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IAB: Online Is Still Pretty Healthy, But... (John Battelle's Searchblog)

John Battelle's Searchblog — Fri, 21 Nov 2008 07:20:11+0100

News from the IAB (caveat, I am on the Board)...

The Interactive Advertising Bureau (IAB ) and PricewaterhouseCoopers LLP (PwC) today announced that Internet advertising revenues reached almost $5.9 billion for the third quarter of 2008, representing an 11 percent increase over the same period in 2007. While double-digit annual growth continues, the quarter-to-quarter curve remains relatively flat compared to recent past performance....

...The Q3 2008 figures, published in the IAB Internet Advertising Revenue Report, are 2 percent higher than the Q2 2008 results. Set against strong economic headwinds in the U.S. economy, Q3 '08's $5.9 billion represents nonetheless the second-highest quarter results ever. For the first nine months of 2008, revenues totaled $17.3 billion, up from $15.2 billion in the same period a year ago and surpassing the record set in the first nine months of 2007 by nearly 14 percent.

The one everyone will be watching, and most expect will be very bad news, is the Q4 spend. It feels like there is a pause in the market as advertisers rethinking how they are spending, and what ROI means in a world of engaged media. Long term, this is a good thing, I think.

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The art of the bootstrap (VentureBeat)

MySpace application helps Blackberry phones get more social — Fri, 21 Nov 2008 02:42:43+0100

[Editor's note: With the economic downturn drying up venture capital in Silicon Valley and elsewhere, more early-stage companies will be forced to bootstrap their way to profitability. But what does that actually mean for the companies who go this route? Javier Rojas, managing director of equity capital firm Kennet Partners, offers his insights.]

Times being what they are, it’s encouraging to know that some of the world’s leading public companies got to where they are without taking any early venture capital funding. That’s right, Microsoft, Dell, Cisco, Oracle, eBay — they all “bootstrapped” it.

Others, like Siebel Systems, Checkpoint Software, Broadcom and dozens of others, have followed their examples to success. The early years may have been challenging for the new execs forced to turn down paychecks. But they kept the faith that focusing more on customers and real revenues than market sizing and early valuations would someday pay off.

There are many compelling reasons for young companies seeking venture capital to turn to bootstrapping, even when they have other options. Not only might it be a safer way to go today, but it’s also a smart way to build a business.

How it works

When you decide to bootstrap, you commit to fund primary development and growth through internal cash flow from real-life customers. You — the founder — and a limited number of early employees may forgo paychecks for quite some time to make this work. But to keep that strategy to a minimum, it’s common for bootstrapping companies to turn to consulting engagements, non-recurring engineering contracts, value-added reseller agreements and projected supplier contracts. In short, “moonlighting.” These funds go toward initial growth and expansion until the company can stand on its own two feet.

A solid foundation

Opting to be self-sufficient (either voluntarily or not) and rely on real revenue means one thing: The customer is suddenly king. This focus becomes baked into the company’s DNA. Its very survival depends on developing products that its target market actually wants and likes. Customers are often involved in beta testing and are encouraged to become involved in the process. And early on is the time when you want to solidify a customer base for future sustainability.

Bootstrapping companies can also be more rational and less speculative with their allocation of resources. Because they can’t afford to throw money at problems, they have real incentive to solve potentially destabilizing conflicts and errors before they become systemic.

How much bootstrapping is enough?

Raising the right money at the right time can make or break a company’s growth, so it’s important to know when your company has outgrown its boots. Here are some indicators:

- Market growth rate is accelerating: If the market is growing faster than your internal funding, you risk losing market share (and equity) by not catching up.

- Customers are buying products and sales are predictable: You can scale your sales team, and more effectively channel the VC money you raise. As a rule of thumb, you should feel confident that you can predictably bring in at least $2 in gross profit for every $1 you spend on sales and marketing. I recommend a $3 to $1 ration as an even safer barometer.

- Complementary products or businesses have become available: It may be time to expand your offerings through an acquisition. Can you economically acquire new customers through a merger? If you are considering M & A activity and need help financing your growth, it’s time to raise capital.

- The current economic cycle favors growth: This isn’t what we’re experiencing now, of course, but hopefully it won’t be too far off. If the market seems to favor technology investment, or you see new growth areas on the horizon, it could be wise to switch.

- Your balance sheets are weak, or you want to diversify risk: Co-mingled balance sheets can be a major challenge for bootstrapping businesses. A prudent decision for a company may be imprudent for its founder (scaling sales at the expense of cash-flow, for example). As a consolation, selling off some shares can let founders offload some risk as well.

Where do you go from here?

If you’ve bootstrapped long enough to face these issues, you’ve probably done a pretty good job establishing growth and maintaining an equitable personal stake. Now the question becomes, “What do I look for in an investor?”

My advice: Don’t just look for the money — look for a partner with vested equity interest to help you expand. After this point, many parts of your business and how you manage them will need to change. Your investment partner should offer substantial contributions in this direction, not just capital.

A disclaimer: Bootstrapping is not for everyone

Some startups don’t even have the luxury of bootstrapping. Their markets might require immediate action, and they don’t have three to four years to foster growth. Their concepts may be capital intensive, requiring funding from the beginning. And in some cases, founders simply can’t invest “sweat equity” in their businesses by waiving months of pay. Bootstrapping is only for the entrepreneur who has the time and wherewithal to heed all of these factors. But for those who do pursue it, it can lead to a great company and even greater financial rewards.

Javier Rojas is managing director of Silicon Valley-based Kennet Partners, which provides growth equity capital to bootstrapped companies in the U.S. and Europe. Kennet targets capital-efficient businesses with annual revenues of $5 million to $50 million.

Sonic Solutions buys digital video distributor CinemaNow (VentureBeat)

California to set up a $1B electric car network — Thu, 20 Nov 2008 21:02:27+0100

Media software provider Sonic Solutions announced today that it will buy CinemaNow, a company that serves digital video downloads through various platforms. It’s a sweet deal for Sonic, which will not only inherit the smaller company’s inventory of 6,000 movies, shows and videos, but also its connections with more then 250 content producers, including the major Hollywood studios.

Based in Novato, Calif., Sonic is best known for its Roxio software used to professionally burn DVDs and now Blu-ray discs. Before acquisition plans were released, the two companies had been in talks to integrate CinemaNow’s content delivery technology with Sonic’s Qflix DVD drives. This would give consumers the ability to download movies and shows off the internet directly to DVD.

CinemaNow raised $40.3 million in venture capital since its founding in 1999. Backers include Cisco Systems, EchoStar Communications, Index Holdings, Lions Gate Entertainment, Menlo Ventures and Transcosmos.

Salesforce.com beats expectations in Q3 (VentureBeat)

Kids on the internet: Approved by the MacArthur Foundation — Fri, 21 Nov 2008 01:05:35+0100

Salesforce.com, considered the standard bearer for the software-as-a-service business model, announced unexpectedly strong third-quarter earnings today.

Total revenue was $276.5 million — a 43 percent increase from the same period last year — and total income was 8 cents per share. Revenue and income beat out analysts’ estimates of $273.6 million and 7 cents per share, respectively. That’s good news for Salesforce, of course, particularly at a time when the economy is tanking and traditional business software companies like SAP are underperforming.

That’s also a good sign for the many startups that have built their businesses around SaaS or cloud computing. After all, analysts and entrepreneurs in this space like to predict that SaaS and cloud computing may actually benefit from the downturn, or at least avoid getting hit as hard, because they provide a low-cost alternative to traditional hardware and software for businesses. It’s nice to see some numbers to back that up.

Finally, it’s a rebuke to executives, such as Oracle chief executive Larry Ellison, who say SaaS isn’t a real business model. A single quarter doesn’t really prove or disprove anything, but it’s pretty hard to find tech companies surprising analysts nowadays. Salesforce shares have increased $1.17 (more than 5 percent) in after-hours trading.

[Photo:flickr/jenn_jenn]

Nokia researchers show off the mobile experiences of the future (VentureBeat)

Another report points to tomorrow for the iPhone 2.2 update — Fri, 21 Nov 2008 00:30:59+0100

title="nokia-009" src="http://venturebeat.com/wp-content/uploads/2008/11/nokia-009-300x225.jpg" alt="" width="300" height="225" />Nokia Research showed off a bunch of next-generation technologies today at its research lab in Palo Alto, Calif. Among the goodies coming our way are real-time traffic updates, phones that can tell us what we’re looking at, and devices that morph their forms from watch to tablet to phone as needed.

This show-and-tell comes at an interesting junction in Nokia’s history. The Finnish cell phone maker is in the midst of transformation as it begins to focus more on open mobile platforms. Earlier this summer, it bought Symbian and pledged to make its mobile operating system into an open-source platform. It is moving to be more open as a way to fend off competitors such as Google’s Android phone software and Apple’s iPhone.

title="nokia-008" src="http://venturebeat.com/wp-content/uploads/2008/11/nokia-008-300x225.jpg" alt="" width="300" height="225" />Consequently, Nokia has to be more open to collaboration in its research and development afforts, said Henry Tirri, senior vice president and head of Nokia Research, in an interview.

“We’re talking about going way beyond just replicating a computer on a phone,” he said. “We want to provide the user with the right context that they need at the time when they need it. This is the evolution of computing, and we can create it through the combination of technologies already in place.”

An example of delivering context through open collaboration is a highway traffic demo, Mobile Millennium, which researcher Quinn Jacobson (pictured above) showed off. The project is a collaboration of California’s state transportation agency, CalTrans, Nokia’s recently purchased Navteq mapping division, and the University of California at Berkeley. Jacobson said that getting real-time traffic data (like what Dash Navigation tried to do) based on location information from drivers is possible with today’s technology.

The trafffic data is based on the GPS (global positioning system) navigation chips inside many cell phones, as well as sensor data from CalTrans on major arterials. To protect user privacy, the locations of individual drivers are anonymized and not recorded. On top of that, the data isn’t collected in residential districts. What emerges is a map that reveals the green, yellow and red zones of traffic for drivers.

Collaboration is the buzzword on a variety of projects. Nokia has more than 700 researchers at a variety of locations worldwide, including one that was just announced today in Los Angeles. Rebecca Allen, a former University of California at Los Angeles researcher who will lead the lab dubbed Nokia Research Hollywood, said that she will reach out to the entertainment companies in the region to work on mobile entertainment services.

Among the topics of interest is “augmented reality,” in which an image seen through a camera-phone display can be augmented with things that aren’t there. For instance, you could point your camera at a street in San Francisco and the screen could present you with the view of the same location before the San Francisco earthquake of 1906. A number of companies, including Hewlett Packard and Intel, are looking at creating services or games that can make the real world more entertaining.

title="small" src="http://venturebeat.com/wp-content/uploads/2008/11/small.bmp" alt="" />Similarly, Nokia’s Point and Find project will let you point your camera phone at a building, and it will fetch you information about it. The technology comes from Pixto, a company that Nokia bought in 2007. Philipp Schloter, general manager of the program, says that the technology isn’t science fiction. He said that smartphones with cameras have all of the necessary equipment to carry out the identification task. For instance, it’s fairly easy to gather data on points of interest for tourists.

Normally, recognizing an image from a photo taken anywhere in the world could take huge amounts of supercomputing power. But with GPS data, the task is much easier because the Point and Find software only has to recognize images that might be on a particular street, Schloter said. The system could go far beyond the data you can get by pointing your phone at a bar code (apps available on the iPhone or Google Android T-Mobile G1). You can point at a hotel sign and get the rates. If you’re pointing at a movie poster, your phone could within seconds give you data such as movie play times and plot summaries. Nokia has been working with potential allies, like advertisers who could exploit the Point and Find system by offering coupons to users booking appointments via the software. The public beta for the service is imminent, Schloter said.

The most futuristic project mentioned was Morph, which envisions a day when nanomaterials will be able to refashion themselves. With materials like that, you can build a watch that could change itself into a phone or a tablet computer at a user’s whim. Here’s the video of Morph.

MySpace application helps Blackberry phones get more social (VentureBeat)

Apple releases the iPhone 2.2 update. It?s a big one — Fri, 21 Nov 2008 06:13:21+0100

title="curve_home" src="http://venturebeat.com/wp-content/uploads/2008/11/curve_home-169x300.jpg" alt="" width="169" height="300" />The MySpace application for Research In Motion’s Blackberry smartphones has been downloaded more than 400,000 times since it was introduced a week ago. The two companies claim this is an app download record for them. Its users have sent a total of more than 15 million messages and updated their statuses more than two million times so far, they say.

MySpace separately launched a mobile site specifically designed for Blackberry phones in early September, so I assume those who used that site must have jumped on to the new app.

Some more context: Rival social network Facebook launched the first version of its Blackberry app in late 2007, and it now has nearly two million users. RIM rival iPhone has been gaining market share over the last year, and both MySpace and Facebook have also launched apps for it. The latest version of Facebook’s iPhone app was added to the iPhone App Store in July of this year and is the 28th most popular free app on the device; MySpace’s iPhone app was added around the same time and is the 46th most popular free app.

RIM is still a more popular device, though. In corporate America, for example, a new report by ChangeWave Research shows RIM with a 76 percent market share this month — but the iPhone has surged past Palm to take the number two spot with 14 percent. So this Facebook-iPhone user should stop his snide undertones; the early success of the MySpace-Blackberry app is something for those companies to be happy about. Especially as RIM works to penetrate the consumer market.

The bigger issue is the fate of mobile-focused social networking startups as social networking giants like MySpace and Facebook move deeper into mobile, an issue we examined in depth earlier this year. The key for startups will be continuous efforts to differentiate themselves. Loopt, a social networking company that builds services to show you the geographic locations of your friends, seems to be pulling that off. Its free iPhone app is at number 24 on the iPhone — ahead of both larger rivals.

Kids on the internet: Approved by the MacArthur Foundation (VentureBeat)

The art of the bootstrap — Fri, 21 Nov 2008 02:11:21+0100

A new study by the MacArthur Foundation shows that all the time teens spend on the internet is actually not such a bad thing.

Parents often feel in the dark about what their kids are up to online, assuming that it’s dangerous or simply a method of procrastination. (Which, of course, it can be.) In fact, this extensive three-year study (conducted from 2005 to last summer) on how youths interact with digital media found that teens are learning both social and technical skills online that they would not have gained otherwise. Researchers interviewed more than 800 teens and their parents, with over 5000 hours spent observing teens use sites like Facebook, MySpace, YouTube and other social networks.

Sure, it may just look like someone is playing a video game, downloading music or sending silly, grammatically-challenged messages on Facebook. But it turns out that they’re also being exposed to new information and communities, and they’re more likely to retain the knowledge they gain there. Basically, the internet provides a more interactive, peer-driven environment than the sometimes-stifling classroom.

The study found, among other points:

Online socializing has a different dynamic because it’s public and permanent, and kids have to manage a complex network of friends and acquaintances Youth can connect with people of different ages in different areas and pursue interests that aren’t so popular or important to their local group of peers (astronomy, anyone?) Teens can delve deeper into subjects than ever before, and are more motivated to learn from each other rather than adults Most youths aren’t taking full advantage of the learning opportunities on the internet

Eventful launches strategic partnership with Billboard.com (VentureBeat)

Nokia researchers show off the mobile experiences of the future — Thu, 20 Nov 2008 23:51:11+0100

San Diego-based Eventful has partnered with Billboard to bring two new music charts to the music publication’s online property.

Eventful, which lets user discover, share, and request events specific to their location, will add the ‘Eventful Hottest Demand‘ and ‘Eventful Weekly Most In Demand’ to Billboard.com’s famed Top 100 lists. The Hottest Demand list is based on Eventful’s Demand service, which lets user’s vote on which performer’s they’d like to play in their locations. The Weekly chart will rank performers by the number of demands received from 12:00 a.m. Sunday through 11:59 p.m. the following Sunday.

Billboard is close to celebrating its 115th birthday, after positioning itself as one of the world’s leading resources of music news. Eventful’s charts will provide a near real-time popularity check for comparison to Billboard’s charts, allowing viewers and performers insight into who consumers want, and where they want them.

Eventful currently has over 8 million registered users and has become a force to reckon with in the local events space.� Just last month the company announced a Ticketmaster partnership and $10 million in new funding led by Telef�nica Capital.

California to set up a $1B electric car network (VentureBeat)

Eventful launches strategic partnership with Billboard.com — Thu, 20 Nov 2008 21:14:43+0100

Better Place (formerly Project Better Place) has scored a coup in the California Bay Area. The electric vehicle startup has struck a deal with the region, including the cities of San Francisco, San Jose and Oakland, to set up a $1 billion charging network for electric cars, with car availability beginning in 2012.

Unlike its charging network in Israel, it looks like the Better Place network in the Bay Area is a plan to support electric car development throughout the state. The deal in Israel involved a tie-up with Nissan-Renault to make the small cars that work with the stations, which swap out depleted batteries for new ones.

California has a rather larger area and population, and a diverse set of companies that want to commercialize electric cars. That’s likely why it was clearly stated that the thousands of Better Place stations to be installed in northern California will be agnostic to the type of electric car, allowing charging of cars with either fixed or replaceable batteries.

The announcement took place today at San Francisco’s city hall, and was attended by the mayors of the three cities, as well as governor Arnold Schwarzenegger and Better Place’s founder, Shai Agassi. Relatively few hard details were given, outside of the amount of capital to be invested and the project’s start date, with permitting beginning in early 2009 and construction in 2010. But the tone of the speakers suggested that California is finally becoming serious about electric cars.

That might seem to have been the case before, but it’s worth remembering that California was the backdrop for previous failures to commercialize electric cars, providing inspiration for the documentary Who Killed the Electric Car? And the California Air Resources Board has repeatedly relaxed requirements for automakers throughout its lifetime, providing loopholes to escape switching off the combustion engine.

With serious investment going into this project, it looks like this time, the electric car might just survive.

Update: The mayors’ nine-point plan to commercialize electric cars in the Bay Area is reprinted below:

Expedited permitting and installation of electric vehicle charging outlets at homes, business, parking lots, and other buildings throughout the Bay Area; Incentives for employers to install EV charging systems in their workplace and provide similar incentives to parking facilities and other locations where EV charging stations can be installed; Harmonize local regulations and standards across the region that govern EV infrastructure to achieve regulatory consistency for EV companies as well as expanded range for EV consumers; Establish common government programs that promote the purchase of EVs; Link EV programs and infrastructure to regional transit and air quality programs; Establish programs for aggressive pooled-purchase orders for EVs in municipal, state government and private sector fleets and future commitment of purchasing preference for EV vehicles; Expedited permitting and approval for facilities that provide extended-range driving capability for EVs in the region through battery exchange locations or fast-charging; Identify and secure suitable standard (110V) electric outlets for charging low voltage EVs in every government building in 2009; and Identify roll-out plan for placement of 220V EV charging equipment throughout each city including city parking lots and curbside parking.

Apple releases the iPhone 2.2 update. It?s a big one (VentureBeat)

VentureBeat — Fri, 21 Nov 2008 06:41:14+0100

The signs were all pointing to a tomorrow launch of the 2.2 software update for the iPhone — Apple jumped the gun. (Though I guess technically it is November 21st on the east coast of the U.S.) The update is available now through iTunes and it’s actually larger than the big 2.1 software update that Apple pushed out back in September (246.4 megabytes versus 237.8 megabytes).

In terms of what’s included, it’s pretty much what we’ve been expecting, but a few other nice little features. Here’s a quick rundown:

Google Street View in Google Maps Public Transit and Walking directions in Google Maps Display the address of a place when you drop a pin (very cool) Share your location via email (kind of pointless, I think) A fix for a scheduled fetching of email bug Improved stability and performance of Safari Podcasts can be downloaded right to the iPhone over WiFi or 3G A decrease in call failures/dropped-calls Improved sound quality of visual voicemail messages The ability to return to the main home iPhone screen with the click of the home button (AWESOME) The ability to turn on and off the keyboard auto-correction feature

Perhaps more important to people is what’s not included: There’s still no cut & paste functionality, still no MMS functions, still no voice dialing, still no Adobe Flash support, still no way to run apps in the background (and no mention of the ever-upcoming Push Notification system) and still no GPS turn-by-turn directions.

But, for me, the addition of the “return to home screen” functionality by hitting the home button is huge. I have so many apps on my iPhone now that I found myself constantly flicking backwards to get back to do something like send a text message. It was beyond annoying.

Likewise, plenty of people had expressed their hatred of the software’s auto-correct while typing. In fact, I know someone who jailbroke their iPhone just to remove that feature. Now it can be done in the settings.

I’m eager to try out being able to drop a pin somewhere and find out what the address is there. I’ve wanted Google Maps on the web to add such a feature for a while.

And of course, the promise of better voicemail quality and of course fewer dropped calls is always good to hear as well.

Another report points to tomorrow for the iPhone 2.2 update (VentureBeat)

Salesforce.com beats expectations in Q3 — Fri, 21 Nov 2008 00:44:25+0100

title="tomorrow" src="http://venturebeat.com/wp-content/uploads/2008/11/tomorrow.gif" alt="" width="248" height="313" />Tomorrow, we’ll know for sure if the rumored November 21 launch date for the iPhone 2.2 software update is legitimate. But another report surfacing today also points to that date as likely for the launch of the new software, according to AppleInsider.

Specifically, the Fraunhofer Institute for Secure Information has issued a release about an exploit it has uncovered on the iPhone. The exploit allows the device to be forced to dial any number, including potentially bad ones like 900 numbers and the like. But in the report, the Institute notes that a patch for the exploit will be available in an upcoming firmware update — due on November 21.

So unless the Franhofer Institute has its dates mixed up (possible) or Apple is planning to do a security-only minor firmware update for the iPhone separate from the 2.2 update (unlikely), tomorrow has once again been named as the day for the iPhone 2.2 software.

It’s also worth noting that the 2.1 software update for the iPhone was also launched on a Friday.

2.2 isn’t expected to be as major of an update as 2.1 was. It will likely focus on performance issues and bugs, while adding features like transit directions to Google Maps, Google Street View, the ability to download podcasts directly to the iPhone, a new app rating system and a new version of the Safari web browser.