Great discovery experiences requires 2 core competencies:
A great personalization algorithm
A large corpus of content with accurate metadata
A great personalization algorithm allows you to target the right content to the right person at the right time. It should be continually learning and learning (from positive and negative signals). It should take into account as many signals about the user as possible (demographic info about the user, time of day, location, mode of delivery, device) and match that with as many signals within the content as possible.
The second competency that you need is a large and rich body of content. This is where most companies fail. They either have too small a body of content or a database of content that has little metadata.
Example A: You are trying to help people discover shoes to buy. You have 100,000 users and 10 different pairs of shoes.
What is the likelihood that one of those 10 shoes will be something that one of the 100,000 users are interested in? Very low.
Example B: You are still trying to help people discover shoes to buy. You have the same 100,00 users but now have populated your database with 100,000 different shoes. However you've only tagged each shoe with data about its manufacturer and whether its for men or women.
What is the likelihood you will be able to recommend the right pair of shoes to someone knowing only these 2 pieces of information? Also very low.
My advice for companies trying to build a discovery experience is to attack both the breadth (size) and depth (richness) of data problem first. Hold off on a complicated personalization algo until you have enough data to work with.
Also a shortcut to a more complex personalization algorithm is crowdsourcing + collaborative filtering. What I tend to look for are positive engagement signals from users (clicks, time viewing content, item purchased) and then use collaborative filtering to create clusters of users and content. Once you have clusters of users and content, you can surface content in the cluster to the users who haven't seen that item before.
This was a bit of a brain dump post, but just wanted to post it since I've been meaning to share some thoughts on discovery for a while.
Apologies for the sparseness, but would love additional thoughts and comments on your best practices for creating great discovery experiences.
Zynga is currently trading at 120% of book value. Granted their revenue growth has been anemic, but this valuation basically assumes the company will barely grow again. Furthermore it assumes the company will barely break a profit...FOREVER.
It is very interesting to compare Zynga vs Tencent, the leading Chinese gaming company whose primary revenue stream (virtual goods) is very similar to Zynga. Investors in Chinese equity markets are flocking to Tencent (e.g. Google Finance Tencent v. Hang Seng Index) because they see the company as having a reliable revenue stream when compared to the rest of China.
One major financial difference between Tencent and Zynga is that when Tencent passed the $1B revenue mark in 2008, it was operating with a 40% profit margin and it continues to maintain a very healthy 35-40% profit margin while growing to over $4.5B in revenues.
I have faith that the Zynga team is extremely motivated and capable of breaking through its current operational issues (mobile cannibalization, user growth and margins). When it does, the current $2.2B valuation for a company that reaches 300M users a month, produces over $1B in revenues, and has a $1.2B war chest will look ridiculous.
I am a strong believer in Facebook and believe they have years of great innovations to come.
A big part of the current debate over Facebook's IPO is whether or not they can hit the necessary financial milestones to justify their current $100b valuation. The skeptics are looking at Facebook's revenue growth, which was unspectacular as an IPO candidate at 37% this past year. The problem with this analysis is that it is a backward-looking valuation, using historical growth as an indication of future growth.
I believe Facebook will begin significantly accelerating its revenue growth as soon as it rolls out its publisher ad network--something akin to Google's AdSense product.
Chris Dixon just wrote a piece about the need for Facebook to innovate on its business model (http://cdixon.org/2012/05/15/facebooks-business-model/). That innovation will come from Facebook's publisher ad network product for the following reasons:
Existing publisher ads are often irrelevant because they are based on contextual relevance (e.g. you are reading a news article about dangerous toys and the ads are for toy stores)
Recent improvements in display ad effectiveness have validated that contextual relevance is often not as important as user relevance; retargeting ads based on past user behavior and non-contextual relevance are often more than 2x more effective
With immense amounts of user activity on Facebook owned properties and web browsing activity through its ubiquitous Like button, Facebook is in the best position to determine user relevance
Publishers have low switching costs and are only loyal to the highest RPM ad network
Google is currently valued at 5x revenues ($200b market cap with about $40b in revenue). Facebook is currently valued at 20x revenues ($100b market cap with about $5b in revenue). To get to comparable multiples, Facebook needs to find another $15b in revenue.
Google currently generates about 30% of its revenues through AdSense ($12b). The main issue with running an ad network are the substantially lower margins due to publisher revenue splits (Google currently pays most publishers 51%-68% of revenue generated from their sites).
My prediction is within 5 years, Facebook will have more than twice as much revenue generated from its publisher program as Google does today. That would put Facebook at more than $24b in revenue. If Facebook's user data can substantially improve targeting on publisher sites, Facebook would not need to pay as high revenue splits as Google to maintain publisher RPMs and would generate higher margins off its ad network than Google does today.
Facebook became the display ad market share leader with minimal effort. Yahoo, Google, and Microsoft had sales teams with decades of relationships pounding doors for more dollars. Yet they couldn't stop Facebook--with its team literally turning away dollars because they couldn't service them--from taking the #1 position.
The achilles heel for Facebook is user trust. If users stop using Facebook, the flow of user data slows down and its ability to target ads greatly diminishes.
We'll see where things go, but I'm predicting an amazing ride for the next 5 years.
Love the story about Patagonia and its founder-CEO, Yvon Chouinard.
What's great is that it shows there isn't one way to be successful. The article also talks about businesses being told to focus on their bottom-lines; but Patagonia bucks that trend and still is successful.
Perhaps the ultimate metric for business success is the long-term bottom-line, but there are so many ways to create a successful company. If everyone were solely focused on increasing their bottom-line every quarter, the world would be a pretty boring place and there would only be a handful of companies.
For some companies, the best way to create value is to focus on something other than profits or revenues. Patagonia is one of those companies. Though "to not focus" is very different from "to not care" (I'm pretty sure they care a lot about their financial health).
Looking at where tech companies are innovating today, it is clear the new area of focus for Silicon Valley is "discovery." And it's a great thing. Companies that are currently gaining success through discovery as a core feature are Pinterest, Foursquare, Fab, and Instagram. And Web 2.0 companies like Facebook, Twitter and YouTube have quickly shifted their products to make discovery part of their core experiences.
Search, in the way that we know it, was long won by Google years ago. If you know what you want, but just need to find that pointer to it, Google is your solution. By dominating the bottom of a person's decision funnel, Google became a $200b company. But discovery is anyone's game and a much bigger playing field. It's the wide top of the funnel.
While search is rooted in efficiency and transactions, discovery is unpredictable and happenstance--but most importantly emotional. It's what happens when someone posts a beautiful picture on Facebook, links to a fascinating article on Twitter, or emails a hilarious video on YouTube. You HAVE to click on it to learn more and when you do, you love it. Because discovery is emotional, the value of positive discovery through your product is immensely greater than a pure utilitarian product.
More than anyone, Facebook has made discovery its product's bread-and-butter. Discovery is what makes the Feed so addictive--the unknown stories of your friend's lives are revealed on Facebook in real-time. Furthermore, your friends are awesome filters to introducing you to something interesting. That constant feed of interesting stories, pictures, and videos is why Facebook has 800m members spending 7 hours a month on its site.
In a future post, I'll provide some best practices for companies to engineer discovery into their products and create deep engagement.
Would love to hear other examples of great discovery that people know of.
Groupon is in a bad strategic position and needs to quickly pivot. If it does, it might be the largest pivot we've seen in the Internet space. Groupon's cash base will enable the company to sustain for a little while, but we are witnessing a very rapid deterioration of its strategic advantages.
Groupon is a HBS strategy case study waiting to happen (if it hasn’t already). My personal take is that regardless of how the Groupon story ends, it is a rare breed of company. A billion dollars in revenue is a massive achievement. Of US consumer internet companies founded in the last 5 years, there has been only 2 (Zynga and Groupon) that have reached that scale of company—Facebook was founded 7 years ago.
What Groupon has also proved is that there is a massive advertising opportunity connecting local businesses and consumers—hence the hundreds of copy-cat daily deal sites.
Yet the market is proving that Groupon's assumptions about what is defensible in the local advertising space were wrong. Groupon made a bet on a strategy that focused on customer acquisition at massive scale and that its crazy big email list would provide it defensibility.
Once we have a customer’s email, we can continually market to them at no additional cost.
- Andrew Mason, Groupon CEO
The thinking followed that by owning the biggest email list, Groupon would have a unique proposition to small businesses that they would be the only place where they could reach such a massive reach of customers so quickly.
Initially this was a unique value proposition, and Groupon leveraged this to obtain huge concessions from local businesses (50% of value of coupon sold). There began a virtuous cycle where Groupon had access to the best local business deals, thereby attracting more customers, increasing brand value, and making money hand over fist.
Breaking down Groupon’s strategic position using the Porter’s Five Forces model, you get this picture of the company around 2009:
Groupon was exploiting low supplier power, which ultimately was a result of low competition.
Customers loved Groupon, but still the ball was in the customer's court. The deal (Groupon's product) had to be really good. 20% off was not good enough...it had to be 50% off.
New competitors were quickly sprouting. A lot of people said that it was too easy to copy Groupon's business. Groupon and its investors were on the side that it was not easy.
Fast forward 2 years, and this is the strategic position Groupon is in.
Groupon has no strategic advantage. It's competitive advantages on supplier power and little competition have been significantly weakened by the entrance of hundreds of competitors and significant substitute products.
Customers have proven themselves to be fickle. They are loyal only to the best deal.
Suppliers don't value Groupon's reach as much as they previously did. The huge rush of customers have brought several local businesses to its knees because their operations could not scale.
Groupon has tried to extend its model to new products (travel, goods, immediately redeemable coupons) and new locales (international) to counteract its customers' fickleness.
In retrospect, it now looks like Groupon scaled itself too soon. It had not established a sustainable, competitive advantage and its assumption that scale, in and of itself, would prove to not be a true strategic advantage.
Several folks, including Groupon's CEO, Andrew Mason, keep bringing up Amazon as an example of a company that scaled unprofitably before becoming a huge success. Yet few people have contrasted Amazon's huge initial investment in operations versus Groupon's huge initial investment in marketing. Amazon made a very large bet that by building the most operationally efficient backbone, it would have an advantage on all its competitors on a) price b) shipping time c) selection d) personalization and ultimately e) customer satisfaction. Groupon has made a very large bet on building a big email list.
Where does Groupon go from here?
Groupon needs to change course because it will find that all its initial investments in marketing will start to deteriorate in value.
Groupon's current largest asset is not its email list. It's its brand.
Its brand has immediate recognition with both customers and local businesses. What the company now needs to do is determine how it can provide something new to one or both constituents that no one else can.
Without knowing the internal operations of the company, its hard to say what other assets the company can take advantage of to pivot. But the faster the company makes this change, the better. Making this change as a public company is 10x harder than making the change as a private company.
I hope the victim is able to eventually find peace as this incident certainly appears to have left her in an extremely vulnerable state. What's disappointing is that Airbnb had several opportunities to turn this horrible situation into something better for both the victim and Airbnb.
They only had to do the right thing. By doing the right thing, Airbnb could have made the incident a non-issue. They should have taken care of the victim: provided accomodation, resources, and support. The cost? Some phone calls, a personal visit, and some nominal costs. The downside for not doing so? Alienation of its current and future community members and hundreds of millions of dollars in valuation.
A lot of people argue that by doing the right thing Airbnb is setting a precedent and opening the door for future fraud claims. That is a short-sighted and misinformed judgement. Just because Airbnb provides support to this customer doesn't mean they are setting a precedent for how they treat all cases. And even if they are extremely concerned about setting a precedent, they can take mitigating steps.
If this situation were handled correctly, the victim's blog post never would have been written and none of us would even be having this conversation.
This is Crisis Management 101 for Airbnb and they failed. They failed not just once, but multiple times. Each stage of this crisis elevated the stakes of the game, and each time Airbnb mishandled the situation.
Stage 1. Victim contacted Airbnb
Stage 2. Victim writes blog post
Stage 3. Victim writes 2nd blog post
People familiar with crisis management know that the minute a story about a relatively unknown company hits mainstream media in a negative light, the negative brand cost is tremendous. For the millions that are for the first time hearing about Airbnb through mainstream media outlets, they are leaving with a horrible first impression.
There is little Airbnb can do now to change those people's impression. They read the news story, remembered "Airbnb = not trustworthy", and moved on. Tomorrow their attention will turn to something else.
The best thing Airbnb can do is take advantage of its current airtime to broadcast:
1. What its doing to prevent future situations like this from happening
2. How it plans on supporting community members
3. An honest apology
The climb out of a ditch is always more difficult than the fall in. It's up to the Airbnb team to figure out if they make things right. At the very least I hope they make community management priority #1 (it certainly is not right now).
Yesterday, eBay and PayPal announced its acquisition of Where and many felt the reason was to strengthen PayPal's play in the mobile commerce space.
While that is certainly true, the strategic play is to expand PayPal's customer base to include small offline merchants--a much larger market than its current customer base consisting primarily of small online merchants. PayPal's growth and differentiation has been driven by small merchants who were selling online--either on eBay or their own website. Yet the ecommerce industry has begun to be dominated by large players such as Amazon who can provide consistent and simplified buying experiences. Luckily with the recent stunning growth of companies like Groupon, a completely new opportunity opened up for PayPal.
One way to conceptually think about a company like Groupon, which is driving online sales to offline experiences, is as a bank. Groupon is collecting money from online consumers and sending money to its offline merchants. PayPal wants to be that online-offline bank for every small merchant.
The Where acquisition is a great extension of how PayPal will to continue to serve its core customers, small merchants, but in a whole new (and much larger) market -- the offline world.
I've been thinking about things and I'm believe that China's economy is in a bubble. I don't know exactly when, but I'm predicting a bubble burst in the next 3 years.
Unfortunately, my economic prediction in 2007 that our economy was going to crash proved true. Again...I am not an economist, but I'm getting the same sense about China's economy.
Why would I make such a prediction when everyone else is saying China is the growth engine for the world's economy?
1. I don't disagree that China will become the world's largest economy over time. "Over time" to me means in the next 25 years.
2. This is China. Everything is China is not what it seems. You can't trust anyone that might have a financial motivation. All the economic data coming out of China comes from the government. Q: Do they have a financial motivation? A: Yes. Conclusion: You can't trust the #s.
3. There are 1.3 BILLION people in China. That is over 4x bigger than the US. China's government says it's unemployment rate is 4.2%. Again, this information comes from the government. So my guess is that unemployment is actually 3x that and is somewhere between 10-15%. China's working age population is around 900 million. Assume, conservatively, that half of those are looking for jobs and you get 45M-68M people looking for jobs. Uh oh.
4. All the shortcuts that is and have been happening in China over the past 20 years will catch up. Whether that is the health effects of pollution, unregulated and widespread food safety issues, poor worker conditions and pay, or low construction quality throughout the building boom...all of these elements point towards an evitable collapse. It's a house of cards that's been built to demonstrate the power of a Chinese economy.
China has built up a tremendous amount of intangible "debt" in the last 20 years. While even if the #s look good, at some point the government's command-and-control will be unable to juggle all the moving pieces and things will tumble.
And following this train of thought, a Chinese economic bubble burst is bad news for the rest of the world and especially for the US. China is the biggest loaner to the US government. Without China's ability to loan to the US, the US economy will grind to a halt (again).
It's been a while since my last post, but I have a little down time and decided to share a thought.
I was thinking about what the world would be like without startups...and it wasn't pretty. And the reason was that startups are one of the biggest driving forces of progress in our society. Hence, without startups, society loses a lot of momentum.
Why is that? Well basic economics. A startup by its nature has few resources. So to survive, it needs to do 2 things:
1. address a need
2. address the need in a way that is more efficient than how that need is currently being addressed
(1) is pretty obvious. And to serve a need, but with the limited resources that comes with being a startup, (2) must happen.
It's disruptive innovation. And it can happen on a small scale or a large scale. But in the end, startups that survive end up delivering something more efficiently that had been before. And it's their brilliant execution of improved efficiency which is the key to how they survive. No startup can deliver something more inefficiently and survive. The economics just don't work.
A lot has happened in the past month. Most importantly, I accepted a position as Senior Product Manager at Simply Hired and started a couple weeks ago.
It was a very difficult decision for me, especially having spent a lot of time, effort, and money on CoNotes. However I came to a point where I realized CoNotes was not headed in the direction I needed it to be going, and finding income was a priority.
A couple months ago I mentioned I was job hunting to a few people and a couple friends, Amit and Victor, mentioned that Simply Hired was hiring. Although neither worked there, they had contacts in the company and both referred me to the company. Luckily they weren't put off by the fact that I wrote "Wikipedia" as an interest and I went in for interviews. What I found was a set of talented people that were passionate about their mission (to make job search simple) and really down to earth. It was pretty much the trifecta of work environments...plus In-N-Out and Costco are both less than a 5 minute walk away. That made it a grand slam.
Nevertheless, after I received an offer to join Simply Hired, I still struggled to make my decision. At what point as an entrepreneur, do you stop? For me, it was a gut level decision. With the current fundraising and economic situation, the future of CoNotes was not too bright. I could struggle along and keep things alive for a while, but I wasn't feeling the motivation. And coming to grips that I had lost a lot of the motivation behind CoNotes was the deciding factor.
Since I had made the decision to start job searching, I was putting in much less hours on CoNotes and starting to just become much less emotionally attached to it. This kickstarted a growing level of detachment, which eventually led to a lack of motivation. It wasn't that I didn't believe in CoNotes anymore...it was just that I didn't think I had the energy or stamina to push it over this hump.
So has the startup dream died? I don't think that dream will ever die. But right now I am motivated to make a big difference at Simply Hired. It's only been a couple weeks and I love what I am doing. So lets see where this journey takes me...
So I am in a little bit of a dilemma as I applied to YCombinator's program on a whim (literally throwing together an application in 30 minutes on the day of the application deadline). Then I just received a request yesterday to present. The idea behind my application isn't CoNotes, but an idea that came to mind as I was having a discussion with an administrator at the San Francisco Unified School District--the idea had to do with education technology. I guess I thought of the application as my (free) first market validation study. Haha.
I wasn't really expecting anything out of the application because unlike most applicants:
I have not started development
I have no demo
However, I do have 11 years of experience in startups, 4 years of experience in the education technology world, several high level contacts in the education industry, and know how to code. I'm assuming these traits are why the YCombinator folks are a little intrigued.
Now I have to make a decision as to what to do. I certainly do not want to waste anyone's time listening to me ramble about a business idea I haven't really thought through. I also don't know if I have the time to prepare something reasonable to present.
I have a few thoughts on the new Facebook Redesign.
Although the redesign adds some new functionality and encourages more interaction among members via commenting, it is a step backward in usefulness. I now find it more difficult to find out what people I care about are doing.
Facebook clearly has Twitter envy.
Facebook looks to be repositioning itself for monetization via the Twitter model.
This 3rd point is the one I want to focus on. Recent news is that Facebook is facing some cash flow issues unless it finds a new influx of capital or revenues. Facebook has been around for 5 years now, and it has yet to find it's business model. It is clear that the business model will be some form of advertising, but how? Twitter, in its short lifespan, has already positioned itself as a new advertising channel for advertisers. Although Twitter has not yet implemented its business model, it is fairly evident that it will be in the form of charging advertisers for use of its communication infrastructure.
My guess is Facebook now envies Twitter's position with a clear path to monetization, and to reposition itself in a Twitter fashion. Evidence:
Facebook's redesign strongly refocuses user attention on the real-time feed and interactions with the feed.
Corporate pages (e.g. fan pages) now take the exact same form as user profiles. This will enable corporations to act more like people on Facebook--just like how there is no distinction between people and companies on Twitter.
The sudden prominence of stupid quizes. There is no reason why these quizes have sudden increased in prominence of feeds unless they are an unfortunate side-effect of increased prominence of advertiser communication in the feed.
Facebook is a smart company and knows why its users love Facebook. I bet they know their UI changes would have this kind of backlash as well. And I bet they weighed the pros and cons of delaying a path to monetization, and decided in favor of a quicker path to monetization in lieu of consumer desire.
It's now been a little over half a year since I moved out to the Bay Area and have been working on CoNotes. One thing I've noticed is that within 5 minutes of any conversation with a stranger, I am asked what I do. I always give the same response--that I am working on a startup--and inevitably I am asked what my startup does (that question is often quickly followed with an apologetic "if it's ok for me to ask.") Once it is clarified what CoNotes does, 95% of the time I am asked where my office is...and that is what I wanted to write about today.
I work in one of there locations:
Home
Coffee Shop
Library
It is pretty awesome actually to not have a fixed office location. It provides me with a great deal of flexibility for scheduling meetings and for meeting up with people. The main requirements for picking where I work for the day are: free wireless internet and outlet availability. Since Starbucks started offering free wireless, I have become a huge fan of their shops. While the coffee is average, the ubiquity and standardization of stores makes it too easy to work in a Starbucks. My second favorite (quickly becoming my preferred) work location is the library.
However, I have one big complaint about not having an office: bathrooms. Coffee makes me go to the bathroom. Now I don't have any problems with public bathrooms, but going to the bathroom means leaving my stuff unattended. Ever since I had my stuff stolen from me in college when I fell asleep studying at the library, I have been paranoid about people stealing my stuff. However it would be too simple if the only factor was a fear of theft. If any of you work in coffee shops, you know there is prime real estate. The value of a particular seating location can be calculated by a formula like (proximity to an outlet) + (non-wobbly table) + (size of table) + (next to a window) + (far from stanky bathroom). So when you get a high value table, you don't want to lose it. Furthermore, since the economy crashed, I've seen a lot more people at coffee shops than before; I'm assuming these people were all laid off and looking for jobs online at coffee shops. That means if I pack up all my stuff to go to the bathroom, the likelihood of someone taking my prime table is very high (especially now with all these jobless people). So thus is my daily dilemma. Is the risk of losing my table more costly than the risk of someone stealing my stuff?
More often than not, I end up running to the bathroom, doing my business, and running back to my table. But that time in the bathroom is high stress time for me. Luckily nothing has been stolen and I've started to employ a simple trick I learned from the book, Influence: The Psychology of Persuasion (great book, by the way). I just ask whoever is sitting next to me to watch my stuff--as long as they look like they won't steal my stuff themselves, which was an issue when the guy next to me confessed he just recently got out of jail.
Other than that, I have to say I enjoy my flexible work location. It's even better when you overhear other people's conversations that are really interesting...like the lady who is recently divorced after a 20 year marriage and is now chasing a younger man.
I wanted to share a paper that I co-wrote with fellow students while we were MBA students at Kellogg. The paper covers how a company should respond to crises that are a result of user generated content. With the speed at which information is now disseminated on the internet, companies need to be prepared for situations where employees and customers can create a firestorm with a simple blog post or video upload (example: Comcast guy sleeping).
It's kind of a long paper, so if you want to jump to the meat, the heart of our conclusions start on pg. 14.
Having connected thousands of job seekers with startup companies, we have seen some interesting trends since we have launched. The two that stand out have to do with the day of the week and time of day that individuals tend to seek jobs.
1. I am not sure what happens during the weekends that make people realize they are unhappy with their current job, but Mondays are the most popular day for looking for a new job. 20% of our visitors search for a new job on Monday. Tuesday's and Wednesday's are the 2nd most popular days to search for a new job, with 18% of our visitors coming on each of those days.
2. Noon-time PST is the most popular time to look for a job. Just over 7% of job searches on CoNotes come between 12pm and 1pm PST. The amount of job searches starts to climbs quickly from 9am PST (12pm EST), and slowly tapers off in the afternoon. I'm guessing a lot of people's day goes like this:
show up to work
read some emails
update Facebook status to "bored at work"
trudge to a useless status update meeting and munch on donuts
try to stay awake until lunch switching between Facebook and Excel (whenever anyone walks by)
lunch time!
realize hates jobs...there has to be something better than this...
I just got an email today that the small Kiva loan I made was repaid. Those of you who follow my blog will remember that I made that loan about a year and a half ago (post here). I just find it kind of funny that I get an email about full loan repayment to an Nigerian entrepreneur in the midst of an economic crises in the US where people making 100x Jeoffery's income can't even pay off their credit cards.
Below is the text I received from Kiva about the microloan made to Jeoffery:
This is an update on your loan to Jeoffery Ogbvo in Nigeria.
Jeoffery sells provisions like drinks,tomatoes paste,milk,detergent,etc.He used his last kiva loan to purchase more provisions to sell.With the profits he made from his sale.He used it in the payment of his childern school fees.He has fully repaid his kiva loan.He says thank you to all kiva lenders and Lapo microfinance.
Additional notes from Kiva:
1. This update was posted from Nigeria by Kiva's Field Partner, Lift Above Poverty Organization (LAPO). If you appreciate this update, please consider supporting another entrepreneur listed by this Field Partner. You can view other fundraising loans of Lift Above Poverty Organization (LAPO) here:
It just makes you reconsider how we view financial stability in this world. There are a lot of things we need to reconsider and we should take what president-elect Obama said in his election night speech to heart.
"This victory alone is not the change we seek - it is only the chance for us to make that change. And that cannot happen if we go back to the way things were. It cannot happen without you."
Casting a ballot for "change" means very little -- especially in California where the same voters that overwhelmingly selected Obama also voted to ban gay marriage; what hypocrisy! We should all consider ways to make the world better. I will continue to support entrepreneurs through Kiva, mentorship, and ways I best know how; and I hope you will support your communities in the ways you best know how as well.
Wow. Over dinner, my friend, Mike, mentioned that Lehman's bankruptcy caused school districts in San Mateo county to lose hundreds of millions of dollars. I was shocked to hear this because despite hearing about all of the disasters on Wall Street, I expected any effects out in the Bay Area to be secondary effects.
How did this happen? By California state law, school district funds are held by the county, and San Mateo County had a large percentage of its assets held in Lehman bonds. In a cruel twist of fate, Menlo Park City School District, which had a AAA bond rating (highest possible rating), had just issued $30M in bonds to finance the renovation of its schools. So this school district, which had done its job in running an extremely fiscally responsible operation and, furthermore, had used its strong credit history to finance better schools for its students, was directly impacted by fallout on Wall Street.
Now you can argue that the county should never have had its assets held in such risky assets, but it is a sad story nonetheless. How do you explain to a 10-year old that in addition to their home being taken away by foreclosure, that their favorite teacher is being fired and that their playground isn't going get new monkey bars anytime soon?
So I was thinking about how we got to this situation, and I keep coming to the conclusion that it was a horrible chain of selfish decisions -- none, in and of themselves, 100% at fault, but all contributing to the fallout. It's like a horrible example of Macolm Gladwell's Tipping Point gone right. The start was Clinton's policy of encouraging home-ownership for everyone and Greenspan's outrageously low interest rates. Then it was financial firms taking advantage of this cheap credit (basically free money) and the over-securitizing of financial assets. This inventivized mortgage companies to push mortgages (often illegally) onto unqualified home buyers. That was the tipping point. This basically sent the financial industry into overdrive as it had an overload of mortgages that it could trade and make money off of. This created a recursive cycle that resulted in the creation of trillions (with a T as in TONS) of dollars of fake value. Now those trillions of fake money are being unwound out of our global economy.
The problem that I have is that all these players knew EXACTLY what they were doing. It was not a situation where the blind were leading the blind. The major actors in this play were extremely intelligent and capable individuals. But the reward of payoff for all of them was enough to take the risk. Clinton and Bush had political gains in mind. Greenspan had a reputation as a financial mastermind to hold up (do you think it was a coincidence he left his office at the time he did?). The bankers all had huge bonuses at stake.
Now I don't have any problem with capitalism and free-market economics, but they are not a solution to everything. I don't think supporters of these systems ever consider the down-side cost. They only consider the upside reward. Yes, people who work hard and are talented should be rewarded for their good work. But, people who are by-standers should not bear the outsized responsibility for the cost. THAT is the problem with a free-market system; it never will be run truly like a free-market system. It's an option-call for the people with the biggest upside.
We are seeing exactly what happens when we try to impose too much of a free-market system on an economy. For that reason, I cannot support a McCain presidency. On top of the extreme incapability of Palin, McCain has always been a strong supporter of free-market economics. While he claims he is now all about reform, reform, reform, and maverickism (whatever that means), I cannot trust him to implement any reasonable reform.
Let's hope that Obama can be a voice of reason for the next 4 years.
As a business owner, I should love the Republican Party. But I just can't bring myself to vote for the McCain-Palin ticket.
Top 10 reasons in no particular order: 1. The Bush administration is the worst thing to happen since New Coke. It has taken everything good about the Republican Party (small government, states' rights, fiscal conservatism) and thrown it out the door. McCain's statements make me believe we would be in for 4 more years of the same. 2. Sarah Palin. 3. Sarah Palin. 4. Sarah Palin. 5. Palin's response to why Alaska being close to Russia makes her a capable foreign affairs. "you can actually see Russia from land here in Alaska." That's like me saying I'm ready to go into M&A discussions with Oracle because I drive by their offices every day. 6. Sarah Palin. 7. Sarah Palin. 8. Sarah Palin. 9. Sarah Palin. 10. I want people in office that got their passport before 2007.
Some of you have emailed me about the CoNotes Facebook Ads that you have seen. I'm impressed that you have even seen them given the atrocious click-through rate that I have been getting. I am going to assume the only reason my friends have actually seen the ads is because I have emailed them about 50 times about CoNotes. So they are pretty aware of my logo and can recognize it at a quick glance.
I have been running ads for a few weeks now, and below charts the CTR data for the past 2 weeks. I ran the exact same ad with different university targets to see if I could detect any differences in market segments according to which university a person went to. The results were pretty inconclusive as you can see.
I had a theory that there was an underserved recruiting market at schools not typically targeted by startups. Therefore, I was expecting to see higher click-through rates at the liberal arts and top non-Ivy schools. While the average CTR of liberal arts schools was the highest, I can't really make any statements as of yet. I think I will really have to wait for spring to come around to really make any conclusions -- when college students tend to make their employment decisions. Running the ad in the summer time probably hit the alumni at those schools, which is also another interesting group to study.
Nevertheless, despite any trends that are there or aren't there, the CTRs are horrible. The highest CTR I received from ANY segment was 0.2%. Social networks are known to average about 0.1%, so my results confirmed those results. It's well documented that the users of social networks are not in the right mentality when looking at ads. They are there to find out what is going on within their "social graph" and to find some entertainment through social apps. This is much different from the transactional mentality a user has when he/she searches for "digital camera" on Google.
On the positive side, the leads that Facebook does send me (note: this is in the single digits per day) are quality leads. So the targeting functionality is pretty effective. And I'm happy that I can target ads to very specific self-defined interests of users and their school affiliation.
But here is my advice to Facebook. If you are going to build out an advertising platform, you really need to target it to the usage pattern of your users. So what do I mean by that? Well let's think about the main reasons people use Facebook:
To find out about people in their network (in their network = friends or just people "in their network")
To share their experiences with people in their network
To spend time on social activities (not necesarily in their network)
Given these 3 main usage patterns, Facebook's advertising platform should enable different kinds of ads.
For usage pattern 1, self-expression advertising is the most logical fit. People self-affiliate themselves with brands and products. You have Apple fan-boys, Audi tuners, and Jimmy Choo shoe lovers (I'm not totally sure why I know about Jimmy Choo). Why not let companies advertise through these people? It could be a mutually beneficial relationship where brands pick specific people they want to advertise their brand through, and those people are compensated because of the special role they play in their social network (e.g. "mavens" or "salespeople" as Malcolm Gladwell would describe them). Compensation could be money, but even better is probably special privileges to products from the company. Brand companies are very concerned about diluting their brand value, so they want to make sure the right people are promoting their brand (e.g. Kobe lost a lot of endorsement deals after his rape allegations). So to enable such a advertising platform, Facebook would need to build a mechanism for advertisers to find which users to advertise through.
Usage pattern 2 lends itself to more of a transactional advertising model. People often post pictures of food from a restaurant they ate at or write a post about the hotel they stayed at. These are all opportunities to enable transactional commerce. WOM advertising is strong, so why not enable advertisers to take advantage of the best WOM advertising -- through your friends. Imagine that your friend took a picture of an awesome slice of prime rib from Lawry's. If I hadn't eaten at Lawry's, I would either want to save it to a list of "places I want to try" or maybe even make a reservation.
Usage pattern 3 is pretty hard to create a specific advertising platform for. But it doesn't really matter, as this type of usage is actually enabled by 3rd party Facebook apps. Facebook app developers currently can put their own ads on their apps, but it would be helpful as a developer if Facebook enabled ads through their own API. Basically Facebook would create an inventory of ads that developers could tap into and place on their own apps. Depending on the nature of the app, developers could select the best types of advertisements.
The difficult thing about some of my suggestions are that they would be changes in behavior for advertisers. Advertisers like buying advertising products with defined standards and specs. However Facebook has an opportunity to really shape social network advertising if they build out the right advertising platform.
So that's it. Do I really have any evidence to say this would be much better than the current Facebook Ads or their even worse Beacon product? Not really. But I'm pretty sure it is a step forward.
