So Long, AOL

Verizon is buying AOL for 4.4B.  It could be about ad-tech. It could be about mobile. It could be about content.  I’m not sure why it’s happening and i’m pretty sure that it’s not going to work out well for Verizon. But, more than anything to me, the sale feels like an epilogue to part of internet history.

AOL is specail to me.  It was my first job out of college. I had a great boss and I learned a ton. I met some amazing people, many of them have become good friends that i still talk with today. I also learned all the reasons why working at a big company sucks and it drove me to want to work at smaller, more nimble companies.
I also think that the AOL / Time Warner merger is a misunderstood story.  Let me defend it for a second.

Continue reading So Long, AOL

Two Pieces of Business Advice

An employee recently left Kapost (sad to see you go T) and i was out to lunch with her and she asked some advice. I thought back to two pieces of advice that I was given or things that i have witnessed from successful colleagues.  Here’s what popped up:

“90% of Power is Taken not Given”

This is a quote from my old boss Bill Raduchel.  Bill loves saying phrases like this to me, and this was one juicy nugget he spat out in 2002 when I was working at AOL.  I took it to heart. I was a product manager at the time and aspired t

Bill at the Inn at Little Washington

o have even more responsibility within the company.  He noticed that and delivered this great quote.  What he meant was that nobody is going to give me extra responsibility.  If i want it, i have to go take it and earn it.

That’s what i did. I wanted to run video services within the company.  There were lots of people running bits and pieces but nobody was owning it.  Instead of waiting for a title and position to be created, i just started acting like i was the defacto video product manager. I had weekly all-hands meetings with the other stakeholders, came up with a product roadmap, and basically acted like the product owner.  What happened? Eventually the company realized i was the product owner and rewarded me with that title.

In small companies there are too many things to do.  In big companies there are lots of ambiguity, swirl and gray space. In both instances, there’s an opportunity to do what you want.  Just be proactive and go do it.  In real estate, ownership is 9/10 the law.  In startups, doing is 9/10 the position.

Don’t Eat Alone

This is just something i’ve realized. Most of the people we hire at Kapost come from referrals.  Most of the opportunities i’ve been given in my career come from contacts of friends of friends.  The size and strength (i.e. authenticity) of your network matters in today’s work world and in your career.  I’ve seen people (Nick O’Neil) go crazy about this where they actually track in a spreadsheet the people they’ve met and want to keep in touch with and make sure every X number of days that they give them an update.  It may sound excessive but it works.  He has a ton of connections who regularly help him out.

There’s even a pretty good book, called “Never Eat Alone” which talks about the power of these connections.

Those are two things that immediately came to mind.  I’d be curious if any of you have heard any other nuggets of great advice that you’d like to share.

I Still Believe in Patch

AOL released their earnings last week and the market did a collective vomit-in-their-mouth over the results and their market cap dropped by one third.

Lots of the criticism came from AOL’s expenses in producing content and skepticism that they will ever make enough money on the content they are producing.  It also came out that they are spending $160 million a year on Patch which equals about $150k a year on each site.  One analyst (Robert Peck at Quasar Capita) said about AOL, “If you sell lemonade for $1 and it costs $800 to make it, that’s not a great business.”

Personally, I think AOL should continue to focus and pursue Patch. What’s their alternative?  Since Tim Armstrong has taken over, AOL has gone down the path of being an online content company.  That’s their strategy.  To abandon it would mean to become something completely different – something they have no vision or focus on.  Web companies don’t succeed and don’t create value by copying existing incumbents. They do it by innovating and building new distinct and unique offerings.  A hyperlocal site that covers and reports local news, that has local advertising and other deals tied in will exist.  The world is asking for it. AOL is uniquely positioned to build and provide it.  The newspaper is dead, and in 10 years online/mobile outlets are going to be the primary way news is found and read.

Of course, there is a question of whether they are structuring it correctly.  $150,000 a year seems steep for each site.  Could they do it more efficiently? I’m sure they can.  And, even people working there are admitting that their current attemps at revenue have been bad. But to call for them to stop doing it is just dumb.  I’m bullish and still believe in Patch and i think it’s a bold and interesting strategy for AOL and their only chance of being a relevant company in the web space.  I hope they make it work.


Marc Canter’s Big Plan

I last saw Marc in Paris
I last saw Marc in Paris

Over the past 8 years i’ve become friends with Marc Canter. I first met him while working at AOL as we needed new and fresh ideas there and boy did he have them.  We asked him again to come and help us out at Ruckus and he delivered again.

Marc lives in the San Francisco area – or at least he did. Marc has announced that he’s leaving heading to Ohio. You heard that right – OHIO. Why? Because he has big ideas and sometimes the best place to do them is not in the Bay Area. He’s also planning on tapping into some US resources that haven’t been utilized – unemployed people. His plan involves the unemployed force, a non=profit, private equity, grants, and lots of new ideas. You can read about it more here

I wish him the best of luck and hope to drop into OH soon to hear more about it.

I Do Not Agree with the Hog Pile on Facebook

Image representing Facebook as depicted in Cru...

There’s a growing trend in the media to attack facebook.  It started when their redesign got pretty bad reviews, continued when their CFO left, and now is gaining steam as mainstream outlets are questioning it’s core business proposition. There are three different things here and the media is pointing to them as an indication of Facebook‘s failure.  I disagree.  Here’s why:

Product enhancements. One thing i’ve admired about Facebook is their ability to keep pushing their product forward.  They introduced a great photo experience before any of their competitors (and have grown to be #1 on the web).  Even as they were experience phenomenal growth (they hit 8 million student readers), they completely redid their home page when they introduced the News Feed.  While initially hated by their users (FB blog) and the media (Time article), it set the standard for how social networks should display user activity and is now seen as a stroke of genius.  And growth climbed even higher.  At 70 million users they then completely redid the profile page to be a feed-based page as this is the best way for users to continuously portray themselves (see Tumblr for an example).  This was hated at first too.  Now, they redone the Facebook Home page to better showcase conversations and user activity.  Is it like Twitter? Yes.  Is it hated by their users? Yes. But it is also an improvement.  More than any other company i know of, Facebook is constantly pushing to get better in all areas and doing it fearlessly.  Even if they misstep, I applaud them for it.  From my experience at AOL i’ve seen that when yoy have a large user base it’s very easy to become tentative and second-guess every move.  Not changing becomes the easiest path.  It also means you start dying.   This latest change is more an indication that they’re not dying but moving forward.

Valuation.  Facebook got an absurd $15 billion valuation from Microsoft when it sold them some equity.  That deal was more than just equity sales but it also solidified Microsoft’s relationship with them as their exclusive third-party ad provider (story).  That valuation has become a problem as every new raise that happens in the industry (Twitter,  FriendFeed) is evaluated against it.  Facebook is now raising at a more reasonable level at a $5 billion valuation.  I don’t think this is an indication of failure of FB but rather a reflection (a) that these raises are straight equity and not part of an ad sales agreement, and (b) the market is the worst it’s ever been.  I think it’s ridiculous to think that the environment is the same as it was in October 2007.

Business Model. The media talks about Facebook’s failure to make an ad business out of their inventory.   Time’s article this past week was called, “Facebook Takes a Dive: Why Social Networks Are Bad Businesses.” This is completely ridiculous.  First of all, MySpace is making money.  Let me repeat.  MySpace is making money.  They were bought by Fox for $580 million and they then immediately did a deal with Google to sell ads on their search page from 2006 to 2010 for $900 million dollars (details here).  That’s a quick profit of $320 million.  Everything else on top of that year-in and year-out seems to be gravy.  The article in Time continues to say:

What is true is that social network sites have had trouble making money. MySpace was supposed to be a big part of the revenue growth at News Corp. Wall St. thought Murdoch was a genius to buy it. Last year, News Corp had to admit that MySpace would not hit its revenue targets. That is usually not the hallmark of a property that is going to take over the Internet.  Analysts believe that MySpace rival Facebook had revenue of $265 million last year. That is astonishingly low for a company that had 57 million unique visitors in the U.S. last month. And, Facebook also has a very large international user base.

myspace-logoSo let me get this straight, even though MySpace is profitable at $500-800 million dollars a year in revenues and even though it’s generated hundreds of millions of dollars for News Corp it’s a bad business becuase they missed their revenue target last year?  That is completely ridiculous.  Facebook is a differnt issue.  They have repeatedly said that they are deprioritizing ad revenue and instead focusing on growth and user engagement.  Since they started saying this (starting in late 2007), they have grown from 50 to 200 million users.  I’d say that’s pretty good execution.  Facebook makes about $275 million a year.  Could they make another 100-200 million if they started selling more ads on search pages and profile pages?  Absolutely.

All of these reasons above are why sensationalist articles discussing the demise of the social network drive me nuts.   Nobody knows what the future holds, but one thing that we can pretty much be sure of is that sites that have great user engagement and activity – and facebook has over 20 million users update their status at least once a day – will get the ad dollars.  Nick O’Neil has a good post on AllFacebook today on why he’s willing to pay a $34 CPM on facebook.  It’s not the silver bullet but it shows that there is a profitable end in sight for the company and it’s not necessarily the horrible business the media would like it to be.

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AOL mail crushes Gmail

Not in terms of functionality or ease of use but check this out:

Yahoo dominates e-mail with 88.4 million users in the United States in August, according to comScore. That is far more than Microsoft’s Windows Live Hotmail at 45.2 million and AOL at 44.8 million, not to mention Gmail at 26.0 million.

When you look at how much time people spend reading their e-mail, Yahoo mail users spend the most time (286 minutes a month), Gmail users the least (82 minutes), with AOL and Microsoft in the middle (229 and 204 minutes, respectively).

Wow. As a Gmail-lover, i would have never thought that was the case. You read the whole article here.

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Where's Yahoo's RSS Reader?

Isn’t Yahoo! supposed to compete with Google and other consumer properties? I mean, even AOL has an RSS reader (here). People are using RSS readers more and more and Google’s making it social. I now get feeds shared to me every day and they’re usually the most interesting ones. For instance the image below was from a post that was shared to me by Julian and i also think it does a good job representing Yahoo’s efforts in the Reader space. MyYahoo is so 90’s, get with the program Y!

What I Would do to Fix AOL

I saw the annoucement last week (and news stories) of the new AOL CEO, Randy Falco, and got to wondering, if I’m in charge of running AOL which is now in the business of monetizing traffic to AOL.com and other pages, how would i do it? A few thoughts came to mind….

First, i would buy the best, more user-friendly and one of hte most popular social networks around – Facebook. With facebook, you not only get a great social network, but you also get one of the best photo-sharing applications on the internet. Then i would merge it with AIM, change all AIM-pages to be facebook pages, and place the mini-feed on every users home AOL.com page. That would drive traffic. Granted, it would take a long time to get everything on the same platform (calendar, aim, mail, etc.) but facebook’s interface and features are much, much better than AOL’s. Everyone’s speculating about Yahoo buying facebook, why not AOL? AOL has just as much cash and just enough desire to monetize their traffic. It’s almost as if everyone assumes AOL is dying and isn’t going to invest in their future.

Buy Meebo
AIM is one of the most precious assets AOL has and it is being threatened by Meebo. I would buy it immediately and make all meebo-me widgets become AIM widgets and place them all over the web and inside the recently purchased AOL-facebook pages.

Streaming Music Locker

Subscription streaming. AOL should abandon the WMA format and go for only streaming. In an iPod world, the only way to play is to make your server compatible with iTunes and that means abandoning DRM and/or simply abandoning any local download. A service like last.fm + mp3tunes would go a long way.

Video
Go all-flash as DRM instead of Windows Media so mac users can play. Have it all hosted so you can access anywhere and watch anywhere.

Mail
Build, Buy or do whatever it takes to do a SERIOUS upgrade to your mail application. Mail is the largest driver of ad inventory and if you’re service is completely ad-based, this should be your #1 priority. It’s been over 2 years since Gmail launched, you would think someone at AOL would have noticed how to please mail users. Where is unlimited storage, where are ajax-features to reduce latency, where? AOL mail is by far the worst webmail application on the internet. It needs to be fixed.

Voice
AOL bought 3 voice companies between 2000 and 2003: eVoice, Quack, and another one from Canada (i’m forgetting the name). AOL made serious investment in voicemail, voice recognition and other voice services. From what i can tell, all that has been completely abandoned. I would restart this effort and do more click-to-talk services, similar to Google’s. However, all of AOL’s services are tied into mail and AIM making them more attractive. For instance, it would be easy to do click-to-talk and then save to mp3 which would be put into your music streaming locker.

These are just a few of the things i’d do. What do you all think? I think Randy’s in for a tough job and i’m not bullish on AOL’s chances. I think the most successful internet companies are run by those who understand the technology and can see the trends coming. Google embraces technology and let’s it unlock new opportunities and i don’t see somewhat who’s entire background is in TV and TV ad-sales pushing AOL into new models and opportunities. That’s just my initial reaction. Then again, Terry Semel’s done a good job at Yahoo, so who knows.

Beta – Is Nothing Finished?

betas.jpg

As you cruise the Web2.0 aisle, you’ll see almost every site has a “beta” tag attached to it. For those of you who don’t know, “beta” is a label you put on a product before it’s ready for primetime, before you launch. Officially (and according to wikipedia),

the beta period is likely to be unstable but useful for internal demonstrations, but not yet ready for release.

Often this stage begins when the developers announce a feature freeze on the product, indicating that no more feature requirements will be accepted for this version of the product.

What gets me is that many public and totally usable sites still carry the Betama_maps-beta_1.gif stamp. Look at AOL’s Video Product which has been in the news a bunch lately or or Yahoo’s Map service which has been working for over 9 months now (and i really like btw). Or also Google Video also has it although it serves tens of thousands of videos a day. These are not private releases to fix bugs, they are insecurity labels put on to products because the developers aren’t sure if they’ll break.

logo_video.jpgThis completely annoys me. I want people to develop a site until it’s worthy for people to use and then put it out. If it is available for anyone to use – it’s ready. Call it version 1.0. People know what 1.0 means, it means the first iteration. As you fix it and add features, you can go to 1.2, 1.5, 2.0, whatever. But keeping a product in perpetual beta mode is just wrong – have the balls to actually take the training wheels off and see if you can ride.

Not Everyone Sucks

There are some sites that are clever and smart. For example:

1. Writely. They have the best system i’ve seen. At the top right side of thwritely.jpgeir page they have a “beta meter” where users can vote whether their service is stable enough to come out of beta. That’s a great idea. It’s the users who you’re trying to please and if they deem the service solid, then it probably is. This is a company that Google bought earlier this year to build their Google Suite that i’ve speculated about for many a moon.

flickr_logo_gammav12.gif2. Flickr. Instead of being another copycat beta or even alpha – they actually went one more level to the third letter in the alphabet to Gamma. I like it and it goes with their playful nature of the entire site. I totally respect how they do their own thing. Kudos.

Subscription Music Breakdown

In the past few months, i've had quite a few questions about what "subscription" music is. This is my attempt to explain it.

Napster, Rhapsody, MusicNow, MTV, and Yahoo! all offer services where you can get unlimited music for about $10 a month. The one caveat is that the tracks you download with these services are all "rented" – meaning that as soon as you stop paying for them, you can no longer play them. The way this works is that each file requires a license to play. When you download a track you get both the file and the license. For a track to play in a player the license must be valid. Whichever service you use, they automatically renew all licenses every 30 days. If you're no longer a subscriber, the license doesn't get renewed and the files don't play. Another company, EMusic, is a little different – you get 40 downloads of mp3's for $10 bucks a month. While you don't get as many files, you get them in mp3 format and can keep them forever – you truly own them.

Why it hasn't worked? This model hasn't worked for two BIG reasons:

  • Can't find enough music to satisfy $10 a month. What do you want for your birthday? Tell me now. It's hard isn't it. Everybody knows they want something for their birthday, but when they have to think about it NOW, it's tough. It is the same with subscription music. Everybody knows they like a bunch of music and want to download it, but when you're at the front page of Napster, it is hard to remember what you want. Trust me, i've done countless focus groups – this is a big problem. If you can find what you want to download, you don't download and the value of an unlimited download service lessens.
  • iPods and iTunes. iPods are not only pretty to look at, with the iTunes player, they are insanely easy to use. As a device, they are so much easier to use than other subscription compatible devices. Using them, users don't have to ever worry about licenses and they don't have to worry about other media players or connections or anything. An ipod works with – and ONLY with – iTunes which means that it is designed to be simple. Microsoft is a platform company. They make platforms that any vendor can use to sell devices or services. Which is great, but it means that both the devices and the WindowsMedia format itself is going to be much, much more complex – and unfortunately for them, it shows. Until that extra functionality MS allows is really useful, it's only a hindrance.

Will subscription ever be a good way to get new tunes? I believe it will. It is very easy to create music now, and the amount of music being created is only going to keep growing. There is a need for people to find and explore the expanding universe of music. Once there are better searching techniques, I believe the utility of subscription music will rise.

Ian Rodgers, who works at Yahoo Music provided (in this podcast) a great way to think about the advantages of subscription music. It went something like this….

users care about 2 things regarding music: playing music and owning music. If you want to own music, you're best bet is to purchase the CD. You get the music in a lossless format which can be burned into any format at any bitrate indefinitely and also receive associated images, liner notes, etc. If you want to play music, your best option is a subscription platform which allows you to play as much as possible for pretty cheap.

I like that thought, but that doesn't account for iPods, nor the convenience of purchasing only a track vs. an entire album.

That's the theory – what do you think?

A funny sidenote that i like. WMA files (non iTunes) are protected by a technology called in the industry Janus, and by marketers "Plays for Sure." Check out a past blog post of mine which describes why this is a clever reference to a muppet.