Palo Alto, CA – Tony Perkins has probably earned the right to crow. He famously predicted the “dot-bomb” right before it went off, for instance, and through the darkest aftermath, companies he and his AlwaysOn advisors picked as leading potential entrepreneurial investments have managed to stay ahead of the curve for profitable exits. In venture capital or VC-speak, an “exit” is that point at which early investors see a return on their investment, either through the company going public – as likely this year as a woman in the White House – or in today’s more common “merger.”
Being a member of past AO 100 companies gave you about a third of a chance to exit at three times the industry average, Perkins claims. A study from the 451 Group found that, among the previous AO 100 companies 23 companies have been acquired in just the last 12 months for a total of $5.5 billion. Microsoft
Deals are clearly down from a 2005-2006 high of 27, and – depending on who you ask – all were bought out by another company rather than through public offering. Microsoft is the largest “serial acquirer” of AO firms, having now bought six of them.
That said, the yearly listing is somewhat misleading – companies that have appeared on past lists may recur – among this year’s top 250 are many repeats such as Aggregate Knowledge, Digg, Facebook, Gaia – last year’s winner – Topix, Tremor, Trulia, Yelp and Zillow, being among those already familiar to newspaper companies in one way or another.
There’s a long list of “green tech” start-ups, which, while probably worth watching, don’t have a lot to do with publishing; and infrastructure plays – other than making the point repeatedly that selling software as a service is here to stay – don’t generally become competitive game-changers.
Four categories do: Mobile, Consumer & Community, Online Advertising Service Providers and Enablers, and we’ll cherry-pick each of these a bit to raise a flag or mark trend lines.
But we don’t want to miss the forest for the trees. A few key trends are worth highlighting without being tied to any single company.
More…1. Angels are becoming the new early-stage investors and VCs of Silicon Valley, but entrepreneurs in large measure are shouldering more of the burden to become profitable fast. In this economy, start-ups generally are being asked to make it farther on their own steam using their own seed capital, and to demonstrate larger growth rates and revenues before measuring up to even angel investment. As Ron Conway, founder of SV Angels, put it, “It takes more money to fund a mediocre business than a great one.”
Investments of $500,000 at a time – what a panel of angel investors referred to as sufficient to establish “microcaps” – may in large part be viewed as sufficient start-up cash because it just takes less money to start a tech company these days. There’s so much disruption in the ecosystem of the Web that companies like StumbleUpon, Digg, Twitter, and Spiceworks all were built on rapid internal growth, until they got to the point where they sometimes need to jump a chasm to bigger growth and “build the plumbing” required of a larger company, as one investor described it.
Sarbanes-Oxley compliance certainly puts a crimp on growth, and may create the kind of leverage that causes smaller companies to sell out earlier than they might otherwise, just to acquire the kind of infrastructure needed to support the reporting requirements, investors complained. But companies aiming to grow from the start have to invest in SOX plumbing from the get-go, because just like a house built without it, it’s much more costly to add later.
2. While green investments are widely expected to grow by 10 percent or more in the coming year, summit attendees surveyed say that the digital entertainment sector expected to receive the most funding this year is mobile (43 percent of voters thought so, as compared with 25 percent of respondents who thought social media would lead, 20 percent who voted for content and 11 percent who picked tech enablers.) Mobile also was voted as the sector most likely to see more M&A activity, and within the category, the the biggest opportunities were seen for mobile content. As for total investments, mobile was ranked a close third after “greentech” and digital entertainment in total anticipated investment dollars this year.
Those most in the know about mobile – panelists from Nokia, Google, and Qualcomm – all predicted that carriers will likely have to find a way to share the individual handset location coordinates that are so instrumental to applications that can be personalized to a given cell-phone user. There’s just too much upside opportunity there to be ignored, they agreed. Multiple Google panelists affirmed that the new Android operating system, on track to be available in commercial phones by Q3, will be flexible enough to accommodate many applications never envisioned by the search behemoth. It will, as one asserted, be “nothing like Microsoft.”
3. Several entrepreneurs, and their investors, managed to comment in completely different contexts that no-one has managed yet to crack the code on “local” services online. Among those on the AO 250 who are trying: OpenTable, NearbyNow and Outside.In (which didn’t make the list, but did present in the break-out sessions). Outside.In pointed out that its local BuzzMap of most blogged about places in D.C. Maryland and Virginia, is now live on on the site of its partner WashingtonPost.com. And BookingAngel.com, an Australian company poised to give OpenTable a run for its money, said unequivocally that Internet Yellow Pages are “dying.” A most concerted effort among all local leaders appears to be a focus on some version of a “pay for results” or pay-per-booking business model. But, at least in the case of BookingAngel, the reservation works automatically, generating a qualified lead sales opportunity until the prospective business client is virtually forced to reject business or pay between $3.50 and $8 per reservation. If the local search marketplace in increasingly populated, it certainly appears that the survivors will have at least proven their right to survive.
4. The more mature the Internet supposedly becomes as an industry, the more likely companies sound like they were named by a 4-year-old.
The ‘Short List’
Not even three days of CEO pitch sessions were sufficient to make it through AO’s entire Global 250 list. As noted in our lede piece, Twitter took top honors this year as AO’s “hottest, most innovative, and potentially disruptive tech startup on the planet.” But we’d be remiss in not relating AO’s category winners in sectors most likely to affect you, and saw several others that may warrant more attention.
In “Consumer & Community,” KPMG and company selected hi5. The social network, launched in 2003, has become one of the world’s largest social networks and is a top 20 Web site globally with 80 million plus million registered members in more than 200 countries. That said, the individual appeal seems not much changed from GeoCities of a decade ago where the appeal is to “find friends in your hometown,” show off your photos, listen to music you like, reconnect with classmates and “build your own page and express what’s important to you.” On some level, it’s so much work to engage in yet another social network that until someone important to me joins, I’ll probably have to take their word for it.
For my own taste, I was singularly impressed with IBeatYou. One of an increasing flow of companies out of Los Angeles, IBeatYou dares users to “challenge the world” in “a place where you compete with anyone in anything, anytime.” Participants can compete – challenging anyone to any contest by submitting a video photo or text; judge competitions or get friends to rate your entry; and finally brag, “win with a beatdown, talk smack, and rack up stats.”
Everything about the site plays to a user’s will to win. Register and you find you’ve won 100 points just for logging on. Fill out your profile for more points (yes, all you marketers can already see where this is going), and participation counts in the never-ending quest for a higher score. With competitions like “your most useless talent,” “best 60-second rant,” or “best pic of you drinking,” on many levels it smacks of YouTube, but with scorekeeping, and better ways of making challenges personal and timely.
Celebs like Golden State Warrior Baron Davis and Will Ferrell provide personality if not all that much presence – Ferrell’s last logon was two weeks ago – but they do warn you that IBeatYou is as much about settling a claim in your own circle than being a “stan” (stalker-fan. New vocabulary word from the rapper session.) Best online newspaper Web ap, anyone? Booyah…
Into the “Cloud”
We won’t dwell on infrastructure companies except to note, on some level it seems singularly odd that online newspaper companies persist in investing millions in their own, highly specialized CMS’s when so many other companies are running headlong into “cloud” computing. AO’s top infrastructure company, OpSource, provides a complete Web operations infrastructure and service solution for software as a service and Web businesses, and it’s committed to always providing the most current technology and applications solutions while still allowing customers to pay “on demand.”
Taking a closer look at SaaS services rather than “building your own” in hopes that audiences will materialize seems the only sane response to today’s tight capital markets. Rather than “build it and they will come,” OpSource offers, “plant it and see if it grows. “
Among “Enablers,” AO’s category winner was Youku, headquartered in Beijing. Since it’s all in Chinese, I can only guess at its claims, but the site is such a blatant rip-off of YouTube’s design, that we can only assume that’s where this is headed. MySpace must have thought so too when it decided to partner with the company.
Video To Rock Your World (or at least your Wiki)
A more compelling presentation, and collection of big media partners, was evidenced by Move Networks, whose infrastructure underlies ABC, Fox and the CW’s efforts to make their recently aired video available for download. While reliant upon its own separate media player, there’s no denying the success of the platform in its space, and the networks hungry for more interactivity and loyalty from fans seem willing to even enable users to remix and reload videos.
Relative newcomer ManiaTV, not featured in AO’s top 250, presented a clean contrast to Move’s strategy in targeting established media brands. It would rather create it’s own. Launched in 2004 as the “world’s first Internet television network,” the company produces, sells and distributes “made for Internet” programming targeting 18-34s. A key revenue stream is creating innovative, branded entertainment opportunities to leading brands and advertisers. And, it’s got 8 million viewers a month. The formula has attracted more than half of AdAge’s tops 100 advertisers.
Curiously, both Move Networks and ManiaTV like to call themselves “Television 2.0.”
But it’s not alone; Notably, OrDie Networks (ShredorDie.com, FunnyorDie.com, PWNorDie.com etc.) takes a page out of the cable playbook, building its brand with sold-out campus tours nationwide and video’s ideal “reverse publishing” model: it has produced 10.5 hurs of programming from FunnyorDie that will air on HBO in 2009.
As imitable as we may think all these models may be, for most online newspaper publishers the video entrepreneur that will rock their world is Kaltura. Kaltura calls itself the “first open-source video management platform” available on the Web. Using words like lowest price, source control, flexibility and extendibility, Kaltura’s differentiating feature nonetheless seems to be its advanced participatory or collaborative controls. Say someone were to post a wedding video online, and the original videographer missed the reception. A user who shot the reception could go online to the same platform and just “cut in” the closer – he or she could even insert multiple scenes from a different angle in the earlier video file without doing away with the original; each version of the mash-up would be preserved and be accessible from an idex.
If this sounds like a video Wiki, you’re absolutely right. It’s therefore no surprise that Kaltura has just done a deal with Wikipedia, the 9th largest site on the Web with 207 million unique users. Look for video Wikis soon, but don’t just look.
Kaltura is distributing around a “freemium” model, meaning that a free video management platform is already available. SDK or CMS (content management) extensions with browser-based applications, custom work and support or premium functionality are extra and constitute Kaltura’s profit motive. Note that among the CMS extensions already ready for primetime is Drupal.
The prospects for third party syndication, streaming and revenue sharing are mind-boggling, as are the truly editorially thrilling Web collaborations. Imagine a “Katrina” wiki where users can download the application in a minute that allows them to publish and remix their own video online. Users can pull in a Flikr video, mash-up video from other news sites, all in an open-source, drag-and-drop environment for any wiki platform or PHP site. Match that with Adap.tv (discussed below) and you’re off to the bank.
As was clear in the “Big Media” panel, top video content owners are willing to “play” in the Internet space to find the right business model for new audience realities, but by the time they get there, they’ll find the online-only competition has had the time to acquire substantial polish – er, FountainheadNetworks.tv’s “Bitchslaped.tv” notwithstanding.
Tony Perkins, organizer of AlwaysOn, likes to point to the fact that 30 percent of America’s leisure is spent online, while only 6 percent of the ad dollars have found their way there. “That’s poised to change,” he said.
The final “Enabler” company offered the stage this year that deserves a hard look is Neighborhood America. NA has developed a richly layered community platform (a.k.a. “enterprise social network solution”) with where users can interact around virtually any brand. The structure of the community itself is designed to let members know instantly what resources are available within it, and what they can do to make use of the applications provided.
Called Elavate, this platform has been used by customers as diverse as Kodak and Scripps Networks to promote products and gain consumer intelligence, and there’s an API that allows continued innovation. Key goals: ad revenues, retail sales, and referrals through peer-to-peer marketing. A second product, MovoMobile, allows marketers to develop a mobile marketing campaign and connect it to any Web-based community.
And, like OpSource, Neighborhood America’s platforms are built on the software as a service model.
Video and Semantics Lead Ad Trends
We have no idea why AO lists adap.tv in consumer applications, as it’s clearly targeted towards helping publishers make the most of their online video advertising. The company’s “OneSource” video ad platform is billed as the first open and universal platform of its kind. With a single point of control, the company allows publishers to match their online video inventory with video ads from ad networks, who typically have the largest potential pool of such ads, but which come in a large number of different formats.
Here’s the problem. Online newspapers have a growing repository of video content available to viewers who, by their past behavior, have demonstrated that they’re willing to suffer one form or another of video advertising. But this advertising comes in a smattering of formats – overlays, pre-roll, mid-roll, post-roll, Flash, streaming – you name it.
Combine this with the fact that the ad serving technology companies don’t interact, and you’ve potentially dissociated the most interesting local video out there from being matched to good, contextual video ads.
When it fully appreciated the amount of revenue that it could unlock for publishers everywhere from multiple ad sources, Adap.tv changed its initial model as an ad overlay company and created a tool that can integrate all forms of video ads with video content. Oh, and the CEO knows a little about advertising. Before forming Adap.tv, Amir Ashkinazi founded shopping.com, which was sold to eBay.
While we’re on the subject of behavioral targeting, it’s worth noting that a different word has crept into the online advertising lexicon: semantic advertising. Peer39 enters the space with technology developed in Israel and based on research at the Technion Institute of Technology and Princeton’s Institute for Advanced Study. Entrepreneur Amiad Solomon now has $12 million in financing from Canaan Partners, JP Morgan and Dawntreader Ventures, and secret weapon SVP of Ad Sales Hugh McGoran, recently of Platform A, which acquired Tacoda.
But McGoran is just the most visible Tacoda overlap. Among Peer39’s advisors are Daniel Jay, former Tacoda President, and former co-founder and CTO of Permissus and Engage; Eytan Elbaz, co-founder of Applied Semantics and inventor of AdSense; and Larry Allen, chief architect for Tacoda’s market strategy and largely responsible for the growtn of Tacoda Audience Networks. (Also noteworthy, James Oppenheim, CMO, joins the company from The Jerusalem Post where he was director of New Media.)
Knowing behaviors has always been only part of the equation to targeting advertising, and proponents of BT know this only too well. The problem becomes how to target down to the page level the sense of a particular type of advertising to the sentiment and understanding of a particular type of content – combined with the need to multiply that experience to achieve mass scale. It’s when things go to scale that the sensibilities are sometimes strained, but Peer39 has applied its algorithms to social networks, where there’s seemingly an endless supply of content at least.
Natural language processing and machine learning are part of the picture, but so is “appeal,” and this has been hard to differentiate as social networks proliferate.
Peer39 promises brands they won’t be embarrassed by the context of their advertising, and if those promises hold true, it could start a stampede.
And yet, perhaps whatever publishers do to “optimize” their ad yields, there will always be “remnant space.” For this real world, there’s Rubicon. (Go ahead, click on the Web site. It’s a hoot just to watch the “ads served” ticker climb past the 32 BILLION mark.)
Rubicon’s play is to make hay in the inefficient space that exists between unsold ad space on publisher Web sites and the myriad of ad networks that purport to monetize that. There are easily 300 such networks, and Rubicon works with 229 of them. Workind with Rubicon, publishers insert just ONE ad tag, and Rubon uses its technology to find the best yield rate, while still respecting channel conflict. The system, in short, “lets publishers focus on their core… we figure out what works best and send you one simple check,” said CEO Frand Addante.
AO’s pick for the category: Conductor. We’ll have to take their word for it. The site is clearly “under construction.”
