twopointouch

I was delighted to attend the Chinwag Live event on widgets last night - perhaps especially since we’re having our own event on the topic next week, it was great to have the opportunity to hear what people are thinking on the subject. The event was extremely well attended and there was some good discussion, especially, as always, after the main panel had finished.

Stand-out quote for me was from a member of the audience, having heard how brands are using widgets as a marketing tool, who said, “err… aren’t these things just a way to get people to go back to your main site?” Nothing new under the sun, Horatio.

Another very interesting reference was to this post on Ventureblog.com by David Hornik about the ‘widget economy’, where the point is made that some widgets have symbiotic relationships with their hosts, while others are parasites. And that this is a challenge to the development of the idea of widgets as a way to create a business:

That challenge is a byproduct of their precarious relationship with the “host” services to which they attach. To the extent those relationships are symbiotic, the combined organism will thrive. However, to the extent those relationships are, in fact, parasitic, the host will need to shed the parasite in the name of survival.

Parasitic widgets are basically out to get you to go to another site. Something that popped up news headlines for example, which took you to a news site when you clicked on them rather than displaying more information in situ.

Symbiotic widgets enhance the site they’re on - things like YouTube videos, maybe something that shows your latest flickr photos, or a music player. Google Adsense for Content is parasitic in the sense that it aims to take people elsewhere, but symbiotic in that it gives a kickback to the site owner if it manages to do that.

Parasitic widgets sometimes seem like the sensible way to make money from the widget model. A media owner flashing up teasers from the site owner’s publication of choice isn’t really giving anything away. It seems like all-win for them. But then again, as a site owner, are you really going to put something up that purely serves as a distraction from your own content? I’d suggest not. Certainly, if you were MySpace, you’d be encouraging widgets that help users make their profile page better, and blocking widgets that send users out of the system. The symbiotic route is a slower burn, but a more secure model.

So in a way, the widget business is a miniaturised version what’s going on with marketing in general over the last ten years. That we’re moving away from a culture in which brands could simply expect to grab eyeballs, attention, custom by virtue of simply being brands to a culture of permission marketing. Where brands realise they’ve got to give in order to receive. The more enlightened brands are going to be saying, “right, we’ll give you this cool doodad that lets you embed exclusive, useful, usable content on your site. Because then we’re helping you and helping your readers. And then there’s a bit more chance that you’ll come back to us when you’re looking for more cool stuff.”

I’ll put the wrinkles bit in a separate post.

Spent the morning at Internet World and will be back tomorrow. However, for anyone who didn’t go today, let me give you the benefit of my initial reconnoitre:

1. Don’t arrive first thing. Such was the excitement that greeted the opening of the doors that there was a real scrum to get through, akin to Top Shop opening to Kate Moss collection yesterday. Sail through 30 minutes later would be my advice.
2. They have a ’system’ for printing out your name badge from your internet registration number. If you arrive during the scrum, someone will nick your badge to avoid waiting an extra minute for their own. That means you have to go back to the entrance and fill in the form again. By this point, you will be fuming - see point one, above. [If anyone meets a version of Ian Delaney who appears well-dressed, youthful and physically fit, give them a clip round the ear from me].
3. You might want to drop the laptop. No power sockets and no free wi-fi will turn the thing into a pointless burden after 2-3 sessions.
4. If you go to a seminar, do sit next one of the PA speakers. The place is really loud and people on the second row of some sessions I attended were complaining that they couldn’t hear.
5. This is very much a business conference/show. Don’t expect too many geeks in heavy metal t-shirts and trainers. Do expect a lot of suits. The Web 2.0 display area contains 5 tiny coffee tables. Email DM companies, on the other hand, command half the hall.
6. Plan your seminars. They were the main thing I went for, yet I ended up missing a couple that I really wanted to go to. One due to identity theft, but one due to poor planning. There are as many as six on at the same time. The Keynote stage was really packed for every session, but some of the other sessions are really good and have lots of spare seats to spread out on.
7. If you are meeting anyone who doesn’t have their own stand, make better arrangements than ‘I’ll ping you an email’. See point 3.
8. It’s in Earl’s Court 2 - so West Brompton is a better stop to aim for than Earl’s Court, all other things being equal.

See you tomorrow, perhaps, when I’ll have dropped that AC/DC t-shirt. I really had the feeling that the event was geared towards ‘mainstream catches up’ rather than ‘come and see the cutting edge’, but am happy to be proven wrong.

It’s so sad to hear about the brain drain in the UK recently. Geography is Destiny, said the NY Times in February, stupidly.

Sam Sethi writes recently about the need to be big if you’re going to compete over here - though I understand his (and Mike’s) blog is about to do just that. Tom Coates, Ben Metcalfe, Yoz Grahame have/are all going to the States. Peter Nixey of Webkitchen, who has just departed for San Francisco, writes:

Even in less than 24 hours here it’s blindingly incredibly obvious even to Pete, a friend who’s come out travelling with me, that there is no point in hanging around in London to do a startup.

The people, the technical expertise, the price of living and the weather combine to create an atmosphere of potential here you can almost taste in the air. Visiting San Francisco firmly changes the question from being whether one should come here to how to make it happen.

Back in rainy London (note to self: global warming seems to have devalued this cliche), there’s a climate in the air that says you can’t make your startup internet business work in the UK, because the investors won’t allow it to here. That only the US, and particularly the West Coast, and more particularly the Bay Area of San Francisco is receptive to the NEXT BIG THING. I’m more than a little suspicious of that attitude, to be honest. The atmosphere may well be more heightened in the Bay Area, but I really don’t know if that will make a business more likely to succeed. The millions upon millions spent by webvan (not Bay Area, but close) didn’t make it any less of a crackpot idea.

Y-Combinator - Paul Graham and partners’ mini VC fund, based in SF - typically invests $6K per employee in startups. Are you really telling me that can’t be done in the UK? Their attitude is that it doesn’t take money to be a successful company; it takes a great idea: like reddit, for example, which was profitable pretty much from its inception.

Jean Paul Richter said “cheerfulness is the atmosphere in which all things thrive”. That’s probably true and it’s my own interpretation of the idea of SF, some of its reality and its ability to embrace the pottiest of business ideas. Small examples - digg - three rounds of VC funding from companies based in SF and no closer to a profitable business model. Technorati, same story. Plenty of others, same story.

So what happens when they stop laughing?

At least in London, the museums are still free.

OK, I’ll try not to let this site become too much like a boring diary of what I do at work and get back to the normal web services and social media output.

But not yet.

Today, the website for NMK Forum 07 finally went live. It’s taken me a while, mainly because of my incompetence a few small technical teething difficulties. The site is to announce and publicise our summer conference and it promises, though I say so myself, to be pretty good! I’m also lining up a live backchannel chat application for the event itself on the site as well as oodles of A/V extras to document the thing thoroughly.

We’ve got Jason Calacanis, Dan Gillmor and a host of others lined up to speak and a ton of top-rated panellists. We’re after massive panels - 10 people or so - the idea being that they’ll (a) be able to tackle anything the audience wants and (b) not be boring. So there’s still spaces for any Web 2.0 mavens out there. New media journalist Mike Butcher (NMA, Techcrunch UK, Vecosys, etc.) is the programme organiser this year, so do email him if you think you’re qualified to talk about whatever Web 2.1 might be, successfully making cash out of UGC, Mobile 2.0 or any other internet and media topics of moment. It’s worth mentioning, too, that Simon Collister is at this moment bending over backwards to generate PR for the event.

The trouble is now, having made that site, it makes me want to give this place a splash of paint…

The likelihood is that - in this day and age - your attention is stretched fairly thin. The law of information states that, “the rapid growth of information causes scarcity of attention”. Few would deny that there’s been an explosive growth of information over the last few years. It’s estimated that the average consumer is exposed to around 8000 marketing messages a day.

What some people are saying as a consequence, is that since it is their attention, and not information that is a scarcity, then that attention is worth cold, hard cash. You want some time to talk to me about your new product or service? Fine, you can pay me to listen.

The mechanism for this to happen remains unclear, but one idea proposed is that we start collecting our own attention data. We might then sell or lease this information to marketers and thus they’d be able to target us with relevant information.

Not everyone is entirely thrilled about this plan. If you were a media producer, for example, used to selling an inventory of eight million page views for traditional banners, then this attention malarkey is something you’d rather just went away. You might also be rather concerned about whether this sort of approach can work. A lot of brands are looking for a relationship with customers. If they’ve obtained that with money, how much real attention are you actually likely to get?

A tangled web indeed. So that’s why we at NMK have organised tomorrow’s Beers and Innovation event, The Attention Seekers. George Nimeh, is the chair and we’ve got some clever panellists: Chris Seth, MD of Piczo; Sam Sethi of Vecosys; and Alan Moore, co-author of ‘Communities Dominate Brands’.

If you’re in town, do sign up and come out for a subtle mix of intellectual stimulation and alcoholic tranquillisation.

FOWA day two, then. Lots of learning for me, as many of the presentations had more of a developer angle. It’s stuff I’m interested in, but tend not to understand a lot of the time thanks to an arty-farty background. In general terms, I do not know my API from my elbow. I met and heard from a lot of people who do, though, and got filled in on the basics, fast.

One of the surprise hits of the day was Philip Wilkinson’s presentation ‘What Will Succeed and Fail in 2007?‘ Surprising, not because Phil is normally rubbish, but because it was one of three short presentations voted onto the schedule by attendees after the ‘official’ speakers had all been booked. For those who don’t know, though, Wilkinson founded the comparison-shopping site Kelkoo (formerly ShopGenie) and has more recently launched a Web 2.0 style social shopping venture, Crowdstorm, and so you’d hope for some expertise on the subject matter. And why was it such a hit? Because he offered concise ideas and controversial examples. What follows is a paraphrase from my notes, and a couple of interjections where my opinion diverges from Phil’s.

Recognising the arrogance and nigh-impossibility of predicting sure-fire successes and doomed failures, it’s more reasonable to offer some criteria for what seems likely to bring success; a framework for a popular service, as it were. Note that in the list of hits and misses, these are examples of services failing under this particular criteria. A web app might fail on some of these and succeed on others.

1. Don’t roll out a clone of another product.

The second YouTube might be successful; but it’s not very likely to bring anyone $1.65bn of success. And if you are the seventh online calendar or the 22nd social bookmarking service, then you need to be offering something very much better than the leader to make an impact.

Hits: Netvibes, del.icio.us, flickr, photobucket.

[Counter-example: MySpace - definitely not the first social network, but maybe it launched at the right time to capture a wave of people who had broadband and a desire to use the Internet in this way?]

2. Simplicity is the key

Applications that try to do too much lose focus and fall between stools. Stellar successes do a single thing very well.

Hits: Twitter, flickr, StumbleUpon, YouTube

Misses: Odeo, hubpages, edgeio, 30boxes

[Counter-example: MySpace, again, doesn't appear to be faltering despite its attempts to be all things to all users. Also, the Netvibes-style personalised homepage/RSS reader/search portal has dozens of functions and appears to me to be gaining ground.]

3. Don’t sell technology; sell user empowerment

Applications that are built for the readers of Techcrunch or for the development community might possibly get you the attention of a future employer, but won’t make your fortune. Don’t be a ‘technology tourist destination’.

Hits: meebo, spinvox, skype, eBay - all solve a proper, mainstream problem. They may have innovative technology, but that isn’t really the point.

Misses: Clipfire, Renkoo, wehanghere

4. Put the selfish individual before the social good.

Successful web-apps need to work for one user in order to get their buy-in and to start building a community. Network effects might add value, but they shouldn’t be the only value.

Hits: last.fm, del.icio.us, wesabe

Misses: 43 Places, Flixster, trustedplaces

[Counter-example: does last.fm belong on the 'hit' list here? My understanding is that it's only through the presence of a community that the recommendation engine works? Also, my socialistic tendencies incline me towards the idea that people are naturally altruistic. The success of Yahoo! Answers would seem to confirm that - points and stars as your only reward.]

5. Don’t try a play if the big boys can copy you

The ‘big boys’ can presumably copy anything they like, but I guess that the point is that they can’t just take over your community. I’d guess that once you have a community then that becomes difficult to compete against. This would be why Google bought YouTube rather than just sticking with their own video offering, in my estimation.

Hits: digg, Facebook, YouTube

Misses: Metacafe, Kiko, wikio

6. Enter the Mainstream

Many, if not most, web applications appear to be built for the use and benefit of 20-something net-heads. Successful web apps will be able to ‘cross the chasm’ and get your parents using them.

Hits: Pandora, YouTube, Skype

Misses: last.fm, digg, del.icio.us

[Counter-example: the list here obviously courts controversy. Can any of those 'misses' really be counted as a failure? Also, I'd suggest that some of the people building vertical, Enterprise 2.0 applications will be failing all the way to the bank. However, I understand and appreciate Phil's point.]

7. Ability to generate a large, loyal following

It stands to reason that some of the most successful Web 2.0 start-ups have enormously passionate followings. This sort of customer evangelism is clearly the best marketing that money can’t buy.

Hits: Threadless, last.fm, digg, flickr

Misses: Odeo, ecademy, flock

There’s a reasonably good report (but watch out for the pop-ups) in the Christian Science Monitor about the micro-economy created by Google Ad-sense. For most people, as you’ll appreciate if you’ve ever used the platform, we’re talking very micro. The success stories cited in the report are making a cool $100 a month from their blogs. That’s an even-cooler fifty quid here in the UK - the price of a cheap pair of trainers.

And those results are over-inflated. The article makes use of a self-selected poll of bloggers who all said how much money they made on their blogs. How much more likely are you to elect to take part in such a poll if you consider your blog financially successful, than if you know it’s a miserable failure?

I liked the overall tone of the report, though, because it’s pretty level-headed about your earnings potential as a blogger, unlike that ridiculous Business 2.0 ‘Blogging for Dollars’ story with the Michael Arrington cover:

“I’ve gotten so much from giving and sharing my videos for free,” says Mr. Garfield, whose vblog is at SteveGarfield.com. “I’ve made so many friends from all over the world.”

That’s a good attitude, I think we’d all agree. There’s been some other benefits too: Garfield’s also made enough money for some new computer equipment and stuff out of his blog, and has found his way into a spot of consultancy. I interviewed Ashley Norris of Shiny Media last week, whose UK blog network just took £4.5mn in venture funding. If you look at their plans for investing that money, you’ll find that there’s very little about traditional blogging in there. It’s about video, competing with the big boys and R&D.

So what does this and that tell me about blogging for dollars? It can take you places - it’s got me a new day job that I like a whole lot more than the slough of despond that freelance journalism had become. I’ve talked to plenty of other people whose blogs did the same thing for them. Look at Scoble, for example, his blog got him the life of Reilly at Microsoft. It’s got people like Steve Garfield into consultancy. It’s got Shiny to the point where they can start to act like a ‘grown-up’ media company (Ashley’s words).

The vastly inflated figures in the Monitor piece shows you what you should do if you want money, though:

• Google Adsense income: $1bn
• Google Adsense payout: $780mn
• Google takes: $220mn
• Average blogger takes: ~$100

Charlene Li of Forrester Research has now released (blog post) her research paper into measuring the return-on-investment (ROI) of business blogging. I was promised a copy of the paper when I signed up for a webinar on the subject back in October, so hopefully I’ll be able to report in more depth soon without coughing up the $279 that Forrester is asking.

[Update: Yay - got my copy. May take a few days to digest.]

Li says that the report found six main benefits cited by those companies interviewed: “greater brand visibility in mainstream media on the Web, word of mouth, improved brand perception, instantaneous consumer feedback, increased sales efficiency and fewer “customer service-driven PR blowups.”

In relation to the GM Fastlane blog, researchers found that when all these factors were costed, the blog “generated $578,000 in value on an investment of $291,000″. Impressive figures. However, these benefits were measured against quite specific goals: “to share information about its products and to start a dialogue between GM leaders and customers” was a main one (or two). The report measures the cost of getting 100 people to comment on the blog, compared to the cost of getting equivalent customer insight through focus groups “at the cost of $15,000 a month, or $180,000 a year”.

This kind of begs the question - or two questions. First, are those two things equivalent? I’m a big fan of company blogs, make no mistake, but I am not sure they are. Second, what about if you only spent $5000 a month on those focus groups? Does that mean that your blog actually made a loss? Yes, it would, if your stated aim is obtaining that feedback and nothing else.

A similar case might be brought against ‘word of mouth’ as a goal. If you take the ‘advertising equivalent’ approach - a common, if unpopular, metric of PR activities - then you may or may not be able to show a return. But are those things ‘equivalent’? Surely, you’ve achieved something very different by not using advertising to stimulate word of mouth.

Lots of questions, and I’m not an expert. I guess my feeling is that:

(a) While attempts to distil blogging ROI into an Excel sheet are undoubtedly a very good idea, and perhaps the only way some marketing execs will be able to get the plan past the grumpy FD, I think it’s a good idea to make your aims fairly broad. Measuring the power of a blog against the cost of focus groups (or advertising; or traditional PR; or more service reps; or a longer development cycle) is potentially putting the blogging champion into a corner if the aforementioned grumpy FD turns round with an alternative, less costly plan to deliver the same result.

(b) It’s pretty hard to measure the returns on something that’s actually very different to its alternatives by costing up those supposed equivalents. Having a business blog is not the same thing as doing some PR, some advertising and some focus groups. It can allow you to achieve some of the same aims, but it also has its own unique benefits that aren’t easily achieved in any other way. I’d say that achieving the impression that people are listening at your company is one of the main advantages of the blog format, for example. So is having a better Google position for your CEO’s name. So is the ability for customers to talk to that person in an intimate way. The equivalence model doesn’t really help measure ROI on these benefits.

Check Li’s blog post - linked above - for a good list of blogging ROI FAQs. Look forward to getting my hands on the paper.

Technorati: blogging, blogs, Forrester, ROI

Attended the eighth annual Edelman Trust Barometer launch this morning (social media release here - hey - put down those pitchforks, angry bloggers!). I have to say it was a fascinating piece of research with all kinds of implications about how politicians, businesses and NGOs might change the way they behave and communicate in order to inspire greater trust. Quick hint to the many CEOs of multinational organisations reading this: socially responsible behaviour - in particular, attention to the global warming agenda, listening to employees and treating them fairly - is now one of the key stimulants of trust in Western organisations.

As far as social media is concerned, the subject of this blog, there’s not quite as much to say. The bad news is that bloggers come at the bottom of the trust league table according to the report. (click for bigger)

This year, only 6% of people in Western Europe view the blogger as a credible source, down from 10% last year. We’re even lower than a PR, for goodness’ sake! Similar distrust was exhibited by US respondents.

That’s not quite the whole story, though, and I think we bloggers might be able to wrestle a sort-of victory out of the jaws of defeat. ‘A person like yourself‘ is the joint top-most trusted source - 45% of us would trust that sort of person - only doctors get the same amount of respect. And so who exactly are the bloggers that you read? OK, probably we all read some blogs that represent the opposite viewpoint to our own: it’s often inspiring and thought-provoking. Just like a Guardian reader might pick up the Daily Mail from time to time. But think about your favourites, the ones that make you smile and think ‘well-said’. People like yourself, I’d wager.

It all depends on how you frame the question. Do I trust bloggers? As a species, probably not. Do I trust John Smith, who I happen to connect with through his blog? Yes, I do.

Panellists made the same point about the distrust cited towards politicians. No, I don’t trust politicians (an appalling 16% rating in the survey), but yes, I do trust Tony Benn [insert your own favourite elder statesman, but I recommend Benn]. As Hugh MacLeod says in his piece about this event, “Trust has a personality.”

Similarly, perhaps, ordinary employees of companies are trusted dramatically more than their CEOs (28% versus 18%). In that case, who is it that you want spreading the good word about your products and services? The CEO blog is often very interesting and gets written about, because CEOs are powerful, mysterious and weird creatures; but in terms of persuading people to trust and maybe do business with your company? Supporting Jane in Marketing’s blog (or indeed Jane’s marketing blog) and giving her time to work on it may well be a better business move - and maybe those produced by a bunch of other people in the company.

More detailed coverage from David Brain here. But then he had to write a good post - he’s Edelman’s European CEO. Bloggers Stuart Bruce, Iain Dale and Hugh MacLeod (op.cit) were also in attendance.

Technorati: Edelman, events, trust

The WSJ hosts a debate between two venture capitalists on whether we’re in a Web 2.0 bubble. The participants are Todd Dagres, founder and general partner of Spark Capital in Boston and David Hornik, a general partner with August Capital in Menlo Park. Don’t expect to come away from the article with a strong opinion one way or another, but do expect to feel a lot better informed. The participants reach some consensus on the idea that, “great entrepreneurs are the key to building valuable companies.”

Mr. Dagres begins: Web 2.0 is a bubble for 3 reasons: 1) There is far too much money chasing Web 2.0 deals. Too much money means too many companies getting funded at higher valuations. 2) There are virtually no barriers to entry in Web 2.0 and therefore the ability to develop a unique solution and sustain a competitive advantage is virtually nil. Therefore, it’s difficult for Web 2.0 companies to build long term value. 3) There is very little liquidity in the market for Web 2.0 companies. The Dow was recently at a high and still no liquidity. Without liquidity, Web 2.0 companies must rely on acquisitions to achieve liquidity and this will put a lid on the potential exit options and ultimate valuations of these companies. In short, they will be playing a musical chairs game in which there are far too many players and too few chairs.

There are some similarities between the current “bubble” and the last one that burst in 2000: Lots of incomplete and under-experienced teams, business models based more on eyeballs than cash flow, and a rash of incremental and “me too” deals.

Mr. Hornik responds: I do not believe that the existence of too much venture capital money chasing too few interesting ideas constitutes a bubble. The Web 1.0 bubble inflated because the public markets were willing to bet on unproven ideas. Public markets are ill suited to evaluating such risks. On the other hand, the venture capital community exists precisely to take on that risk. While many Web 2.0 companies will fail, they will not likely fail in significantly greater proportions than has been the case with other venture investments historically. So it is hard to imagine how this so-called bubble will over-inflate. Venture capitalists will rationally stop investing in ideas that don’t bear fruit. Those that do bear fruit will gain traction and either be acquired or go public. Those are the traits of a rational market in my mind.

[...]

Mr. Dagres: I agree that there will be interesting companies coming out of the Web 2.0 wave. Every wave has its winners and losers. The notion of a bubble, however, is that a particular market gets overdone, i.e. over-hyped, over-invested, and ultimately experiences a high mortality rate. I think the Web 2.0 space will have a higher mortality rate than other segments of the overall media and technology industries. There are far too many MySpace and YouTube genetically challenged clones. All but a few will fail. The winners are generally the ones that get in early and out before the bubble bursts. There are rare examples of bubble companies making it through the bust and going on to become successful and valuable companies. By the way, the combined cash flow of Spot Runner, LinkedIn and Facebook is less than that of one Costco store.

The debate continues here…

Also note the following table from the TNL.net blog which shows that while there have been some enormous deals (MySpace, YouTube), the average Web 2.0 acquisition is somewhat more modest.