New york times does a piece on Max Levchin and slide.com. I’ve met Max and I think you could toss him into any startup and he could make it work. Its a good article on what it takes to start company after company.
http://www.nytimes.com/2007/10/28/business/28invent.html?_r=1&pagewanted=all&oref=slogin
It seems that not a day goes by these days without someone screaming bubble bubble bubble. Many of the internet “old timers” (anyone in a management position last time around) got burned in the first bubble and now everything they see is a sign of a bubble and impending destruction. I don’t agree, companies that are getting huge valuations today have huge amounts of traffic and actual revenue and relatively low operating costs compared to 8 years ago.
Remember only 2 years ago, every expert was pointing out that Myspaces acquisition for $580 million was the peak of web 2.0, Same with Youtube and now Facebook? Yet no one mentions that myspace will pull in over $700 million this year.
1. Yes there are a lot of stupid ideas being funded these days, but 10 Stupid ideas require the same amount of funding as 1 Stupid idea did in the last bubble. Spending a few hundred thousand to test out 10 different business ideas and seeing which one works is just the cost of doing business. As long as 1 win out of 10 pays for the 10 losses there is nothing wrong with the model.
2. The only companies that are getting funded are those that are seeing traction and already have some sort of revenues. There is no getting 10 million these days for a stupid idea you came up with last night.
3. 10 years ago Knowledge was hoarded. Googles/Goto business model was nothing revolutionary. Amazon actually invented affiliate marketing and there were a LOT of people making insane amounts of money off it, same with SEO and SEM. Creating a adwords like system was a no brainer for people involved in the affiliate marketing world. The problem was the vast majority of people running internet companies had no clue about the internet. I remember working at a internet company at the time and they hired a bar tender to become a project manager! In todays world senior management is much more aware of affiliate marketing, SEO, SEM and other ways of generating money.
4. Vaporware isn’t IPO’ing, there is no exiting when all you have is a stupid idea and no revenues.
5. Ad rates are still rock bottom, revenues generated today are done between 5 cents a CPM for social networks up to $5.00 CPM for niche sites like autoblog. No ones business is based on making $30 CPM’s
6. The ability to start a company is now a commodity. You don’t see “experts” yelling that adsense is a bubble even though hundreds of thousands of people now making a living from it. You don’t see experts saying Ebay is a bubble even though hundreds of thousands of people make a living from it. Why do people have a hard time accepting that anyone and their dog can now start a company online AND make money ? The cost of starting a website is heading to 0, sure there are a lot of startups today but give it 4 or 5 years and there will be 4 or 5 times as many then as there are today.
The best is yet to come, as Advertising rates will increase and I think Microsoft will become a leader in the space as they are innovating and Brian McAndrews who leads the Advertiser and Publisher Solutions seems to know what he is talking about. I am pretty confident we will see remnant advertising rates double in the next 2 years.
Got a nice little mention on the BBC at the start of the month.
http://www.youtube.com/watch?v=qhVPQZXPG3o Its at about the 6 minute Mark.
Its hard to allow troops to access the site from around the world as the same IP addresses are used by scammers. Hitwise is now reporting that plentyoffish is the Market Leader in the UK. I can say that the UK is by far the hardest market to support. The scamming problem is 10 times worse than in the USA as it seems scammers are actually based in the UK and actively working with other scammers around the world. The worst part of the UK is that everyone shares IP addresses which makes things a lot more complicated.
I was at the web 2.0 Conference this week. Some of the things that stand out.
1. Founder of Electronic arts is starting a mobile company, Said on stage Mobile dating is 100 Billion dollar industry. Far as i know mobile revenues in north america are under 6 million.
2. Most of the new companies discussed seem focused on stealing others content repacking it somehow or out right copying existing companies.
3. Most executives I talked to were more focused on talking about what company they were going to start next not the company they were currently at.
Reuters put out the following which says that there aren’t enough Advertising dollars to go around to all the sites that want to generate revenue. Most stricking was that 90% of Advertising revenues are made by the top 50 sites and the top 10 sites take 70% of that, with google taking 40% of all Online US advertising.
Facebook looks like it will average over 50 billion pageviews a month, or 600 Billion pageviews this year on revenues of 50 to 75 million coming from banner ads. That works out to an average CPM of around 10 cents. Google on the other hand makes an average $15+ CPM on search.
I see a lot of paid sites now looking to cash in on advertising but it doesn’t really make much sence, given the average top 10 site only has 400 million pageviews a month. Given a 10 cent CPM that works out to about 40k/month, but since dating sites have less pageviews per unique you might get 50 cents a CPM but that only gets you 200k/month in revenue. For a site like match does giving up 10-20% of your screen space for ads make up for a 2% increase in revenues ?
Many of the users who end up on plentyoffish do so because they lose repesect for paid sites. No one wants to pay for a service and then be bombarded by flashing ads, like the ones here, those are so annoying I don’t even allow them! Many of the sites that trying this, like Lavalife, or true.com etc are just desperate for more revenues or a good story for investment bankers to sell to potential Acquirors.
I’m off to the web 2.0 conference next week. It always amazes me how much easier it is to get deals done at conferences verse trying to send an email to a company and then work your way up the chain. After web 2.0 its off to a Major investment banking conference, speaking in front of a few hundred bankers and stock analysts should be interesting.
Anything at the web 2 conference look really interesting or is it just more of the same?
Looks like Rockyou is trying to sell its self for $200 to $500 million. Given that the company only puts widgets into facebook and myspace and has no real way of making meaningful revenue I can’t see how they can ask for that much. Rockyou could be kicked off Facebook or cloned by facebook at any moment and replaced. If Rockyou does figure out how to make money facebook could just say give us 90% of your revenue or we will shut you down. I think in the long run the biggest problem will come when Myspace or facebook buys one of these big widget companies. What would happen if myspace bought a widget company that controlled a lot of the top widgets on facebook? I can’t see that going over to well.
