Tuesday, May 08, 2007

Microsoft-Yahoo? Don't Bet On It

Though the combination would be a formidable opponent to Google, company sources say merger reports are based on talks a few months ago

On paper, a merger of Microsoft and Yahoo! looks like the perfect foil to the seemingly unstoppable momentum of Google. Combined, the software giant and the online media titan would have easily the largest audience on the Web, a far more potent advertising engine, and finally, a credible position in the all-important Internet search market.

For those reasons, reports on May 4 that Microsoft (MSFT) and Yahoo (YHOO) are discussing a merger or wide-ranging deal made some sense, especially to the investors who swarmed over Yahoo's shares early in the day. But as was the case with repeated rumors of a Microsoft-Yahoo merger over the past few years, the prospects of a deal look unlikely. It now appears that the reports in the New York Post and The Wall Street Journal were based on talks that happened months ago.

Both Microsoft and Yahoo declined to comment publicly. But a Microsoft source in a position to know about talks told BusinessWeek that there are no current discussions of any significance. Another source close to the situation also indicates that talks are not current.

A Real Alternative

So why all the new excitement about a potential deal? Mainly because a merger or even an extensive partnership would touch off an epic battle for the top position on the Internet. Microsoft and Yahoo together would present the only real alternative to Google in an online world that increasingly resembles the Microsoft-dominated computer software business.

For the past couple of years, Google has romped across the Internet. It has used an increasingly dominant position in search, and the diminutive text ads that appear with search results, to rocket to $10.6 billion in sales last year, up 73% from 2005. And with an estimated quarter of all online advertising already in its pocket, Google has begun experimenting with ads in print, radio, and television.

All that has left many people from media moguls to big advertisers fearful that the company, with a market value of $147 billion, would usurp their businesses and exert outsize control of the rapidly evolving advertising world. Especially with last October's $1.7 billion acquisition of the video-sharing site YouTube and last month's $3.1 billion DoubleClick purchase, advertisers, agencies, and rival Internet outfits have worried that Google would become all powerful online (see BusinessWeek.com, 4/9/07, "Is Google Too Powerful?").

Appealing Ad Alternative

So no small number of players in the industry are rooting for the counterbalance that a Microsoft-Yahoo alliance would create. "It would create a new gorilla in the advertising arena, a super-portal," says Jim Lanzone, CEO of Ask, the search unit of IAC/InterActiveCorp (IACI).

Some Microsoft businesses would benefit from a combination with Yahoo. Neither Microsoft's MSN Web portal, which commands only 10% of online display ad impressions to Yahoo's 48%, nor its AdCenter search ad system, has caught fire. Yahoo's dominance in online display ads, as well as its well-received Panama search advertising system, introduced in February, would give Microsoft's ad efforts a leg up.

For its part, Yahoo has also been struggling to contend with the Google juggernaut. Despite its dominance in display ads, Yahoo now has only 22% of the search market to Google's 54%. And search ads count for nearly all the growth in the online ad business in recent years. The combined entities' search service might attract both more consumers and more advertisers. "Microsoft and Yahoo combined would be a more formidable force against Google," says Ryan Jacob, portfolio manager with Jacob Internet Fund, which counts Yahoo shares as 4.3% of its portfolio.

Fearsome Management Challenge

The biggest prize for the combined companies might be just the thing that sets Google apart: more data on customer intentions. Much of Google's success with search ads stems from its ability to divine customers' buying intentions, so it can show them the most relevant ads and then charge advertisers more for the service. Combining customer data from both Microsoft and Yahoo potentially could close some of the gap with Google.

For all that, the reasons not to do a deal remain stronger than the reasons to do it, according to some observers. For one, combining the companies would be a fearsome management challenge. They're in different states, they have many overlapping services bound to spur turf battles, and Yahoo's Silicon Valley culture retains some enmity toward Microsoft.

Consolidating those operations could take two years or more, by several accounts. "It will cause them to fall behind 18 to 24 months," says Samir Patel, CEO of SearchForce, a search marketing software firm in San Mateo, Calif. "I don't see a compelling reason for Yahoo to do it," adds Charlene Li, an analyst with Forrester Research (FORR). "It would be a nightmare. The memories of Time Warner-AOL (TWX) come to mind."

Slight Savings and Synergy

What's more, the imperative of a deal doesn't appear quite as urgent for Yahoo in particular. Company officials and some others in the company, in fact, have been more optimistic of late, thanks to Panama and some recent wins, such as a deal last month to provide ads for Viacom's (VIA) Web sites and the Apr. 30 purchase of online ad exchange Right Media. "You wouldn't have done that if you were going to sell the company in three or four days," notes Ellen Siminoff, CEO of search marketing firm Efficient Frontier and a former Yahoo executive.

Even for Microsoft, the reasons for a deal look iffy on a closer inspection. To keep Yahoo users, Microsoft wouldn't want to change the branding, but that means savings and synergy could be slight. What's more, there's "almost 100% overlap" in their respective online services, says Charles Di Bona II, senior research analyst at Sanford C. Bernstein, from search services and search ad systems to e-mail and news. "The Googleplex visitor parking lot would be full the day after this deal closes," Di Bona says. "There are all sorts of ways these guys don't fit together."

That said, a less sweeping deal, combining search or advertising efforts, might benefit both companies without unduly burdening them with massive integration issues. "I see partnerships happening more than a merger," says Li.

For what it's worth, Yahoo executives also have indicated they prefer to set their own course. "We're not going to compete with Google by trying to be Google," Jeff Weiner, executive vice-president of Yahoo's Network Div., which comprises its consumer Web properties, told BusinessWeek in mid-April. "We'll compete by being Yahoo." The right price might change those intentions, of course. But for the time being, Yahoo apparently will remain just Yahoo.

Hof is BusinessWeek's Silicon Valley bureau chief. Greene is BusinessWeek's Seattle bureau chief.

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Let the Phone Pick Up the Tab

Imagine having your very own mobile ATM—otherwise known as your cell phone—in the palm of your hand

Cheryl Bussani's son was grown up enough to move out of their Daly City (Calif.) home into his own place. But he still needed the occasional quick infusion of cash, and his new home in Pacifica, Calif., was far enough away that it wasn't convenient for Bussani to just drive over and drop off a few dollars. "It wasn't worth the gas," she explains.

So Bussani makes loans to her son via cell phone. She uses a service provided by Obopay, in Redwood City, Calif., that lets her transfer funds by dialing a few numbers on her wireless handset. The professional housecleaner also collects her own payments and pays bills with the service.

Bussani is part of the vanguard of U.S. mobile-phone subscribers who are doing their banking with wireless handsets. The practice is expected to gain traction in a matter of months when the likes of bigger, more established companies including banking powerhouse Citigroup (C) and wireless behemoth AT&T (T) kick off ad campaigns extolling the low cost and high convenience of paying over a mobile phone.

Following the Money

They may have a point on price. EBay's (EBAY) PayPal Mobile, which lets people wire funds and donate to charity through a phone, is free for many transactions. Obopay charges 10¢ to send money (see BusinessWeek.com, 5/14/07, "Souping Up Your Cell Phone"); contrast that with Western Union (WU), which charges 11% for transfers within the U.S.

And there's reason to expect mobile-phone payments will become easier. While some early versions require a software download onto a phone, AT&T will begin including software on devices in the fourth quarter. Cell-phone makers like Nokia (NOK) and Kyocera, along with Visa and MasterCard (MA), are trialing phones with embedded chips that allow for contactless payments. Simply wave your phone in front of a reader to pay for purchases. That should cut checkout time by 50% to 70%, studies have found.

By 2012, 292 million phones sold worldwide will contain these so-called near-field communications chips, according to consultancy ABI Research. "Consumers tell us they are ready," says Pam Zuercher, vice-president of product innovation and coordination for Visa USA. The credit card association's March survey of 800 U.S. consumers showed that 57% would be interested in buying such a phone. And among 18- to 42-year-olds, 64% said they'd switch wireless carriers for it. "We believe mobile banking will be one of the bigger applications," says Greg Latour, senior vice-president of technology development at wireless carrier Cellular South, which, like carriers Amp'd Mobile and Helio, already offers Obopay.

Fee-for-All

If optimists like Latour are right—and considering the success of contactless payments in places such as Korea, there's reason to think they will be—the increased reliance on mobile payments is likely to have a ripple effect on financial services. Wireless service providers will demand their cut of financial transaction fees. Mobile payments are also expected to crimp demand for cash and checks, which still account for more than half of all consumer purchases.

At stake is $1.4 trillion in small payments of under $25 made in the U.S. each year. By 2010, about 10%, or $140 billion, of all payments under $25 will be made with contactless cards, estimates Dan Schatt, an analyst with consultancy Celent. Of those, 10% could be paid with mobile phones, he estimates.

Established players such as Visa, MasterCard, and First Data (FDC) will continue to angle for the business of processing payments and the right to collect the fees that amount to as much as 2% of purchases. But use of checks, printed by companies such as John H. Harland, could be affected. So could demand for ATMs, run by companies like First Data, recently purchased by an affiliate of private equity firm Kohlberg Kravis Roberts for $29 billion, Schatt says.

Plenty of Players

A number of upstarts stand to benefit. Schatt lists companies like Gemalto, which makes Smart Cards for contactless payments. Companies such as Atlanta-based Firethorn and Sausalito (Calif.)-based mFoundry, which power mobile banking and payments applications could profit from this move. So could outfits like ViVOtech, which sell related hardware such as in-store scanners. "We can get a bank up and running [on mobile phones] in six weeks," says Drew Sievers, co-founder and CEO of mFoundry.

Wireless service providers tend to keep tight reins on the applications they give users access to, and they will want a share of the transaction fees. Yet, unlike such carriers as Japan's NTT DoCoMo, U.S. wireless service providers are expected to stop short of offering financial services on their own. "We don't see any operators we deal with even considering this strategy," says Tripp Rackley, CEO of Firethorn.

And, of course, the service providers themselves could gain handsomely. Obopay is making a push with funding from investors like wireless powerhouse Qualcomm (QCOM). Web giants like Google (GOOG), already offering payment services online through Google Checkout, could potentially enter the fray. Cell-phone makers like Nokia could step into the market as well.

Spend-shifters

To prevent any business disruptions, processors have been among the first to jump into mobile payments. First Data doesn't see mobile payments as a threat: "We see it more as an extension of consumer choice," says Brian Friedman, vice-president of innovation for First Data financial institution services. It's not taking chances, though, and is ramping up mobile efforts. On May 2, First Data invested in ViVOtech and has committed to using the startup's hardware in offering contactless payments.

Visa and MasterCard are conducting near-field communications trials. Visa, for one, has developed its own mobile payments software. "Today, $17 of every $100 of spend is spent on a Visa card," says Visa USA's Zuercher. "We are looking at mobile as a way to shift [even more of this] spend." To that end, the company will be adding more capabilities, such as person-to-person money transfers and ticket purchases, later this year. Visa is also trying to address issues such as ease-of-use and security, which plague contactless payments in other countries (see BusinessWeek.com, 11/21/06, "Contactless Payment Comes to Cell Phones").

And banks aren't sitting still. Citibank, for instance, is piloting Obopay with select customers. It's also trialing near-field communications in New York with Nokia and Cingular/AT&T. And then there's Citi Mobile, launched in April in California and expected to roll out nationwide by the end of May. Based on software from mFoundry, the service lets users search for ATM and branch locations, reach customer service, and check balances. "The uptake is within our expectations," says Steve Keitz, Citi Mobile Director. "We think this is the next step."

Kharif is a reporter for BusinessWeek.com in Portland, Ore.

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'Brandjacking' on the Web

Technology May 1, 2007, 12:01AM EST

A new study by MarkMonitor finds that cybersquatting and other abuses against big companies with well-known brands are on the rise

If ever there were two companies with more different lines of business, they would have to be InterContinental Hotel Group and World Wrestling Entertainment.

Both are the corporate parent of household names. WWE (WWE) is the $400 million (fiscal 2006 sales) producer of professional wrestling exhibitions and TV shows like Smackdown whose stable of stars includes Undertaker, Chris Benoit, and Rey Mysterio. InterContinental (IHG) is the Britain-based $1.9 billion (2006 sales) hotelier, which owns such storied brands as Holiday Inn and Crowne Plaza.

What these two markedly different companies have in common is a problem protecting their brands from abuse on the Web. From domain names that use trademarked words and phrases to direct users to sites with no connection to the company, to selling counterfeit goods on auction sites like eBay (EBAY), the cases of WWE and InterContinental illustrate how widely well-known brands are being exploited online, and how combating the problem is turning out to be a huge challenge.

A new study released Apr. 30 from MarkMonitor, a privately held firm that alerts companies if their brand is being abused online, has put some hard numbers on the scale of the problem. Using the top 25 companies on the Interbrand 100 list of most valuable brands, which includes names like Coca-Cola (KO), Microsoft (MSFT), Disney (DIS), Citibank (C), Google (GOOG), and Dell (DELL) (see BusinessWeek.com, "The 100 Top Brands 2006"), the San Francisco outfit found that brand abuse on the Web is greater than previously thought.

Microsoft on the Warpath

The biggest problem for the companies, at least given the overall number of incidents, is cybersquatting. It's the unauthorized use of a trademarked name or phrase in a Web domain pointing to a Web site that isn't owned by the trademark holder. MarkMonitor found more than 286,000 instances of cybersquatting for the 25 brands it studied—an average of 11,400 instances each. The data was collected during a four-week period starting Mar. 9 and ending Apr. 6 and was averaged over that period. If MarkMonitor's numbers, collected in what it has dubbed "The Brandjacking Index," are on the money, the scale of the problem alone is astonishing.

If a figure equal to more than 11,000 incidents per company on average seems high, then consider the case of Microsoft, one of the companies in MarkMonitor's sample group. It has been particularly active in suing people it says have been using domain squatting to infringe on its trademarks. It currently has four federal lawsuits pending and recently settled two others in the U.S. against companies it says have registered domain names that are close to Microsoft trademarks, such as 1microsoft67.info or freehotmail.net. In recent months it has reclaimed more than 1,000 different domain names. In Britain, it has five similar legal actions pending and recently settled another with a company that had registered as many as 6,000 different domain names that contained variations on Microsoft trademarks.

Clearly, cybersquatting is on the rise, and so are the number of domain-name registration disputes. The World Intellectual Property Organization, the global body that arbitrates such disputes, says its caseload jumped by 25% in 2006. Even so, it received only 1,823 complaints last year, the highest since 2000. That number suggests that WIPO in an entire year is likely to receive complaints on less than 1% of the domains hijacked in a single four-week span tracked by MarkMonitor. Certainly many disputes can be resolved without going to WIPO. Lawyers can often shut down a site using a hijacked name by sending a cease-and-desist letter, while other parties may not even know their trademarks are being used.

The Fans Weigh In

MarkMonitor gathered the data for the study in the course of monitoring Internet brand abuse as a service. Among other things, it checks 134 million domain-name records every day using its own software and search algorithms, and closely watches filings with the U.S. Patent & Trademark Office for evidence of trademark abuse. (The company declined to disclose how much it charges for that service.)

Cybersquatting is just one of the problems that faced Stacy Papachristos, a lawyer at WWE's headquarters in Stamford, Conn. "We first heard about it from our fans," Papachristos says. "They'd write us pointing out Web sites that weren't affiliated with us, but which were using our names to make money on their own products."

In one recent decision from WIPO issued on Mar. 5, WWE was able to shut down several Web sites using its trademarks with domain names like smackdownmagazine.com, wwemagazine.com, and wwebackstage.com. They pointed not to Web sites produced by the company but to sites operated by a company called DIR Enterprises, which was giving tips about how to get backstage at pro wrestling events and plans for building a wrestling ring.

Other Headaches for Companies

DIR had registered the domain names days or weeks before WWE had formally changed its name from World Wrestling Federation to World Wrestling Entertainment and registered all the required trademarks (see BusinessWeek.com, 2/2/04, "Is the WWE Rousing Itself from the Mat?"). "They were using our trademarks to draw wrestling fans to their sites," Papachristos says. In a case argued before WIPO, the domain names were reassigned to WWE. DIR Enterprises did not respond to an e-mail seeking comment.

Cybersquatting is only the biggest in a huge array of trademark abuses that MarkMonitor says is growing into big business. The study found more than 300,000 separate instances of brand abuse online (including cybersquatting and other offenses) against the 25 companies in the sample group.

Next on the list after cybersquatting is domain "kiting." This practice exploits a loophole in rules set down by the Internet Corporation for Assigned Names & Numbers (ICANN), which oversees domain-name registrations. Computer software can automate the process of registering a domain for the five-day trial period allowed under ICANN policies. The registration can then be renewed for another five days over and over again, usually under some cover of anonymity, making resolution of the problem difficult. This has created an environment that gives corporations with lots of trademarks to protect a huge headache. In a statement on the problem issued in March, WIPO's deputy director general, Francis Gurry, warned that the current environment of easy domain registrations has "fostered practices which threaten the interests of trademark owners and cause consumer confusion."

No Real Overhead Cost

Shifts in the news and in the time of year can have a big effect on what domains are hijacked. When a lot of media attention was being given to the possibility of an avian flu epidemic, there was a huge upsurge in domain registrations using Tamiflu, the trademarked name of an anti-flu treatment owned by Roche Laboratories. WIPO heard 34 cases involving 64 different domain names related to some variation of the Tamiflu name.

MarkMonitor's study found more than 11,000 cases of domain kiting carried out against the 25 companies in the sample group. One big target of kiting efforts is financial institutions, which accounted for 980 incidents of kiting attacks carried out among the sample group.

Why is kiting suddenly popular? MarkMonitor Chief Marketing Officer Fred Felman says it makes money for those engaging in the abuse. Since the five-day trial period for a Web site registration is free, there's no real overhead cost. At least 1 million hijacked sites are reregistered every day, used to create "pay-per-click" sites that can yield as little as $25 per year. But take that million sites and pretty soon you're looking at a business model that could potentially generate $125 million per year. "We think kiting and domain 'tasting' represent more than 90% of the new Internet domain registrations on a daily basis," he says. "We're talking about people who exist out on the fringe of the legitimate business world," Felman says. "But they're people making real money off of exploiting these brands, probably enough to pay the rent and get a nice car."

Not Just a Problem for Consumers

And then there's e-mail phishing. This is the practice of using e-mail to entice unsuspecting consumers to click through a link to a Web site that may look as if it's operated by their bank or another financial institution. Typically, a phishing e-mail informs the consumer that his bank needs him to "change your password right away." Thinking the message is legitimate, consumers click through, type in their account information and password, and soon learn the hard way that the message they received didn't really come from their bank at all.

While it's a big problem for consumers, it can also be a major problem for the banks or brokerage firms whose brands are used to carry out the crime. Phishing e-mails accounted for 16 million e-mails sent per day during MarkMonitor's sample period, up 104% in the first quarter of 2007, vs. the same period in 2006. Felman says 229 companies were the targets of phishing, and more than half of those were targeted for the first time. Banks, credit unions, PayPal (eBay's payment service), and even the Internal Revenue Service have seen their names used in phishing campaigns.

Capitalizing on Consumer Confusion

Phishing is clearly on the rise. A study by the Anti-Phishing Working Group found that the number of unique Web sites devoted to phishing jumped to just more than 16,000 by February, 2007, from 10,091 in August, 2006. "The problem is definitely not getting better," says Dan Hubbard, vice-president of security research at Websense (WBSN), which shares its phishing data with the anti-phishing group.

Another reason for the surge in phishing comes from simple consumer confusion. "We believe a lot of it is due to the confusion people have over the introduction of new security methods that banks introduce," he says. "Plus, there's been a lot of mergers and acquisitions of different banks. The customer is dealing with a new entity and that creates some confusion that phishers can use to their advantage."

Keeping a close watch on your brand is something every company with online operations has to do, says Del Ross, head of brand distribution and marketing for InterContinental, the hotel chain. "It's cheaper to spend the money to protect your brands than not to protect them," says Ross. "Just about everyone with a brand to protect has or will have this problem, and it's going to get worse."

Hesseldahl is a reporter for BusinessWeek.com.

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U.S. Agency Revenue Jumps 8.8% to $28.2 Billion

CHICAGO (AdAge.com) -- Revenue for U.S. marketing-communications agencies jumped 8.8% to $28.2 billion in 2006, the strongest growth since ad spending began to rebound from recession in 2002. The hot growth came from marketing services, fueled by digital. Traditional ad agencies, grappling with a shift from old media, saw tepid growth.

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Starbucks' Pushy New Neighbor

A small Spanish start-up named Fon is becoming a big issue for Starbucks. And Fon doesn't even sell coffee. In late February, the wireless-community builder launched a marketing campaign called "Fonbucks," giving away Wi-Fi routers to Starbucks' neighbors around the country. The idea was to get Fon routers close to Starbucks customers trying to connect to a wireless network, giving them a choice between $2-a-day Fon Wi-Fi access or $10 Starbucks T-Mobile access.

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5 clean technologies drawing intense VC interest

The Deal's Tech Confidential was released last week and profiled five clean technologies that venture capitalists are showing increased interest in. Here's a quick rundown on those technologies and some venture-funded startups working in each area:

3G Solar - The third generation of solar companies include HelioDynamics, which is working on manufacturing rotating parts that can follow the sun as it moves across the sky. Energy Innovations, which has raised $29 million, and crosstown peer Practical Instruments are making "concentrators" that use mirrors to focus sunlight more precisely. Konarka Technologies, which has raised about $60 million in venture capital, and HelioVolt are working on materials other than traditional silicon, such as copper indium gallium selenium, and developing processes that allow solar cells to be printed onto surfaces other than roofs, such as windows.

Fuel Cells - Fuel cells remain problematic because the chemical reactions either generate too much heat or require supercool temperatures. One answer to this problem could be nanomaterials. Promising companies in the field include CTP Hydrogen and Franklin Fuel Cells.

Biofuel - There are many ways to produce this. One potential source of biofuel is the methane stored in garbage and animal waste. Startups such as Ze-gen are paving the way for methane-to-power conversion. Even pond scum may one day have a role to play. GreenFuel Technologies has raised $20 million to work on generating biofuel from algae.

Water - Obstacles remain, but New York's Verdant Power and Ocean Power Delivery in Edinburgh, Scotland, which has raised $39.5 million, are vying to develop wave power technologies.

Wind - Southwest Windpower, which has raised $10 million, and Mariah Power are developing wind turbines for residential areas. Some startups are developing kites and balloons that can generate wind power. For example, Magenn Power makes floating wind turbines that the Ottawa company says are superior to conventional turbines.

There are other areas as exemplified by the investment segmentation that Vinod Khosla has done in this area. But, these five areas are a good place to start for venture capital firms just starting to get active in this area.

For more on venture interest in cleantech startups, see: TechConfidential PodTech.net

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Google's MyMaps threatens, but won't destroy Platial

In the time honored tradition of Web 2.0, Google's launch of a new product last week prompted predictions of the imminent death of hundreds of startups offering a similar service. This time the culprit was Google's MyMaps, a personalized map making service for individuals.

The presumed victim was Platial, a startup backed by Kleiner Perkins Caufield & Byers, along with hundreds of less serious mashup tools. But, as has been seen previously in comparison shopping, social networking and vertical search, Google's entry into a new area isn't equivalent to a death knell for all startups that find themselves suddenly competing with the web giant.

Platial CEO Di-Ann Eisnor wrote last week that Google has indeed disrupted Platial's business but it was neither surprising nor devastating. That's because Platial can compete on features such as community, privacy and functionality.

And even if Google begins to dominate the market for personal online mapmaking, it will do so by expanding the number of people participating in it, which should compel companies such as Ask.com, Yahoo and MSN to begin to participate in it more deeply. This should only make the best online map startups more valuable.

For more on Google's MyMaps release, see: O'Reilly Radar Robert Scoble

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Searching for the hottest Silicon Valley startups

LinkedIn founder and chairman Reid Hoffman is using his company's question and answer service to boost deal flow. The busy angel investor posted a question on LinkedIn's Answers service last week wondering "What are the three hottest companies in Silicon Valley currently?" Something must be in the air because Matt Marshall of VentureBeat asked his readers the same question a few days before.

The responses show that after Facebook, there really is no consensus answer. NetSuite, Linden Research, LinkedIn, AdMob, Digg, NanoSolar and Tesla received multiple nominations. Bebo, AdBrite and Aggregate Knowledge, companies I think are building fast growing, profitable businesses, each received a mention. One I didn't see in the response section yet that I think holds tremendous potential is TechMeme.

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NBC/GE VC fund the latest media entrant

A new $250 million venture capital fund announced earlier this week by GE and NBCU joins a crowded filed of media companies targeting early stage startups. As The Deal's Richard Morgan writes:

By targeting "developing technologies, platforms or business models with a strong strategic fit with NBC Universal" — then paying up to $15 million for each opportunity that passes muster — the General Electric Co. units are playing catch-up with other conglomerate-size strategics. Among existing entries are Time Warner Investments, which began life as the venture capital arm of America Online Inc.; Steamboat Ventures, which the Walt Disney Co. founded in 2000 but kept from investing until 2002; and Comcast Interactive Media, which the largest U.S. cable company set up in 2005 to, in its words, "develop compelling online interactive services."

None of those companies have made much of an impact with their venture funds, so there's plenty of room for the GE/NBCU vehicle to differentiate itself. Beth Comstock (pictured above), President of integrated media at NBCU, said the goal of the fund is to gain access to and influence cutting edge media technology.

The main question for all these media funds is what happens when times get tougher? Where do these venture funds rank on the list of corporate initiatives most likely to be eliminated as part of overall cost cuts? Instead of launching a fund during good times, it might make more sense to launch one during tough times when valuations and competition are lowest.

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India trying to save the world from yoga patents

Western governments are granting patents, trademarks, and copyrights over yoga to con-artists who claim to have invented the millennia-old practice. The Indian government is retaliating by publishing a giant, multi-lingual database of yoga-stuff so that patent examiners can see that "yoga didn't originate in a San Francisco commune."
The U.S. Patent and Trademark Office has issued 150 yoga-related copyrights, 134 patents on yoga accessories, and 2,315 yoga trademarks. There's big money in those pretzel twists and contortions - $3 billion a year in America alone. It's a mystery to most Indians that anybody can make that much money from the teaching of a knowledge that is not supposed to be bought or sold like sausages.

The Indian government is not laughing. It has set up a task force that is cataloging traditional knowledge, including ayurvedic remedies and hundreds of yoga poses, to protect them from being pirated and copyrighted by foreign hucksters. The data will be translated from ancient Sanskrit and Tamil texts, stored digitally, and available in five international languages, so that patent offices in other countries can see that yoga didn't originate in a San Francisco commune.

It is worth noting that the people in the forefront of the patenting of traditional Indian wisdom are Indians, mostly overseas. We know a business opportunity when we see one and have exported generations of gurus skilled in peddling enlightenment for a buck. But as Indians, they ought to know that the very idea of patenting knowledge is a gross violation of the tradition of yoga.

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Supreme Court Issues Two Important Patent Decisions

May 1, 2007 3:18 PM byJason Mendelson

Clearly, the Supreme Court read my patent rant. Okay, maybe not, but I'd like to claim that they did. As many of you know, I have a real issue with the entire patent litigation system. As many of you also know, Brad and I are huge proponents of invalidating software patents, in general. We feel that they stiffle innovation and are used mostly by unsavory folks trolling for dollars.

Today, the Supreme Court issued two important rulings. The first opinion deals with the concept of what is "obvious" under patent law. In a rare, rare situation, the court was unanimous. I haven't read the opinion (yet), but the news is reporting that they slapped down a federal appeals court that went too far in providing patent protection. Clearly the court is sending a message to the PTO office that it believes there are too many patents being granted.

In the second case, the Supremes endorsed US law that says US patents are not infringed upon if the products at issue are made and sold in other countries. In other words, foreign law pertains to goods sold in foreign countries.

It will be some time until we know how / if this actually affects our patent system as it stands today. For now, it's a step in the right direction.

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User Generated Objects: 3D Printing In The NYT

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We've mentioned stereolithography, or 3D printing, on these pages several times in the last few years and now the mainstream media seems to have got the bug too: the NYT has an article that reviews the current state of 3D printing and the prospects that maybe one day we'll be printing objects from our home. They say:

3D Systems, a pioneer in the field, plans to introduce a three-dimensional printer later this year that will sell for $9,900. “We think we can deliver systems for under $2,000 in three to five years,” said Abe Reichental, the company’s chief executive. “That will open a market of people who are not just engineers — collectors, hobbyists, interior decorators.”
Even at today’s prices, uses for 3-D printers are multiplying. Colleges and high schools are buying them for design classes. Dental labs are using them to shape crowns and bridges. Doctors print models from CT scans to help plan complex surgery. Architects are printing three-dimensional models of their designs. And the Army Corps of Engineers used the technology to build a topographical map of New Orleans to help plan reconstruction...
“You could go to Mattel.com, download Barbie, scan your Mom’s head, slap the head on Barbie and print it out,” suggests Joe Shenberger, the director of sales for Desktop Factory. “You could have a true custom one-off toy.”

Beam It Down From the Web, Scotty - New York Times PSFK Articles On 3D Printing

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Google Analytics Is Re-Launched: Do These Five Things First In V2

Complexity SimplifiedGoogle announced the launch of Version 2 of Google Analytics today. Over the next few weeks Google will upgrade current GA users to the new version. Many of the most frequent GA users (big or small) already have access to V2 as of this morning (please log into your account and check).

Version 2 is so radically different and provides such a compelling value proposition to users of web analytics that I am excited to write a blog post about a product (the first time I have done this in 11 months of existence of this blog).

I am also the Analytics Evangelist for Google but you’ll see that I am so excited about GA V2 not because I consult for Google but because I believe that v2 is a leap forward for all of its current users and a new standard for the industry when it comes to interacting complex web analytics data. Please share with me what you think, at the end of this post.

Also while this post is about GA V2 it contains examples of the best practices I have talked about on this blog frequently, I have just tried to do those with GA here. So if you use Omniture or WebTrends or WebSideStory or HBX or Visual Sciences or ClickTracks or indexTools or NetInsight or any other piece of web analytics software (and care only a little about GA) you’ll still find tangible examples of analysis you can do to find actionable insights. You can follow along and replicate these with your web analytics tool.

Here are the five things you should do the first time you log into GA V2:

Summary:

  1. Notice the awesome new data interaction model.
  2. Take the enhanced “data discoverability” for a spin.
  3. Context is king! Find your context quickly.
  4. Ahh…. Segmentation is just a step away.
  5. Upgraded goodies: Schedule and email any report or dashboards, Better site overlay, Much nicer page level reporting and more.

Details:

# 1: Notice the awesome new data interaction model.

One more of most dramatic changes to Google Analytics V2 is the new immersive data interaction model. It sets a new benchmark for how users interact with data. It shifts the model from a few digging long and hard to find insights to the many not having to dig a lot to find first blush insights and also having the power to easily and quickly dig deeper if they want to.

The V2 UI is completely new and the center piece of this launch. Every where from totally customizable dashboards to the overview reports to the presentation of the data and more “stories” that go with the reports now. The tool is easier to use, key metrics jump out to you and it is ever more easy to understand what is going one (if only all sexiness in the world was so productive! : )).

Here’s the new dashboard (notice the use of colors, font, content groupings etc in service of quickly communicating with you):

Google Analtyics Dashboard

All images in this post are linked to slightly higher resolution images, go ahead and click on all the images . The screenshots represent real data for this blog.

Here is the new presentation of the split between New vs. Returning visitors (notice the small “story” under the graph, the use of colors and layout of the table, and a quick and easy way view that communicates not just what happened last month but also a eye catching graph that tells us “performance” vs site average):

Google Analytics: New vs. Returning Visitors

As you’ll use the tool you’ll see more and more examples of effective communication of data via a very well thought out UI that is perhaps the best one today amongst all web analytics tools.

People underestimate the value of being pretty. Our world of web analytics is already too complex and data is hard to parse and insights harder still to get. Effective presentation of data (ok pretty!) is greatly accretive to helping understand trends and insights and significantly increase ease of use both for a lay person and the super analyst.

# 2: Take the enhanced “data discoverability” for a spin.

It is both a blessing and a curse that there so much data that we have access to. It means both that we can track and report a lot but it also means that it is a non-trivial challenge to find all the metrics/pieces of data you need to find the nuggets of actionable insights.

The new version of Google Analytics does a great job of addressing this challenge by immensely improving, what I call, data discoverability. The key data you need is not hidden sixteen clicks away. Most of it has been surfaced so that it is staring at you already or you can find it in two clicks.

For example look at the Visitors Overview (click Visitors on the left navigation in GA):

google analytics v2 discover data

Notice that not only do you get a trend of the Visitors to the site but you can also get all your key metrics in one “page view”. Further more the next action is within easy reach, either click on one of the many metrics you see under the graph or there are Visitor Segmentation options being suggested to you. You quickly get the whole story but you also learn what else is there.

Did you notice the lovely sparklines? Somewhere Edward Tufte is smiling. :)

Here’s another example. I am deeper into my reports and want to see where my traffic is coming from. Easy report from any tool (and a report you should constantly look at).

google analytics v2 discover data

On one page you have three interesting ways to discover data (and find insights):

1) You can easily switch the “master metric trend” to one of the other metrics (and get a quick glimpse of the performance of your referring sites).

2) You can easily switch between “standard metrics” to “bottom-line metrics” (Conversion). Compare image below to image above, one click access to clickstream (behavior) and outcomes.

google analytics v2 goal conversion

3) Oh your standard metrics are always there, even though you were looking for Visits, to prompt you to dig deeper (notice that Visits are doing ok but something happened in May that caused a increase in content consumption - pages/visit and time on site - and caused lowered bounce rates).

As you use the tool you’ll find many little and big ways in which the new UI makes it easier for you to drill down, drill up and drill around.

# 3 Context is king! Find your context quickly.

On this blog we have highlighted the importance of having relevant context to helping you make optimal decisions. The recent how should analysts spend their day post indicated that 20% of the time should be dedicated to staying plugged into the context.

The new version of Google Analytics provides several features that help you get relevant context to the performance of your website metrics. I think both of these make it significantly easier for novices and experts to understand their data (which might lead to more insights). Let me share a couple of examples……

In my emetrics presentations I have talked about how key metrics are often “lonely” and need friends to highlight important opportunities and occurrences. No matter where you go in the new Google Analytics your metrics won’t be “lonely”, you won’t find too many reports where you only look at one metric by itself. Lots of thought has been put into showing key metrics in context.

Here is a example, I am looking for the conversion rate for the last month and sure enough it is easy to fine (click on traffic sources, then Keywords, then switch Visits for the graph into Goal Conversion Rate):

google analytics v2 search keyword performance

Now notice something cool, not only do you have a trend for conversion rate on your website but in the Site Usage area of your report you can see your key metrics for the Search Traffic (numbers in bold black) but, this is fun, notice that you can also see (in smaller grey font) the comparison of your search metrics with your Site Metrics. You easily get important context such as “the % of new visitors is higher for search but their site page views per visit is lower”. Often we buy into the hype of search engines because we might only look at one metric or the other, now you can get the whole picture, quickly.

And you don’t lose that valuable context as you drill down, in this case I drill down to looking at the Conversion Rate for the top keyword from search engines:

google analytics v2 search keyword drill down

Even at a quick glance I know exactly how this keyword is performing, not just for Conversion Rate but all other important metrics (this is the top performing keyword but only contributes 1.41% of the site visits!).

Also data discoverability continues to be enhanced, notice right under the keyword are options to see performance for Total, Paid (PPC / SEM) and Non-Paid (Organic - SEO). You never have to leave the “page” to do all this.

But perhaps one of the easiest way for you to get context about your performance is to simply compare it to a, well, comparable time period. With Version 2 this is easier than ever. You still have to boring calendar you can choose your time periods from, but what I like better is the new Timeline feature where I have the option to using two slides and drag them to choose my date range. Very efficient…..

google analytics v2 context from time

As soon as I hit Apply Range I can see at a glance trend of the main metric I was looking at for the two time periods (Visits) but notice the changes for all other metrics. My sparkline trends now show the two time periods. I also have automated raw numbers for my key metrics and in helpful Red and Green indicators how each metric has performed over those two time periods.

Again in this case you can understand your performance better and even at this high level the questions you should now ask of your data will bubble up.

The nice thing is that once you choose your timeline for comparison in any report, that comparison then permeates all your reports so that you can start at a high level and drill down and still have the valuable context. Here for example is a drill down to sources of traffic to the site where I find the same timeline comparison…….

google analytics v2 time context for traffic sources

You can hover your mouse on the timeline to get daily performance, or you can easily look at the deltas for the key metrics (click on the image above to see how the context continues for your top sources and keywords, all on the same page - remember the goal is for you not to dig around to get actionable insights).

# 4: Ahh…. Segmentation is just a step away.

Most of the reports you’ll see in Version 2 of Google Analytics provide easy access to segmentation options. For example in this report while looking at the Direct Traffic you can simply click on arrow next to Segment and you can see lots of segmentation options (including by some Value that you can define and pass to GA):

Google Analytics v2: Segmentation

And here is another example for when you are deep in the bowels of doing your long term analysis you can quickly see how these options (in a composite image) would be very helpful:

Google Analytics v2: Segmentation

# 5: Upgraded goodies: Schedule and email reports/dashboards, Better site overlay, Much nicer page level reporting and more.

You now have a very convenient to share your analysis / insights with a wider group of people in your organization. Just select any report (even ones you have segmented and timeline compared etc) and click the Email button…..

Google Analytics v2: Email and schedule reports

As you can see above you have the ability to write a custom message, choose a convenient format (including extremely high resolution PDF’s) and the schedule.

Site overlay gets a v2 upgrade as well, notice something new…..

Google Analytics v2 - Site Overlay

The site overlay report not only opens in a new window (where you can simply “surf your site”) but on the top you see a new “navigational bar” that allows you to switch your choices of what you want your site overlay to display. In the screen shot above that Clicks, Goal Value (How much is each link driven in terms of goal revenue), Goals 1 and 2 (click density for driving to conversion goals that you have set for your website). You can now visually get a great picture of how each page is performing.

Site overlay is one of the most underutilized reports of any tool, with v2 it gets better in Google Analytics and builds a foundation for future enhancements.

Page level analysis has also gotten easier and much better in V2. As you’ll see in the screenshot below you can choose the page you want and then look at a detailed summary or navigation summary or entrance paths to the page or external sources who referred traffic to a page or the keywords that drove traffic to a page from a search engine.

Google Analytics v2: Page level analysis

The Entrance Paths is particularly interesting. For example how many people came to the product page, where did they go next and of those how many ended up in the shopping cart and if not there then where did they end up? Good to understand and actionable (even though I am not a huge fan of site level path analysis, that is not a good use of time).

Novice users (or experienced users!) will find it very convenient to locate help and definitions throughout the application. Just click on the question mark icon next to any metric you see or the Conversion University link next to any report.

Google Analytics v2: Help

Let us all resolve never to get confused about Hits, Visits, Visitors and Unique Visitors!! : )

So what should you do now? Can’t let you get away without action items now:

  1. If you have used Google Analytics thus far then try the analysis above and give the new reports a spin, I guarantee that you’ll find the tool significantly easier to use and you’ll discover your own little and big trends faster.
  2. If you have never used Google Analytics before then now is a good time to try. It still comes free (sign up here) and you’ll see what a free tool can do that your current web analytics tool can’t. You may or may not decide to use cancel your current tool subscription, that is a very personal choice, but you’ll make that decision for a informed position.

Closing thought: Having been such a fan of Measure Map I am super impressed with what Jeff and his team have delivered, something that is a revolutionary step forward when it comes to complex web data and how we interact with that data in our quest to find insights. But I am a greed person and want a lot more! :) I am excited for the future possibilities of innovation and invention on top of this new platform.

What do you all think? Have you tried V2? Are you excited about what you have read above (if you made it this far)? Was this post by a Analytics Evangelist or a super excited web analytics geek/blogger? Please share your thoughts and feedback via comments, I would love to hear what you all have to say. Thanks.

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Hot or Not Tears Itself Apart, Reinvents

When James Hong and Jim Young founded HotorNot in October, 2000, they had no real plans for the service to be anything other than a fun site for a few friends. They turned a free low end computer they received for setting up an etrade account into a web server, launched the site from their house in Mountain View, California, and emailed 40 friends. By the end of the day, 40,000 people had visited the site, which now had 30 second load times.

It wasn’t too long before the service was hosted at RackSpace and the users were flooding in to rate user-uploaded pictures of themselves on a scale of 1-10. In January 2001 they added a dead simple dating site. Instead of reading endless profiles and trying to find a connection, users just say yes or no to a given picture. If it’s a yes, the other person is shown your picture the next time they look through profiles. If they like you as well, a connection is made.

The Money Rolls In

Until last month, HotorNot was free until that last crucial stage when two people wanted to meet each other. At that point, one of the members (usually the man, Hong tells me) must have been a paid subscriber, which costs $6/month. Hong says their conversion rate was extremely high - 15% of active users eventually upgraded to premium accounts.

The premium revenue, plus advertising and fees for virtual flowers, soon topped $600,000 per month. Nearly all of that was profit for the two founders, who reportedly pocketed $20 million or so between them over the years. The company has never raised any outside funding.

Hong says they receive 2-3 emails per day telling them about marriages that resulted from an initial meeting on HotorNot.

In the last year though a few competitors have popped up (see yesnomayb, a copy of the business model) and a number of free dating sites also started to eat away at traffic. Traffic started to drift sideways, and the developers were getting bored at doing little more than site maintenance. Going To A Free Model

That’s when Hong and Young decided to rip apart their business model and remove the requirement for members to have premium accounts to talk to each other. A month ago, the requirement was turned off, and about $500k/month in revenue disappeared overnight. The founders also turned the company into a proper “C” corporation and issued stock options for the first time to all employees.

(I can’t help thinking that if HotorNot took venture financing somewhere along the way, they would not have been able to get their board of directors to agree to this.)

Hong says this lit a fire under the company, which is now running on reserve cash of a few million dollars. So far things look good. Traffic jumped over 60% - 10 million people visited the site in the last month, up from 6 million the month before. Advertising and virtual gift revenue spiked, and the site is now break even even though they killed their largest revenue stream.

Hong and Young aren’t stopping there. They have plans to expand the site greatly and say they will launch new products in the coming weeks.

Whether this works in the long run is yet to be seen. But the company wanted to try something new, and the founders took enough money off the table to be comfortable for life. Entrepreneurs tend to have a screwed up way of measuring risk - the more the better - and these guys are no exception.

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Deal Note: Scribd

from BGSL by umair So Scribd is hot - really hot. If we accept the rumour, at the A-round, Scribd achieved a valuation of >20m. Not bad, given the fact that it hasn't exactly seen exponential growth in terms of attention share. The hypothesis behind investing in Scribd is easy - a global repository of documents will garner an incredible attention share at any reasonable scale. Even at a measly Digg-scale, the revenue potential of a Scribd begins to be significant. And then there's the fact that Scribd ads can be hypertargeted... Now, that's all well and good. In fact, what's really interesting about Scribd isn't the yawner of an investment thesis - but the fact that it's one of the few startups around that really pushes the definition of what media is. Can other people's documents really be a medium? What are the economic of that medium? Very interesting and thought-provoking questions. But back to the IRR. I'm just not so sure of the key assumption behind the investment: that Scribd solves a problem that actually exists. Is there a supply of prosumers with "documents" leaping at the chance to share them? Initial attention share tells us very clearly - not yet. And even if there are, why wouldn't they just start a blog? YouTube had a clear monopoly on online video (at least usable online video). Scribd doesn't have the same clarity of market power. Would I have taken a bet on Scribd anyways? Probably. Good ideas are (very) few and far between these days. And the potential upside of a Scribd is well worth the risk. Let's discuss the sideline of a Scribd as host (essentially) for ripped-off books, magazines, etc. YouTube was in a legal grey area (ie, microchunks). Scribd isn't (which it acknowledges). Can Scribd exert pressure on publishers? Not unless it's in the grey area. But the larger point ist that there are lots of other positionings to be explored - Scribd as Office meets community (which is what a lot of the buzz is about), Scribd as Digg-feeder, etc - which is what offsets the risk of the key and somewhat shaky assumption, and makes Scribd a fairly cool play which will be a lot of fun, if not an obvious game-changer.

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