This is post #9 about the Qloud experience. The previous post was about about how we used YouTube as a music engine. Read that post here.
The year is 2007 and we’re building as fast as we can our new music service. It’s going to be a full-powered music streaming service on top of a collaborative music search engine and it’s going to be sweet.
Before we launched I went out to lunch with Sean Parker (known by many of you as Justin Timberlake in the movie The Social Network). At the time he had left Facebook and was about a year into his new VC gig at Founders Fund. We sat down to lunch and the subject immediately turned to our upcoming launch. He asked, “Hey, do you know about Facebook’s platform?” I didn’t and he went to explain it to me. Basically FB needed a way to expand and what better way than have companies build their product in to Facebook. While the 3rd party companies would provide the development, Facebook would allow you to message and add their users as your users. It sounded cool.
I went back to the team and explained this upcoming launch. I got in touch with Dave Morin (yep, the Path founder used to be head of Facebook platform) and he gave us access to the platform. Our plan was to build a subset of our service on Facebook and gain some early users. Then, when we launched our new website we could make a claim that says, “We already have 10,000 users on Facebook.”
It did not go that way at all.
Launching on Facebook right when the Platform was launching was probably one of the best things we did. Because it was new, it had a bunch of early adopters. It also had a bunch of loopholes that allowed us to market and message millions of users. If you remember getting a ton of requests to join some stupid game, that was the platform. We used to do things like “You can’t install our app unless you invite 30 friends.” and people did it.
Of course Facebook wasn’t happy about this, but we weren’t going to stop. Kudos goes to our colleague Noah who really figured out how to growth hack the crap out of it.
Lessons learned: at both Kapost and Qloud, we grew because we attached ourselves to a tidal wave in the industry. In Qloud it was the Facebook platform and Kapost it was Content Marketing. Facebook eventually would shut down the platform but not until much later. Heck, even Zynga used it to become a billion dollar company leveraging Facebook’s platform. Sometimes the bright and shiny new thing in the industry is worth going after.
The next post is about the actual launch. Check that out here.
iLIke was purchased by MySpace this week for $20 million. Hearing this annoucement, i couldn’t help think that something was off. Something just doesn’t make sense.
Some facts: iLike has 50 million registered users. That’s a huge number. They are definitely one of the most popular applications on Facebook and one of the best applications anywhere for concerts. They have built some things that are quite hard to build such as:
- A mp3 download store (link)
- A music activity feed crawling millions of artists and millions of users
- A ticketing system integrated with Ticketmaster
- A self-serve advertising system
They have raised $16 million bucks and claim to be profitable. Both Facebook and Amazon were interested in the deal. If both of these are true why would they sell for $20 million? Selling for $20 means that the investors get their money back and then then $4 million gets spread around to shareholders. Basically nobody makes any money that they are happy about.
To compare, Facebook just bought FriendFeed for $20 million and they have 1 million monthly uniques. iLike has at least 3x that on the web and 50x total and they are growing.
Also, I can’t imagine why a dynamic, fast moving company would want to go work at MySpace instead of Facebook or Amazon.
- MySpace vs. Facebook. One is doing a fantastic job of innovating and developing new innovative software (FB). The other is bleeding users, bleeding cash (MySpace Music) and restructuring. iLike has also actively been courting Facebook for the past 3 years. They’ve thrown Facebook / iLike parties and done everything possible to try to get a FB acquisition. Going with MySpace is strange
- MySpace vs. Amazon. One (Amazon) is in iLike’s backyard in Seattle and the other is down in LA. One is making good inroads into providing a viable music store to iTunes. The other (MySpace) started as a primary space for music but is now controlled by the labels and is getting worse and worse as they try to cut costs.
Both of those don’t make sense so then you have to conclude that they are just doing this for the money. But if (a) they are profitable and (b) it’s only $20 million on $16m raised then that doesn’t make sense either.
My conclusion from all this non-sense:
- iLike was not profitable and were running out of money. They needed to either raise more money or sell.
- Fatigue. Working in the digital music industry and having success at it is exhausting. Your main content source (music) brings with it tons of headaches. The labels are working against you every step of the way
- Facebook had no interest in getting into the music business. I think they see content area as something for partners and although iLike probably asked them repeatedly, they backed away from the deal. There is no better content company that is more integrated into Facebook than iLike. If FB didn’t want them, they’re not going to get anyone.
- MySpace paid more than $20 million. They won’t disclose the terms but my guess is that there is some kicker in there that made the deal very attractive to the shareholders. Too bad we don’t know what it is.
At least one or more of these have to be true. What are your thoughts?
I’m an iPhone users and i love it. It has transformed my mobile phone usage and dare i say, my life. With the internet at my fingertips, i no longer go more than 10 seconds without knowing the answer to a question. I have come to realize that the world of computers and the internet will always be with me, following me around and enriching my life. It also makes me realize that my relationship with my computer is going to change. Because i can Google, email, YouTube, Facebook, and check sports scores from my cell – my desire to have my computer near me is dwindling.
The new iPhone 3GS makes me think about the landscape of the computers out there. If you don’t know it, there’s a new type of machine that’s becoming popular called The Netbook. It’s a $200-400 machine that is quite small and sometimes comes attached to a wireless contract so it can be connected at all times. In this regard, it is very similar to a cell phone purchase except in a bigger form factor. (click here to check out HP’s 200 dollar machine)
When i think about the machines out there, i think of this continuum:
One thing that is interesting is how Apple is has high priced machines in their Macbook Pro’s and Air devices and “lowend” machines in their iPhone. Whatever market you’re at, Apple will have the slickest machine. Microsoft, on the other hand, has less slick highend machines, and netbooks on the lowend. Personally, i like Apple’s direction more but it’d be even better if they had a tablet or smaller sized laptop that was an iPhone/laptop hybrid for $400. I think the regular PC starts to disappear and all sales are Netbook sales. Why would anyone pay $1000 when they can get a decently powerful machine for $200?
What will be great is the day day when all i have is my cell phone and i just plug it into monitors and keyboards when i want to work at a desk. My iPhone cradle gets a lot more functional and my need for a second machine disappears.
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.
So 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.
I did an interview last night for USC business school where i was asked a lot of questions about Qloud and its beginnings. Questions like “What advice would you give to aspiring entrepreneurs? What have you learned?” Well here goes…
i often hear people talk about “doing something big.” While I admire their desire to change the world, i find it interesting that quite often the companies that do end up changing the world started as small passion projects/startups. And the business model they find is usually nowhere in sight at the beginning. Some examples:
- Facebook started as a Harvard-specific tool to get people to better interact with each other. After it worked well for Harvard, it expanded to the Ivy’s (and Duke & Stanford), then slowly to other schools and eventually everyone. That wasn’t it’s original goal. They just wanted to make it easy for people to hook up – i mean, connect
- Craigslist started as an email list to share functions, jobs and stuff in San Francisco. They sat in an office and got emailed tips as to what was going on. They then added some comments and emailed it out and eventually just posted it to a web site.
- The Google guys were in grad school and staring at some big servers they had. One idea they wanted to try was to index the entire web. Once they did that, they then had to brainstorm as to what they could do. They never started with the desire to dominate web advertising. Larry Page Speech
This thought of doing something you believe in and are passionate about regardless of the size really hit home for me when i heard Kathy Sierra’s keynote at SXSW this year. She had 16 points on how to make breakthroughs happen. Point #15 was Don’t mistake narrow for shallow. She pointed at hyper-focused blogs like Passive Aggressive Notes and the “Blog” of “Unnecessary” Quotation Marks as mastering a very tiny sliver of the internet. But you could point to the 3 i mention above (Facebook, Craigslist, and Google) as examples of companies that started narrow and gradually expanded to be game-changers.
When thinking about companies, i think it’s important people try new ideas and things they are passionate about. You’re going to be working 24 hours a day 7 days a week on one idea, so you have to love it. Or as Tim O’Reilly says Work on Stuff That Matters. It’s clear that startups don’t have all the answers when they begin so at least you can start with something you’re willing to continuously think about.
I was again struck with this thought this morning when i read Clay Shirky’s great post about newspaper and the change they are going through. He too talks about Craigslist saying:
Imagine, in 1996, asking some net-savvy soul to expound on the potential of craigslist, then a year old and not yet incorporated. The answer you’d almost certainly have gotten would be extrapolation: “Mailing lists can be powerful tools”, “Social effects are intertwining with digital networks”, blah blah blah. What no one would have told you, could have told you, was what actually happened: craiglist became a critical piece of infrastructure. Not the idea of craigslist, or the business model, or even the software driving it. Craigslist itself spread to cover hundreds of cities and has become a part of public consciousness about what is now possible. Experiments are only revealed in retrospect to be turning points.
So, my advice to aspiring entreprenuers is – (a) focus o something you love; (b) don’t focus on changing the world but rather focus on doing something, one thing, extremely well. If you execute on those 2 points, it’s easy to expand into something more powerful and profitable.
I heard a great podcast yesterday on NPR about the iconic Obama poster (seen above). The poster is done by a fascinating artist named Shepherd Fairey. It’s a little known fact that Fairey is also responsible for the Andre The Giant “OBEY” sketches that i remember from the 90’s. He really gets around.
In this case, Fairey took a photo he found on Google and then altered the neck, the eyes and the colors (and cropped out George Clooney) to make a poster than came to symbolize the campaign. Shepherd always claimed that he made the poster from an Associated Press photo and about a month ago, it was finally determined which photo he used and who the photographer was. It was a photo of Obama sitting at a press event in Darfur with George Clooney.
All this would be nice and peachy except that because the photo was an AP photo, the AP came to Fairey and threatened to sue if he didn’t dish out a percentage of revenue he made from the poster. Fairey acknowledged that he’s willing to pay the standard license fee and attribute the photo to the original photographer but he won’t be bullied into paying. So, instead he sued the AP in an attempt to discourage companies from punishing artists for creating art.
While his argument stands on fair use, to me the real issue is about people making derivative works. It’s the 21st century and lots of people take lots of images and transforming them into art. If each is penalized into paying a bounty for the original source we’re limiting and hurting society.
In this day and age, users are both consumers and creators of content. So many YouTube videos have copyrighted works in them. Last week there was a huge fiasco around Facebook’s Terms of Service when they claimed they owned all user uploaded material. Thankfully, they backed off. But the backlash from the users illustrates that ownership of property, attribution, and sharing is really important to the web.
If anything this just leads me more and more into believing in Creative Commons. It’s truly the only mechanism that let’s people properly manage their rights
I got quite inspired when reading this post by John Borthwick. First of all, the YouTube data really surprised me in that YouTube is now the 2nd largest search site online, bigger than Yahoo! at over 3 billion searches a month.
Second and more importantly, i started thinking about real-time search. Finding out what is happening right now on the web is really cool and going to becoming increasingly important and interesting. As real-time events happen such as earthquakes, sporting events, meetups, etc. we’ll want to search the web and find out what people are thinking. This is a fascinating new arena that comes with real-time messaging. We’ve always has AIM and Facebook‘s status messages, but we’ve never had a way to search through them and get a snapshot of what’s happening. Until now. Go to Twitter’s search at http://search.twitter.com and type in something and you’ll immediately see what people are thinking and doing on the web. It’s incredible
I’m still getting my head around what this means and how it’ll play out but i have to imagine that real time information will be quite valuable.
There’s a new book by Seth Godin called “Tribes” which talks about the startup culture and out-of-the-box thinkers. Two interesting parts of the book are the parts about followers and the parts about Leaders.
A good question exists talking about the difference between employees and followers. Employees show up each day and do their tasks whereas a follower is someone who is following a calling. Followers work because they believe not because they are told to do so. Great companies illustrate this. You can see people flocking to Facebook and Apple because those companies inspire. They don’t recruit but spread gospel. It’s interesting.
This relates directly to the talk about Leaders. The following characteristics were thrown out in the book:
- Leaders challenge the status quo.
- Leaders create a culture around their goal and involve others in that culture.
- Leaders have an extraordinary amount of curiosity about the world they’re trying to change.
- Leaders use charisma (in a variety of forms) to attract and motivate followers.
- Leaders communicate their vision of the future.
- Leaders commit to a vision and make decisions based on that commitment.
- Leaders connect their followers to one another.
Makes me think about how i interact with my coworkers and how i behave at work. Some people are better than others at finding a vision and staying focused on it. What do you think? Is this hard for you to do? Do you know some people who are particularly good at it?
I just read a great article by Clive Thompson called “Head for Detail” about Gordon Bell‘s latest experieement. Please just read the first 2 paragraphs. It’s about Gordon and how he is recording everything he’s doing (video, audio, emails, web, everything). He’s been doing it for the past 14 years and is able to bring up almost eveyrthing. Clive writes about Bell, saying:
He[Bell] had a tiny bug-eyed camera around his neck, and a small audio recorder at his elbow. As we chatted about various topics–Australian jazz musicians, his futuristic cell phone, the Seattle area’s gorgeous weather–Bell’s gear quietly logged my every gesture and all my blathering small talk, snapping a picture every 60 seconds. Back at his office, his computer had carefully archived every document related to me: all the email I’d sent him, copies of my articles he’d read, pages he’d surfed on my blog.
This really resonated with me as i am already trying to record my life. I have photos up on Flickr, i have my ideas going to my blog, i have my mundane thoughts going to Twitter, my videos going to YouTube, and my friend interactions recorded on Facebook. I’m already on the web but just in the totality that Bell is. Storage is getting cheaper and cheaper it’s gone from $233,000 for a gigabyte in 1980 to less than $1 today. Soon there will be enough storage in your cell phone for your entire life to be stored. I do this because i want to remember. I want my memories to be accesible all the time and reading the article made me realize how inefficent i’ve been in capturing them.
I really like articles like this becaues they make you think about where the world is going and wonder how human interactions and functions will change. It touches on how humans will change when we no longer have to remember stuff. I already don’t remember phone numbers beceuase of your cell phone. What if you don’t have to remember people’s names and interactions and you free you mind to be more creative. Just imagine – that’s what i’m doing now….
- Why aren’t you better?
I’ve been a big flickr fan for years. I take a lot of photos and that’s always been my favorite spot to put them. Flickr‘s been great at pioneering the 2.0 photo experience. They were the first to have a photostream view – not just albums. And they were the first to have tags which allow you to organize your photos in a better way. However, they haven’t done much lately. Sure, they added videos which is GREAT but that’s about it. The look hasn’t changed, there aren’t many new features and i feel that they are getting out developed by facebook’s photo experience and Google‘s Picasa. Sure those sites have different goals for their photo experience but at least they are moving forward. What’s Flickr done for me lately? Nothing.
Both Facebok and Picasa allow you to specifically name who is in each photo. Facebook does this by “tagging” a photo with a user and Picasa does this by analyzing the faces in the photos. Both are brain dead simple to use and are really slick. I’ve always used Flickr’s tags to do this with thier photos but i’d like to more specifically associate a photo with a user.
I also think that Flickr could make the “editing” of photo metadata easier. The order a picture shows up in your photostream is effectively the date you took it – but if you upload a photo much later, you have to go back and manually adjust the dates so it appears in the right spot. Flickr has always made title and description editing amazingly simply by keeping it in-line but adjusting the date and privacy of a photo still takes you to another page. Why can’t they make that easier? Same thing with setting a group of photos to a later date. This is too hard to do.
The bottom line is that i still love Flickr but i feel that it’s getting stagnant. i’m starting to think that Flickr has officially become a Yahoo company and not a nimble startup. And i don’t want to hitch my wagon to something that is in maintenance mode. I knew this day would come and i think the day might finally be here. I think i could say the same about delicious too. That site could have been much bigger than it is.
I’m wondering now – where should my photos go? What’s going to be be even better. I don’t like how Picasa is only albums but i do like how they are at least getting better and better. Is there a 3.0 photo experience that i can use?