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Over the last few weeks I've started to suffer from Four Square fatigue. After all, Four Square is a lot of work. To get the benefits of Four Square, you need to proactively check in wherever you go. And, while each checkin requires a relatively small amount of work, in the aggregate, it takes real effort to make the most of the Four Square experience. Would it be better if Four Square just checked you in automatically any time you lingered at a location for more than 15 or 20 minutes? Or does that cross the privacy line for most of us?
The challenges of Four Square have gotten me thinking more broadly about privacy on the web. On the one hand, the less proactive input a service requires, the less friction there is in maintaining its usefulness. Automatic Four Square naturally will produce more data, on average, than does a Four Square that requires proactive behavior. And, for many, the Four Square experience would be greatly enhanced. On the other hand, when data is being passively collected by a service, there are natural privacy concerns that come with that data collection. How many of us want our every daily stop published to the Web? So perhaps automatic Four Square would turn away more users than it would attract.
This privacy vs. utility debate is not a new conversation. You may recall the uproar in the early days of the Web around personalization. There were those (perhaps there still are) who were deeply concerned about the collection and retention of data for the purpose of personalizing the online experience. Yet few of us today find it concerning to receive Amazon's product recommendations or Ticketmaster's concert reminders. In fact, if you are like me, you are more than willing to provide scads of personal data to enhance your online experience.
Personalization has evolved over time. In the early days of the Web, you had to explicitly state a set of preferences. The Internet only thought you liked the things you said you liked. Now services like Amazon and Netflix quietly collect preference data from the things you buy and watch. And, of course, ad networks collect tons of data by watching where you go on the Web, what you click on, where you linger on a page. Using this data, advertisers are increasingly sophisticated about the advertisements they choose to present to you as you wander the Web.
While there are still those who find ad targeting intrusive, if you are like me, you are happy to have ads for things you actually care about (if only spammers were as sophisticated -- or do they know something I don't about my coming erectile disfunction). As with personalization, consumer acceptance of ad targeting has been an evolution. Targeting has grown more precise, more granular and, as a result, more valuable to consumers. [1] As consumers have seen the value of that targeting, they have grown increasingly accepting of the things they had previously feared.
We have all seen that consumers are willing -- often times happy -- to trade privacy for utility. I know that I am. And, while Mark Zuckerburg's statement that privacy is a generational concern was controversial, I think he is absolutely right about that. The coming generations of consumers may not abandon the idea of privacy in its entirety, but they will certainly have very different views of the appropriate balance between privacy and utility. That balance has already clearly shifted in the direction of utility and I believe the trend will continue.
To some this will be viewed as a warning -- a cry of the coming privacy apocalypse. I don't see it that way. As technologies and standards evolve, doors open to new products and services. We are on the verge of an explosion of new ideas.
Automatic Four Square and its progeny are coming. And I, for one, am excited about that.
[1] Obviously there are extremes of everything. It is perhaps too "granular" to start seeing ads for Prozac after buying a book on depression, or ads for funerary services after sending an email about the passing of a family member. But, to my mind, businesses are ill served by crossing those lines. The marketplace will vote loud and clear -- one need look no further than Facebook's beacon program -- and keep non-market behavior in check. The advantage of markets, of course, is that they correct for evolving standards. Perhaps there will come a time when consumers consider it perfectly appropriate to receive advertisements for funerary services upon the passing of a loved one. When that time comes, there will be real utility in the coffin banner ads and consumers will be happy to see them. Why should current standards of appropriateness impede such "progress."
This afternoon I attended an event sponsored by Proctor & Gamble called the "Innovation Outreach Venturing Day." The event was an effort by executives at P&G to connect with the investment community in the Bay Area to discuss how P&G might work more closely with the emerging technology companies we all touch every day. The pre-amble to the event was a run down of the scale of Proctor & Gamble's business and the massive amount of technology they already leverage. The scale of P&G is pretty stunning -- P&G has 32 separate brands that do more than half a billion in revenue annually (and more than half of those do more than a billion). The company has 135,000 full time employees and did nearly $80 billion in revenue last year. In other words, Proctor & Gamble is freakin' huge.
And because of their scale, P&G already leverages massive amounts of technology. When talking about social media platforms, they mentioned that they already have more than a dozen in trial within the enterprise at the moment, and they continue to assess more. They have looked at every knowledge management system you can imagine, and continue to assess more. They have worked with every digital agency on the planet, and continue to assess more. What is interesting, however, is that one thing they aren't trying are cloud services. It was made clear that P&G runs everything behind their own firewall. And they have no intention of moving any part of their infrastructure into the cloud. P&G's view of the enterprise is pretty old school.
But when it comes to advertising, they clearly understand that they need to be more forward thinking. They aren't discounting television by any stretch. The continue to spend hundreds of millions of dollars in television advertising. But, as they say, P&G needs to "bring the experience to where she already is" (the folks at P&G always talk about "she" and "her" when discussing their customer) and they know that these days that is online. So they are working hard to have a big presence in digital media.
That said, Proctor & Gamble's online bets tend to be around huge aggregations of traffic, like Yahoo and Google. It was particularly interesting to see how bullish they are on Facebook. In a small group discussion about social media, one of P&G's technology leaders talked about Facebook's growth trajectory and how they are on a path to serve 5 billion people. Accordingly, P&G feels that it needs to have a significant presence on Facebook. If you are wondering if Facebook is making any money, you need look no further than P&G. It is clear that Proctor & Gamble is working with Facebook in a big way -- as an advertising platform and a brand destination. P&G's explicit goal for 2010 is to assure that each of its brands has a meaningful presence on Facebook and they are willing to pay dearly for that. And while P&G's thought leaders expressed some skepticism about the efficacy of Facebook's "engagement ads," they certainly view Facebook as a must-have for digital advertising and brand building. They didn't quantify what they are paying for that exposure, but it is quite clear that the numbers are very big.
Perhaps as interesting as P&G's love of Facebook, was its skepticism about Twitter. They described Twitter as "much more like television than one might think." To P&G, Twitter is a great broadcast medium -- it is best for one to many communications that are short bursts of timely information -- but as good as it is for timely information, the P&G folks do not view it as particularly relevant to what they are doing on the brand building and advertising side. For those things that Proctor & Gamble thinks are most interesting and important, they do not believe that Twitter will ever approach the value they can get out of a Google or Facebook. But they are open to looking at other alternatives that will have more of the engagement and brand building attributes that they hope to exploit in Facebook.
It was fascinating to get a bit of a view inside such a huge and influential company as Proctor & Gamble. And it is encouraging to see them reaching out to the greater tech community. In fact, P&G is opening an innovation office in the Bay Area and they've committed to have their senior execs make more frequent trips out to what they view as the "most important innovation ecosystem globally." It will be great to continue the conversation. There's no question that it will benefit P&G and Bay Area startups alike.
UPDATE: As you can see in the comments below, a representative from Proctor & Gamble wants to clarify that P&G does not now claim that they project Facebook's growth to 5 billion users. Rather, they are projecting the reach of their own products to 5 billion users. Since the growth projection that I heard at the P&G event wasn't attached to any time frame, I took it simply as a statement of how huge Facebook could become over time. And I agree. Facebook will be increasingly huge, and increasingly important, over time. So it didn't strike me as such a controversial statement. That said, Proctor & Gamble would like me to correct the misunderstanding, so please let it be known that if Facebook, in fact, reaches 5 billion users some day in the future, P&G did not project that that would happen :)
True, no one asked me. But here's my two cents anyway. Twitter should open up its platform to advertising. That's right, advertising. Forget all this hoo-ha over selling data or paid business accounts or dashboards . . . Twitter has everything it needs to build a wildly-successful ad driven business model. It should get on with it.
The two hallmarks of successful advertising-driven businesses are 1) massive scale and 2) abundant context. How has MySpace built such strong advertising revenue atop their social media platform? Huge scale and a ton of context. Same is true of Facebook and Yahoo and Six Apart. And, of course, the mother of all ad supported businesses -- Google -- is all about scale and context.
Twitter's scale has been well documented. Huge and growing. Does the fact that much of the Twitter traffic exists on third party clients make in-stream advertising less practicable? I don't think so. I think it actually solves the problem of how Twitter will be able to monetize its off-platform traffic. Third party apps can choose to present ads along with the rest of the stream or pay a fee to receive advertisement-free data.
As with each of the social media platforms listed above, Twitter's unique experience will require a unique ad format. In this instance, I think the format is pretty easy to envision. Twitter should constrain advertisements on its system to 140 characters or fewer. By doing so, Twitter ads will be pretty spartan. But if Google ads have taught us anything, it is clear that a relatively small number of characters and a link are more that sufficient to engage a consumer. Moreover, by matching the ad format to that of a tweet, the ads will not only fit well with the consumption behavior on Twitter.com, it will also work well with the many third party experiences enabled by Twitter's API. Twitter need only create some visual distinction between tweets and ads and it can very simply insert the ads in the tween stream, as can Tweet Deck and Siesmic and Tweety and StockTweets . . . .
What about context on Twitter? Huge and growing. The very data others have suggested Twitter should sell to third parties is invaluable to create the necessary context for a successful advertising model. Not only will Twitter know the things about which any given user is tweeting, it will also know who that user is following and the things about which they are tweeting. That's a huge amount of context for advertisers. I'm guessing Toyota would love to advertise to an individual who tweets about shopping for a new Honda Hybrid. And they are likely just as eager to advertise to an individual who follows numerous eco-tweeters. It is easy enough to envision a self-serve platform that allows a huge range of advertisers to bid for context and get great results.
The best thing about context-driven advertisements is that, when well-executed, they can be viewed by consumers as content, not just advertising. Look at Google's ads as case in point. It has been a long time since I've heard even a hint of objection to advertisements on Google. Why? Because the ads are often more compelling than the organic search results they appear beside. True, Twitter ads won't be a response to a query like in Google. But there should be more than enough signal for businesses to get great results advertising on the platform.
Finally, I think that users would embrace Twitter ads. We all recognize that Twitter needs a business model and we all want a long-term sustainable platform. If executed well (watch out for those lurking privacy trolls!), Twitter ads would become a natural part of the Twitter experience and add value, not take away from it. Better yet, we could all stop speculating about Twitter's business model and move on to more interesting discussions about things like the transformative impact of the real time web. So do us a favor Twitter and start serving ads already. I, for one, look forward to it.
Today TechCrunch posted a list of the "Top VC Blogs (According to Google Reader)." I was very pleased to find out that I came in at number three, sandwiched between Fred Wilson and Brad Feld. But I have to admit, the ranking makes me feel a little guilty. Not because I don't think there's good content on VentureBlog (after six years of blogging, there must be some good stuff in there somewhere). But because I really don't blog enough. Every couple of weeks or so, something jumps out at me that demands a blog post. In stark contrast, Fred and Brad post all the time. I have huge respect for them for that. And not just because of the quantity, but because they post great quality stuff day in and day out. So my hat is off Fred and Brad, who are the rightful owners of the top two VC blog spots without any questions.
The challenges posed by trying to maintain an active blog are only further exacerbated by the incredible proliferation of "media channels" these days. I don't mean professional media channels. I mean user-controlled media channels. Blogs. Podcasts. Twitter updates. Facebook and LinkedIn status messages. YouTube channels. Etc. The list is daunting. Yet anyone who takes seriously the idea of communicating directly with his or her "customers" really can't ignore the opportunities posed by each and every one of these channels.
What's more, each of these media channels serves a different purpose. Podcasting can not replace blogging, which can not replace tweeting. A jogger isn't going to read my blog while taking a morning run, but may well listen to VentureCast. An entrepreneur trying to quickly get up to speed on the state of Venture Capital is not likely to listen through 30 hours of VentureCast, but could easily browse through VentureBlog for relevant content. And anyone foolish enough to care what I'm doing on a day to day basis will not likely find that out on VentureBlog or VentureCast, but could certainly subscribe to my Twitter feed and get the latest and "greatest."
The more I think about the relevance of each of these media channels, the more I realize that it is important for me to engage on each and every one of them. To that end, I have recently revived VentureCast -- now with my partner Howard Hartenbaum. We intend to record a new show about twice a month. The first two we've recorded are already available on iTunes, so check it out. It also means that I need to share more thoughts on entrepreneurship and Venture Capital on Twitter, which I will surely continue to do. And, of course, it means that I need to blog about the world of Venture Capital more frequently. If nothing else, this post is a good start.
Just yesterday I had breakfast with Rene Lacerte, the founder of PayCycle, and we discussed the power of great customer service. When Rene first pitched me on the idea of PayCycle, the service was not yet built. Nonetheless, he was already discussing how he would integrate the customer support experience into the overall service offering. He rightfully pointed out that every change you make to an online service will have implications for the customer support team -- whether it is training, navigation, speed to resolution, etc. So from its inception, PayCycle's product management and customer support went hand in hand. Rene is now building his second customer-focused service called Bill.com and it too has been built from the bottom up with customer support in mind.
As we ate breakfast yesterday, Rene and I had a long discussion about the fact that despite being called Software as a Service, very few SaaS organizations put any emphasis on the "service" piece. Sure, you could argue that the "service" in SaaS is all about delivery and not about customer support. But that would be a mistake. Service businesses live and die based upon the satisfaction of their customers. While it is conceivable that your software could be sufficiently foolproof that customer support is limited to receiving "thank you"s from your happy customers, so far no one has quite found that Holy Grail. Customer support remains a significant piece of all SaaS organizations and the more a company recognizes that going into building their service, the more likely they will succeed.
So what does that have to do with the Rosewood Hotel? I was reminded of the importance of customer service this morning as I experienced the Rosewood Hotel's stunning disregard for their customers. For those of you who have not yet been to the Rosewood Hotel (and I would not recommend that you go), it is the new "high-end" hotel that was just built on Sand Hill Road in Menlo Park. For those of us parked in VC-land here on Sand Hill Road, it was a welcomed new place for breakfasts and lunches and, in fact, I have eaten breakfast there 12 times in the little over a month that it has been open. But never again. (Warning: herein begins a rant -- a well-deserved rant, but a rant nonetheless.)
Three weeks ago, when parking for breakfast, I was surprised to see broken glass in one of the parking spaces. As I left breakfast, I pointed the glass out to a maintenance person driving his golf cart by. I assumed it would be cleaned up. Two weeks later, the glass had still not been picked up, so when the manager of the Madera restaurant came by to say hello to me (after all, I was there every other day), I pointed out to him that there was broken glass in the parking lot that had not been picked up despite the fact that I had pointed it out two weeks earlier. The restaurant manager apologized and assured me that it would be picked up. To my shock, it was not. Undaunted, I figured I'd give it a third try. Two days ago, on my way to an event in a conference room in the hotel, I asked to speak to the hotel manager. A nice young man named Daniel came to talk with me and I recounted my tale of woes. I explained to him that while the glass hadn't particularly inconvenience me, that I thought it didn't reflect well on his hotel and that he might want to take care of it. He assured me that it would be cleaned up by the next time I visited, which I told him would be two days later.
I must say I was surprised to see the glass still there two hours later when I got out of my meeting, but I figured I'd give him the benefit of the doubt and assumed that it would be picked up by my breakfast on Friday (today). I was wrong. To my horror, as I drove up to breakfast this morning, the glass was still there. Was I cut by the glass? No. Did I get a flat tire from the glass? No. So why do I care? Because I think that customer service matters. I think that if you care about your customers, you should do more than pretend to listen to them. So rather than park, I drove up to the front of the hotel and explained to them (amidst a fair amount of swearing) why it was that I would not be eating breakfast there any more. The same manager, Daniel, was there and fell on his sword, taking full responsibility for the incident. But as far as I am concerned, it is too little too late. Such blatant disregard for your customers maybe deserves a second chance. And, if you are feeing extremely generous, a third change (particularly when the restaurant is so convenient). But not a fourth chance. So I guess I'm heading back to Il Fornaio for breakfast.
Customer service matters. And it matters more than ever in this age of blogs, and Facebook and Twitter. If you search for PayCycle, you'll find a whole lot of happy customers. And if you search for Rosewood Hotel, I'm guessing you'll see a whole lot of dissatisfied customers. You'll certainly find me there.
Update: Shortly after I posted this rant about the Rosewood Hotel, I got a call from Managing Director of the hotel. Through the power of blogging, twitter and facebook, the Rosewood's MD had read my complaint moments after I had posted it and promptly called a staff meeting to address the situation. He then came over to my office to offer up his apologies for what had happened and his commitment to make customer service a priority of the hotel. While I wish it had not escalated to the point of needing such attention, I certainly appreciate that the hotel's MD took it seriously enough to come to my office and have the discussion.
A short time ago I wrote about my investment in Aardvark. As I said in that post, I believe that in many ways search is broken and getting worse. Not only are there voracious efforts at Search Engine Optimization (SEO) throughout the Web, but the scale of the Internet is monumental today and getting larger by leaps and bounds virtually every minute.
The massive scale of the Web not only creates huge challenges for search, it also cripples discovery. Gone are the good old days in which fortuity would lead to the unearthing of interesting new Websites. Remember when Web directors would lead you to great sites on the topic of your choice (you may not recall but, in the early days, "Yahoo" stood for "Yet Another Hierarchical Officious Oracle" and Srinija Srinivasan, Yahoo's chief of ontology, was one of the most powerful people on the Web). Better yet, remember the good old days of browsing libraries -- the Dewey Decimal System created the propensity for discovering new and interesting books as a result of their being shelved next to related categories -- while looking at one book, other books in its general vicinity would likely pique your interest.
That sort of accidental discovery was driven out of the Web a long time ago. The only sorts of chance Internet encounters most of us have these days are a result of mistyped URLs -- not exactly a recipe for exciting new discoveries. Thankfully, one company has made it their mission to bring back discovery to the Web. StumbleUpon delivers nearly half a billion recommendations per month. Those recommendations can be across broad categories (e.g., photography, video, etc.) or in very focused niches (e.g., electric violins, VC blogs, Alice in Wonderland, etc.). The StumbleUpon experience brings the unforeseen and unexpected back to your browser. I like to think of StumbleUpon as a discovery engine bringing fortuity back to the Web.
Enthralled by what StumbleUpon was doing, a couple years ago I began chatting with the founders about their business. The more I learned, the more excited I got about the prospects for assisted discovery at StumbleUpon. But before I had an opportunity to propose financing the company, it was purchased by Ebay.
Nonetheless, I've stayed in touch with Garrett and Geoff and continued to talk with them about the power of StumbleUpon. So when they began discussing the possibility of spinning StumbleUpon out of Ebay, I was grateful to have the conversation. The need for discovery on the web has not gone away since Ebay bought StumbleUpon. To the contrary, the problem has continued to grow more acute. And StumbleUpon continues to be the best solution to the problem. Over 7.5 Million registered members discover, categorize and review Web pages, making StumbleUpon the Internet's most powerful recommendation engine.
I am thrilled to join the original StumbleUpon team in spinning the company out of Ebay. Along with Garrett and Geoff, Ram Shriram is reinvesting in the company and going back on the board. The primary financial backers of the spinout will be August Capital and Accel Partners and Sameer Gandhi and I will go on the board as well. I look forward to working with Garrett, Geoff, Ram and Sameer to continuing to build StumbleUpon into a large and important piece of the Web's infrastructure.
When Google was out pitching their business to VCs, the reaction of many was "search? isn't that problem already solved?" And, in many ways, it was. Yahoo was well established. AltaVista and HotBot had all the geek cred. And there were plenty of other search options out there. So why in the world would you fund another search engine? (answer: to get really really rich.)
Today, more than a decade after Google got started, one once again could reasonably make the assumption that search is a solved problem. Why would a VC invest in search when Google has virtually cornered the market? The short answer is that many VCs are deeply afraid of missing the next Google (and who can blame them -- Google was the best venture investment EVER). But that's a crappy reason to invest in search. (In fact, it is a crappy reason to invest in anything.) There are plenty of other reasons to look for yet another paradigm shift in search.
I believe that the best reason to continue to invest in search is that search engines are getting worse by the day. Why is that? For one, the amount of content on the Web continues to grow at a staggering rate. While there may once have been a mere handful of definitive sources for any given search, there are now thousands of relevant results for virtually any topic. That problem is exacerbated by the explosion of user generated content.
Far more problematic for search, however, are the economic incentives around the whole search eco-system. There is huge money to be made in search and all savvy online businesses are acutely aware of that fact. Because so much money is at stake, herculean efforts are put into gaming the system. Search Engine Optimization (SEO) has become an economic imperative for all businesses. And the object of SEO is not to get people the most relevant search results to their queries. The object of SEO is to drive the greatest amount of traffic possible to the optimized websites. In other words, the economic incentives of the search business assure that huge efforts are put into making search results less relevant, not more so.
Given those realities, it has been clear to me for some time that important new search technologies would have to emerge to help solve the "decreasing quality of search results" problem. Enter Aardvark. The Aardvark founders -- a group of entrepreneurs hailing largely from none other than the Google mother ship -- pitched me on the power of injecting human knowledge and relationships into the search process. By drawing upon the knowledge of your friends and their friends, the Aardvark founders surmised that you would be able to get more accurate, more relevant, better tailored answers to a huge range of subjective questions (e.g., "Where's the best place to eat sushi in Palo Alto?" "How can I best convert my VHS tapes to a digital format?" "I love The Decemberists -- any other bands out there that I should be listening to?" etc. etc.) Thus, the Aardvark team went about building the necessary technology to solve that problem, and I had the good fortune to fund them in that quest.
This week the Aardvark team is launching the fruits of that labor at South By Southwest (SXSW). They have built a "social search engine" that lives inside your IM and email. It allows you to ask questions of Aardvark, which then goes about determining who among your friends and friends of friends is most qualified to answer those questions. As the Aardvark team point out in their blog, Social Search is particularly well suited to answer subjective questions where "context" is important. Aardvark allows you to gather that context, both implicitly through the relationships you have with the answerers, and explicitly through the conversations between questioners and answerers. The resulting answers prove stunningly well-tailored to the person asking the question. And they avoid the pitfalls of the current search engines -- they are not subject to the vagaries of the proliferating user generated content, nor of the economic manipulation of search results.
I'm certain that there will be ongoing innovation in and around search. Getting the best possible answer to any question -- objective or subjective -- that can be arbitrarily posed, is a monumentally challenging problem. Aardvark goes a long way to addressing the shortcomings of search today and I am excited to see it roll out to a larger group of people.
A huge number of web startups were funded over the last five years. Anyone who reads TechCrunch has seen them chronicled; the Web 2.0 menagarie was dizzying. And, like in the late '90s before, the hopes (if not expectation) for each and every company were high. So why do I believe that we will see a big number of web businesses shuttered in 2009? Because the change in economic climate has made it more difficult for Venture Capitalists to suspend disbelief.
Early stage venture investors have relatively little information upon which to based our investments. We certainly have the most important clue as to the likely success of a company -- we know who the founders are. But otherwise we are necessarily making predictions about user growth, market expansion, monetization, etc. And in order to invest, we need to suspend disbelief about all of these metrics and assume growth, adoption, monetization....
At each stage of investment, VCs need to suspend disbelief about some criteria or other. Initially it may be the ability to build a product with universal appeal. The next investor may see a product with universal appeal but need to suspend disbelief about the company's ability to monetize that audience. The next investor may see a product with a big audience that is in the early stages of monetization but need to suspend disbelief about the ability to scale the scope of the business and the economics. Even expansion stage investors ultimately have to suspend disbelief that even with a working product and monetization that a company will be able to maintain growth and ultimately reach liquidity. So the investment lifecycle of a startup necessarily requires a fair amount of faith.
What happens in a down economy? Investors become less willing to suspend disbelief. Entrepreneurs need to make more progress between financing events before they are able to find investors willing to bet on their ultimate success. And while some startups will be able to manage that transition, others will not be able to reach this heightened bar. I suspect the end result will be a large number of web startups funded in the mid-2000's will run out of money and, unable to find investors who are willing to suspend disbelief, will have to close their doors.
I don't think that this is necessarily an indictment of those startups or the venture process. It is just a byproduct of a system that necessarily involves a huge amount of risk. In up economies, the system is more forgiving. In down economies, less so. But, in the end, the strongest startups survive and thrive.
So, will I continue to suspend disbelief? You bet. Early stage venture investors have no choice but to believe and build. Otherwise, we will invest in nothing. I realize it is a challenging environment out there for company building. But the best antidote to disbelief is real progress. The startup world is always a meritocracy but never more so than in a tough economy. Those companies that show results will continue to get funded. Those that don't, won't. My hope is to continue to invest in those that do. And then work hard to bridge the disbelief gap.
If you have not yet experienced "Digital Natives" in their natural habitat, come on over to my house on any weekend. When I wander down stairs on a Saturday or Sunday morning, the scene is always pretty much the same. The TV is on and yammering away. But my kids are far more engaged in their respective laptops than they are in the TV making noise in the foreground. My 6 year old is likely buying a new go kart for his Webkinz monkey. My 8 year old is busy shooting balloons on Addicting Games. My 11 year old is blogging about some great new Japanese rock band video he found on YouTube. My 13 year old is reading the latest news about his favorite performers on Broadway.com. And, amazingly, while "watching" TV and voraciously consuming the Web, my children are more than capable of fighting with each at the same time -- digital multitasking at its finest.
Digital Natives today may be a small group of non-voting, non-credit card holding kids. But soon Digital Natives will be the predominant consumers of media, goods, services. And as such, they will expect their experiences to be inherently digital. Analog experiences will be viewed as quaint -- perhaps they'll trigger nostalgia for the good old days of board games and books -- but, in the end, the expectations will be one hundred percent digital. Companies will need to think differently about how they market to Digital Natives. Governments will need to think differently about how they engage Digital Citizens. Doctors will need to think diffeerently about how they treat Digital Patients. It won't be an evolution -- it will need to be a revolution.
I already see this revolution when I'm pitched on businesses whose customers are kids. Businesses focused on children or Millennials (the next big group of consumers being chased by the advertising world) have no interest in the historically analog world. Their products are naturally digital. They acquire customers digitally. They interact digitally. Indeed, any analog byproduct of the digital experience (you know, like meet real humans in person) is just that, a byproduct. Kids want their media consumption, their shopping, their communications to be digital. Webkinz is a great example of this phenomenon -- who would have thought that stuffed animals could prove to be the gateway drug to a digital experience? Yet that is precisely what they have become.
In light of all that, it was great to read the timely new book by John Palfrey and Urs Gasser called "Born Digital: Understanding the First Generation of Digital Natives." John and Urs look into the opportunities and challenges posed by this digital revolution. Those of us with kids are living in and among the Digital Natives and certainly can use all the help we can get to navigate this brave new world both for ourselves and for our kids.
I am a huge fan of John Palfrey's. John has spent the better part of the last decade running Harvard's Berkman Center for Internet & Society. On the side, he has been thrilling students in the classroom at Harvard Law School, doing interesting research, charming would be donors to the Center, and moonlighting as a Venture Capitalist at Highland Capital. He is truly a renaissance man. I have the great fortune of co-teaching a class on entrepreneurship and Venture Capital with John and he is a wonderfully understated speaker and thinker.
For those of you in the Bay Area next Monday, September 15th, I am co-sponsoring an event in the city to celebrate the release of John's "Born Digital" book. The reception is for friends of the Berkman Center and will include a talk by John about his book. It should be a great group of people and an interesting conversation. There is no need to RSVP to the event, just come on by. Here are the details:
Book Talk and Reception for Born Digital: Understanding The First Generation of Digital Natives by John Palfrey and Urs Gasser Monday, September 15th, 2008 6:00PM, to be followed by a cocktail reception.Hotel Vitale
8 Mission St
San Francisco, CA 94105
(415) 278-3700
Directions and map: http://www.hotelvitale.com/location/directions&map.htmlMore about the Event: http://cyber.law.harvard.edu/node/4575
More about Born Digital and the Authors: http://www.borndigitalbook.com/
Born Digital in Seattle 9/17/08: http://cyber.law.harvard.edu/node/4576
About the Berkman Center: http://cyber.law.harvard.edu/about
Over the course of the many weeks of on-again, off-again MicroHoo madness, I did a fair bit of pontificating and speculating of my own about the would-be deal. After all, it was THE Bay Area topic of conversation (for one brief moment we all put our Facebook speculation on hold -- I am so pleased that we can get back to speculating about Facebook now and, better yet, speculating about MicroBook, or is it FaceSoft?).
Many of the MicroHoo conversations I had centered around the combined assets of Microsoft and Yahoo. What could the two companies, in combination, bring to bear upon the Internet landscape? And while the press largely liked to discuss the impact a Microsoft/Yahoo merger would have on the search market, to my mind that was not the biggest advantage of the combination. From where I sit, the greatest combined asset of Microsoft and Yahoo would be their vast social graph data. Farmed properly, MicroHoo could have enabled a stunningly powerful social network using nothing more than the fumes of their existing services.
To see the power of Microsoft's and Yahoo's social data, one need look no further than the first visit to virtually every social service. The first thing you are asked to do in the registration process is to give your login data for Yahoo Mail, Hotmail, etc. Why? Because each new social experience on the Web needs to recreate your social graph and the best way to jump start that process is to use the social graph data you already have stored in your existing communications services.
What if MicroHoo were to simply farm the social data contained in all of its current social services? Step one, implement a unified login across all MicroHoo services. I must say that this is one thing that Yahoo has gotten right from the very beginning (and Google has been a fast follower). Since its inception, Yahoo has viewed the customer experience as a unified one across all of its properties. And with each of its acquisitions, job number one has been to unify the login experience. Thus, Yahoo knows that "davidhornik" on Yahoo Mail is the same as "davidhornik" on Flickr is the same as "davidhornik" on MyYahoo. What if MicroHoo also knew that it was the same as "davidhornik" on Microsoft Messenger and as "davidhornik" on Hotmail? In fact, MicroHoo could know that I am the same "davidhornik" on:
Yahoo Mail Yahoo Messenger Flickr Delicious Upcoming Hotmail Windows Live Messenger Xbox Live etc.
Every one of these services contains data from which MicroHoo could have created a social graph an order of magnitude larger than MySpace or Facebook. Add on top of that social data compelling personalized experiences drawn from the likes of MyYahoo, Yahoo Finance, Zune.net, etc. and you've got the makings of a pretty powerful social experience.
So why haven't Yahoo and Microsoft done this on their own, let alone in combination? That's a great question. If I were in charge, it is where I would start. As all experiences on the Web increasingly are informed by social relationships, the long term winners will be the players who can bring the most social data to bear on their services. What's more, as can be seen in the recent announcements by MySpace, Facebook and Google, the ability to own that social graph and make it available for use by third-party services will prove invaluable. While Google has relatively little to offer in terms of existing social data, both Yahoo and Microsoft sit on treasure troves of data (as does AOL for that matter) that would allow them to legitimately compete with MySpace and Facebook as the Social Graph of Record for the rest of the Web.
Not that it would be easy for Microsoft or Yahoo to create a social network from whole cloth. I know it wouldn't. (Just look at Yahoo 360.) But the prize is well worth the effort. Consider the millions of people who have yet to join any social network. While Yahoo and Microsoft may not be the likely starting point for Millennials, it strikes me as a very natural place for the rest of the Web to discover and embrace social networking. Similarly, Microsoft and/or Yahoo seem the natural repositories of the social graph of record for the rest of the Web. If MicroHoo is ever reborn, the big opportunity for the combined companies is to create the social network for everyone else (and the social graph for everything else). In the mean time, Jerry and Steve, if you are listening, you probably should get working on it independently. My guess is that your future in the Web depends upon it.
