My friend, Jon Steinberg, of BuzzFeed has written several posts on the topic, including one entitled Native Monetization, touting monetization that is native and organic to the platform on which it resides. I agree wholeheartedly with both their sentiments, and have for some time. The truth of the matter is that this is hardly a new discussion. Most disruptive shifts – particularly ones in online media and advertising – seem to be decried and predicted many times over many years before they actually take hold. This one is no different.
At Sphere (then later at Surphace), we rode this pony as early as 2008 by championing the untapped value “below the fold” and we reiterated the argument again in 2009, discussing all the points of action that exist in this area of the page – commenting, sharing, etc. All these activities are integrated in the main content well where readers’ focus persists. Mark’s reference to Jakob Nielsen’s Banner Blindness study (actually conducted in 2007 and referenced in our 2009 post) supports the hypothesis that the more native / integrated / in-stream / in-line you get, the better branding and engagement you will achieve as a marketer or attention-grabber of any form. One of the best posts on this topic was written in early 2007 by UX expert and former Aol employee, Milissa Tarquini, entitled Blasting the Myth of the Fold.
The reason why “the fold” was such a focal point of early discussion of integrated / native / etc advertising is that a publisher can only fit so many things above it. By the time you squeeze in a header, navigation and a few paragraphs of content, you’ve reached the proverbial fold, and for most of the past decade, online marketers swore off anything below as verboten. This forces marketers to the right rail to preserve their “above the fold” status, but in so doing, into the “banner blindness” zone. In Mark’s post in TechCrunch, he suggests Kontera and Vibrant as examples of businesses who have figured out an integrated solution. In both cases, these companies have built significant businesses which deserve respect, but many industry insiders describe their products as disruptive to reader experience, at best, and some choose other less complimentary adjectives. Either way, I don’t expect to see these mouse-over pop-up schemes showing up on CNN or NY Times anytime soon and I certainly wouldn’t want them on my blog. Integrated?, yes. Native?, maybe. Organic?, no way. More…
February 2, 2011
We have some big news to announce. We are leaving our comfy home of the past nearly three years at Aol and returning to the land of startups by merging with Outbrain! Technically speaking, Outbrain is acquiring us. As the two leading content recommendation and discovery platforms for online publishers, this is a natural fit and one that we believe forms a formidable opportunity.
First, some background. Aol paid us the nicest possible compliment by acquiring Sphere in 2008. The subsequent nearly three years have been a healthy and fruitful marriage. We launched on 34 Aol sites (plus a bunch of others), watched our business grow to profitability for the first time, and released several new products and features. During that time, we changed our name to Surphace and added a few new faces to the team, though our commitment to providing publishers with the best content recommendation solutions never changed. Around the same time, Outbrain arrived on the scene in a real way with some innovative ideas about how to marry content recommendations with meaningful revenue. Over time, we began competing against each other regularly. A few months back, Outbrain’s CEO, Yaron Galai, and I got together and decided that it made more sense to collaborate, creating a definitive winner in the market by combining our products and domain expertise to form one best-in-class solution. And that’s exactly what we’ve done. A personal thank you goes out to Tim and Jon for supporting our vision and buying into the value created by this merger – it’s a big win for all parties involved. More…
February 25, 2009
It’s been nearly three months since I began my second iPhone journey and if it’s any indidcation, the gist of this post has changed several times before I’ve managed to write it. The iPhone is a device that commands both loved and hated sentiments (but rarely anything in between), as Om blogged about last week. The first month of my second iPhone journey was pure bliss, and I’ll elaborate more on what made it so enjoyable. The more recent two months have been a mix of love, hate, disgust, frustration, joy, serenity and finally, disbelief during the many instances where the battery has died, rendering the device useless.
January 6, 2009
For as long as I can remember, I’ve been rooting for University of Pittsburgh sports teams. My dad, grandmother, grandfather and scattered other relatives all attended Pitt and so it’s been natural for me to root for them, sometimes even ahead of my own alma-maters. So it’s particularly exciting for me that today, Pitt Basketball has attained the #1 ranking in college basketball for the first time in the school’s history. The team has attained the #2 ranking on at least three occasions, one of which came in 1986 before a mid-season game against Georgetown, a game in which I got to be ball-boy for the Pitt team, which included Charles Smith, Jerome Lane and Sean Miller. Sadly, as Pitt teams have done on a number of occasions, they lost that game in embarrassing fashion to a much better Georgetown squad. Recent Pitt teams during the Jamie Dixon era have been different though and last year, they rebounded from several devastating injuries and a sluggish regular season finish to win the Big East Tournament. They haven’t made a serious run in the NCAA Tournament yet, but this could be the year. Most of their starters are back and the team seems to be gelling.
At the beginning of last season, I had the opportunity to attend the Duke vs Pitt game at MSG, a dream of sorts. My alma-mater versus my family school. Interestingly enough, I found myself pulling for Pitt down the stretch, and when Levance Fields hit a game-winning 3-pointer at the buzzer, I was thrilled. This year, I’ll get to see a few more Pitt games and the Big East Tournament looks like it may be one of the best ever, given the dominance of this year’s league. I’m keeping my fingers crossed that Pitt may finally have all the ingredients to make a real run at a Final Four and National Championship.
January 5, 2009
Facebook has crossed the canyon. If the “chasm” is the leap from early adopters to mainstream, then the “canyon” is the leap from mainstream to mass commercial appeal. Facebook has taken that leap. In the past few months, my dad, uncle, aunt and the mother of a high school friend have all joined Facebook. Facebook has become, as I explained to a hold-out friend of mine last week, the most fun and efficient way to keep in touch with the people in your life. As recently as five years ago, I reserved most Sunday nights for catching up with people by telephone. That was the way I maintained friendships, particularly with people living in other cities, who I didn’t see face-to-face on a regular basis. I’d call them after dinner, speak for 20-30 mins, get an update on the past few weeks (or months in some cases) and then say goodbye, until the next time we called each other. Today, telephone conversations of this sort are passe. Why waste time on the telephone, a communication medium limited to audio, when we can peruse each others’ photo streams, see what events our friends have been attending, and most of all, from a single page, get a snapshot of their status’. The feature with which Facebook offers the summary view of our friends’ updates is called the News Feed. If we really care, we can review their historical status updates to get a more complete picture of how they’re doing. When’s the last time you received as complete of an answer to the question “How ya doin?” <insert Joey accent>. Most industry wonks agree, the status update is Facebook’s single greatest achievement. It allows people to keep in touch with the absolute minimal amount of effort possible. It’s possible that Facebook makes it too easy, contributing to the loose ties effect that sociologists have been preaching, where our networks become less centered around a few close relationships and more around many looser ones. More than any other tool in my universe though, Facebook is having a significant impact on that shift in the social landscape. Their crowning achievement, the status update, is such a good invention that several companies have been formed around it, the most notable of which is Twitter.
Not surprisingly, Twitter’s growth trajectory has been similar to Facebook’s. Twitter virtually launched two years ago at SXSW in Austin, when it caught fire among a captive audience. Since then, it’s consumed the early adopter market and steadily made it’s way toward mainstream. In the past few months, several celebrities and consumer-focused orgs have caught on and grabbed ahold of Twitter accounts to communicate with their constituents. According to Compete.com, Twitter traffic measured by unique visitors is up 640% in the past year – though this figure doesn’t fully account for Twitter’s influence since a big chunk of their traffic flows through one of several messaging apps that feeds the platform. Like Facebook, Twitter is having it’s own effect on social behavior. I’ve recently noticed conversations taking place between groups and individuals that might be unlikely to converse otherwise. One example is GazaNews who has, not surprsingly, attracted a bunch of followers recently and engaged in some compelling back and forth. This is a good thing. Open dialogue and discourse between people that are geographically and/or ideologically far apart can only be healthy, and for a company as nascent as Twitter to be enabling this is a huge accomplishment. Twitter has essentially peeled off and borrowed a piece of Facebook by identifying and unleashing the full potential of this feature…not that there was anything Facebook could have done about it – it’s unlikely the status update could have been patented. Still, Facebook should buy Twitter to reclaim ownership of the feature and own the social media landscape that they’ve helped transform. It would re-establish them as owners of all things status update-related and give them another outlet for their ad sales activities. Better integration with Facebook would also expand Twitter’s influence exponentially, making it a far more powerful tool than it already is. The reality of Twitter is that it’s a feature that caught fire, but can probably only survive so long by itself. Facebook could likely acquire them for a reasonable price right now and quickly justify it by the further growth they can help fuel on the platform. It would also be a strong defensive move for them. If one of their competitors – in social networking, blogging or sharing – acquired Twitter, they’d essentially be stealing a piece of Facebook and I think that may come back to haunt them down the road.
December 9, 2008
I’m on UAL 673 from LGA to Chicago right now. It’s been a little while since I flew one of the old-school U.S. airlines – I’ve favored JetBlue and Virgin America recently – and while it wasn’t a carefully considered decision, now I know why. A few years ago, I lived on United. At one point, I had half a million frequent flier miles with them. When I arrived at the airport this morning, I brought my boarding pass directly to security, at which point they dismantled my bags in search of my toiletries. As they extracted my traveling toothpaste, shaving cream and moisturizer (especially important in the winter:), I asked him to stop, put it all back and let me check the bag. Having traveled with the exact same toiletry bag at least five times with its current contents, I was surprised by the lack of consistency and general inefficiency of our airline security screens, but that’s not my point here. When I returned to the ticket counter to check my bag, they charged me $15. Surprised, I objected and questioned the policy to make sure the employee hadn’t made a mistake. “No, we began charging for checked luggage two months ago. American did it first,” she explained. I can understand charging for food, headphones and even pillow kits, but charging for checking luggage? This seems a step too far. Now I understand why I’ve favored the newer, more streamlined airlines recently and have another reason to continue doing so. The flight I’m on, a 9a from LGA to ORD, that would be a popular business flight under normal circumstances, is about 40% full.
The American airline industry seems to me very analogous to the American auto industry. We have a few old entrenched companies who have survived – United, American, Delta, Northwest – who we’ll call the Vintage 4, and we have newer upstarts – Southwest, JetBlue, Virgin America – who we can call the Nouveau 3. The new companies are streamlined, have assembled more efficient business models and are slowly but surely, winning over American travelers. They’re winning over Americans because they’re offering a better service and the superior health of their businesses shows clearly. The Vintage 4 have aging fleets, union contracts that make it more difficult to compete, and maybe partially as a result of the above, pesky disgruntled flight attendants who are a far cry from the stewards and stewardesses of an earlier era. No need to elaborate there. In the auto industry, we have a few new upstarts developing electric-powered cars, albeit not quite ready for mass production, and we have entrenched players, who have consistently failed to innovate or evolve. I’m written about this several times already, but the airline industry is a perfect comparison for what happens over time when the incumbent fails to innovate and respond to the market. In today’s WSJ, Bob Lutz, Vice Chairman of GM, defended CEO Rick Wagoner, saying “To blame the American automobile executives for this frankly is ridiculous. How were we supposed to forecast this when the government doesn’t forecast it and the financial institutions couldn’t?” What a bullshit comment. He misses the point completely. Financial institutions fucked up and three of the largest five no longer exist. That’s what happens when you fuck up. The only difference is that with the financial orgs, it happened relatively quickly, over less than a decade as mortgage-backed securities gained in popularity. With the auto industry, it’s happened over 40 years, and yet they’ve spurned each and every opportunity to shift course. The federal government should demand specific milestones be met towards a greener and more efficient industry if GM and their brethren are to take loans funded by taxpayer money. If that means Wagoner, Lutz and existing management find new careers, that’s fine. The industry and the companies will be better off for it. In fact, I’m not sure they can execute a successful turnaround without new management. As long as they continue to make excuses for past performance though, it’s clear to me that they won’t be making the kind of progress we expect any time soon.
November 22, 2008
Future White House Chief of Staff, Rahm Emmanuel, was recently quoted as saying “You never want to let a crisis go to waste…it’s an opportunity to [get things done]….” I sure hope that Barack Obama is smart enough and courageous enough to listen to his appointed advisor. There are two immediate areas where we have the chance to be opportunistic in a crisis scenario and move the country forward. These chances don’t come along very often. Since Barack Obama is at the dawn of his presidency and his early decisions will set the tone, I urge him to do the right thing now and put his administration in motion the right way. This opportunity will probably not come again.
Detroit: To Bailout or Not To Bailout
I’ve written about this issue previously but I’m even more concerned now. GM is the poster child of a storied American auto industry that reached its peak in the 50s and 60s and has been declining ever since. In the first half of the 20th century, America was the auto industry. We invented the things and made them better and more efficiently than anyone else for a long time. Starting in the 70s, though, that began to change (see chart). While their market shares were consistently declining, Detroit automakers fought tooth and nail in Washington to avoid more aggressive fuel efficiency standards, in turn, exponentially growing our demand on foreign oil and generally being a nuisance to the environment and the long-term sustainability of our economy. To make matters worse, in 1999, GM decided to buy Hummer and start production of a vehicle that goes 9-10 mpg, and is exempt from federal fuel standards.
GM currently burns (loses) $2B of cash per month! Being in the startup/venture world, I know a little about burn rates, and GM’s is outrageous. Their operating costs, driven largely by UAW demands, are universally 2x above market rates. With this setup, they will never compete favorably with Toyota, Honda and new emerging car-makers in Korea and China. This past week, Detroit auto execs flew down to Washington to plead their case. They each flew their own private jets to a meeting for which they were not prepared and did not have a plan. At roughly $2,500 per hour, the airfare alone cost the companies roughly $30,000. Now, forgive me for judging, but if I were a CEO with less than six weeks of capital in the bank going to meet with the only venture capitalist left who is considering funding my company, I’d prepare a detailed presentation for the meeting and would probably not lavishly and publicly waste my firm’s capital on my way to town. No venture capitalist I know would consider giving that management team a second meeting so why is Ms. Pelosi? Hedge fund managers currently oversee about $2 trillion and private equity adds roughly $1 trillion more. As far as I can tell, not a single one of these investors is jumping at the opportunity to own a big chunk of GM. Why? Because investing in GM means investing in America’s past. No smart investor wants to invest in the past. If the U.S. treasury wants to use our tax-payer dollars to make good investments, let’s invest in Google, Apple or RIM. Let’s prop up levered industries like real estate that are suffering right now. Let’s invest in geothermal, solar and wind energy. Let’s invest in America’s future, not it’s past.
Energy Policy: Time to Institute Gas Tax
This past week, the price of oil dropped below $50 a barrel from $147 in July. That’s a drop of 65% in four months!! This is an equally important opportunity that Obama should not let go to waste. The conventional move that we’ve seen repeated every time we experience rising and falling energy costs is to preach about the need for alternative energy when prices are high and go back to driving our gas guzzling SUVs when prices fall. In fact, those words could have been taken right out of Obama’s mouth on the campaign trail. These low prices (average last week was $1.98/gallon) are an opportunity to finally put in place the gas tax that has been discussed for the past decade. There’s been renewed talk of how this should work with many advocates calling for a price floor, and the money generated could fund the clean energy movement that is going to help revitalize our economy and get us out of the current mess. It woud also put pressure on all the necessary constituents to put their money where their mouths are and commit to eliminating our dependence on foreign oil within 10 years. That’s the timetable Obama presented on the campaign trail and it’s an ambitious one. For us to have any hope of achieving it, he needs to capitalize on every opportunity and that means starting now.
Neither of the above two proposals are popular in Democratic circles. Detroit and the UAW have been traditional Democratic supporters for decades and Washington Democrats have traditionally protected them. This time, however, is different. We all know that times have changed and the notion that we should consider investing tax-payer dollars in a dying dead industry during a massive economic recession is beyond the pale and Change We Cannot Believe In because it’s not change, it’s more of the same and exactly what Obama protested for the past two years. Yes, a GM bankruptcy could cause untold disruption to the market, but as one pundit explained, the market is drunk and won’t get better until it pukes it all out. Similarly, implementing a gas tax during the current economic cycle will be unpopular. Raising taxes during tough times is never easy, but it’s too big an opportunity to pass up. Consumers are accustomed to paying higher gas prices and the cliff that prices have fallen off in recent months represents a rare oppotunity to take action. There is concern that Obama’s apointment of Clinton advisors, including Hillary herself as Secretary of State, represents a return to politics of old. I hope that’s not the case. I’ve been a supporter of Obama from day one of his candidacy and I have as much hope for his presidency as ever. Though squandering these two opportunities will make it very difficult for him to live up to the promises of the campaign, because they won’t likely come again (GM will probably fail again and we’ll have the chance to fund or not fund them again, but the shrinking U.S. Treasury will have $50 billion less in it’s coffers). Let’s hope he does the right thing and achieves a new outcome.
November 18, 2008
Everyone seems to have an opinion lately of how the government should handle the current economic crisis. Normally, these would be easy to dismiss, given our relative inexperience compared to the authority of those in charge, however watching Hank Paulson waffle back and forth, seemingly each week, on the best strategy to secure the economy, I’m less convinced that our leaders truly know what to do this time around. Granted, these are unprecedented times so Paulson deserves some slack, but I find it auspicious timing that we have a president-elect who has pledged put an unprecedented level of information on the web, detailing government spending and lending transparency to an institution that historically lacked it. Given the critical nature of the present, this may be the best opportunity we have to go one step further and leverage technology to harness the massive intellectual firepower of this country, and efficiently share ideas to find the best solutions. I hope Obama recognizes the opportunity presented by this crisis and wastes no time in putting his transparency/technology plan into action.
Nicholas Kristof wrote last week that education was essential and shouldn’t be relegated to 5th on Obama’s list of priorities. Apparently, Obama’s website – Change.gov – took down an ordered list last week and replaced it with five domestic priorities, in no particular order:
The principal priorities of the Obama Administration include: a plan to revive the economy, to fix our health care, education, and social security systems, to define a clear path to energy independence, to end the war in Iraq responsibly and finish our mission in Afghanistan, and to work with our allies to prevent Iran from developing a nuclear weapon, among many other domestic and foreign policy objectives.
This past Sunday, 60 Minutes presented his priorities in the following order:
- Economic Recovery
- Energy Independence
- Health Care
- Social Security
Personally, I disagree with Kristof and support this order. Certainly, the travails of the economy are hard to ignore and that’s why it needs to be a pervasive priority, but I believe energy independence is the single-most important issue facing our country and one that directly affects our ability to rebuild the economy, create sustainable and universal health care and indirectly help fix social security. As both Al Gore and Paul Krugman have recently explained better than I can, a robust clean energy economy can create millions of jobs, replace dying industries (read: auto) with a new and burgeoning one that’s full of promise, and create a vast new exportable good for the country. An equally important motive, reducing our dependence on foreign oil will boost national security because we’ll have less incentive to meddle in middle east affairs, making the country safer. During the campaign, Obama said he would eliminate foreign oil imports within 10 years. It was such a popular claim that McCain pledged to do the same. It’s an aggressive timetable, but one the country should commit to. We’ll all be better off for it.
As for the issue/question of the day – what to do with the ailing auto industry and specifically GM – Michael Levine lays out one of the best arguments I’ve read in today’s WSJ on why bankruptcy is the best option for GM. There partially exists an image problem for Bush/Obama because having already bailed out Wall Street and AIG, not doing so for Detroit would seem elitist and contrary to the guiding principles of the Democratic party. Also, UAW did Obama a big favor by waiting til Nobember 6 to mention that GM had less than two months of cash in the bank. Doing so earlier would have made it a campaign issue, which likely would have hurt Obama’s chances. They also donated heavily to his campaign, which makes this Obama’s first real test. Will he cave to the pressures of Pelosi and protect traditional Democratic interests possibly leading to an appeasing administration that never gets anything big done, or will he do the right thing from the start and set his presidency in motion?
His mantra during the campaign was Change and allowing GM to go bankrupt would represent a much-needed one from the politics of old that are dragging down our country. Fundamentally, GM is not a competitive organization. We’ve all watched their market share consistently slide for the past several decades. If the smartest pe funds aren’t interested in the investment, why should the tp fund (tax-payer) consider it? I visited Detroit twice in the past year and the pervasive urban decay that’s impossible to miss tells the whole story. The best course of action is to help GM engineer a well orchestrated bankruptcy plan with federal assistance. Directing federal funds towards unemployment insurance and pension guarantees is a far better use of cash than life support for a dying business. As Levine explains:
If GM were told that no assistance would be available without a bankruptcy filing, all options would be put on the table. The web could be cut wherever it needed to be. State protection for dealers would disappear. Labor contracts could be renegotiated. Pension plans could be terminated, with existing pensions turned over to the Pension Benefit Guaranty Corp. (PBGC). Health benefits could be renegotiated. Mortgaged assets could be abandoned, so plants could be closed without being supported as idle hindrances on GM’s viability. GM could be rebuilt as a company that had a chance to make vehicles people want and support itself on revenue. It wouldn’t be easy but, unlike trying to bail out GM as it is, it wouldn’t be impossible.
Levine goes on to point out that a GM bankruptcy will make addressing health-care coverage more urgent, which is a good thing – it will lend a hand to the next major priority on Obama’s to-do list. To President-elect Obama: this is your first test and it’s coming before you even take office. If you get it right by doing what’s unpopular within your own party, you’ll win the respect of some of your foes and set a strong precedent that will commence your presidency the way you ended your campaign, seeking to repair what’s wrong with America, without missing a beat.