Escapin' through the lily fields I came across an empty space

There has been much debate in the last week over platforms, holes, products and ecosystems.

All of it made me think back to my youth, the days of AOL, around 1995-1997. Back then, one of AOL's innovations was a publishing platform (Rainman - Remote Automated Information Manager) which allowed thousands of content producers - of all sizes and skills - to publish into AOL. As a result, back then the breadth of content on AOL was remarkable and filled every possible niche. It was a wonderful, rich, vibrant community of content. I joined AOL back then because Geoff Gould published his Grateful Dead forum on AOL (keyword: Grateful Dead, I recall) - one of the first online communities. Indeed you can still see today he uses the same modified AOL logo he used back then:


As a platform, this worked precisely because AOL provided the two key components every platform must deliver to create value: distribution, and monetization. AOL offered distribution through its thousands and then millions of users. It delivered monetization through its pricing scheme: users paid AOL for Internet access by the hour ($6.95 or $9.95, I can't recall) and content providers got paid a percentage of the hourly rate related to the time users spent on their AOL pages. It worked, it worked well, and literally thousands of flowers bloomed (think about the analogies to the Facebook platform, or iTunes store, or Windows OS - offering distribution and monetization always works). The platform succeeded . . . .

Until it didn't.

The Internet business changed, completely, in 1996 when the AT&T WorldNet Service began offering"all-you-eat" (unlimited access) pricing for Internet access. AOL (as an ISP) soon followed suit, as it had to do.

This destroyed AOL's original platform, as it could no longer share variable usage revenues with its content partners. We spent much of 1997 renegotiating thousands of these deals. The revenue stream for these guys ended. I can only imagine the outrage and headlines and hating if this happened today. But AOL too had to change its business.

A funny thing happened, however. Smart content providers realized they could - indeed had to - move to the nascent web. Over there - using HTML - much more rich content experiences and applications and commerce services could be launched. And over time more users would migrate to an open web entry point. The good ones created good businesses, even some iconic ones (early on we negotiated hard with the NY Times - an early AOL partner - as they considered moving their content off AOL - and onto the web!). Others failed. AOL had to flip its business model outside of access fees into advertising, commerce other services. Web browsers became the primary presentation layers, not the ISPs.

Innovation didn't die - instead it flourished into new, related and unrelated, spaces.

History tells us that markets get flushed, always and often. It doesn't matter what we call them - holes, ecosystems or whatever - but things change, business landscapes alter their foundations, and companies themselves are often the catalyst for those changes. But each time good execution survives, and more opportunities are created than those that are filled. It always happens this way.

Comin', comin' around, comin' around, in a circle, indeed.

Users Experiences

I was thinking this morning that one way to create a service of real value is to ensure that the way a user experiences that service is commensurate with the value you are trying to deliver to the user. Feels like a simple idea but harder in practice.

For example, Foursquare. Stated mission: find your friends. With the mobile app, iphone version at least, for a user to get that benefit - finding their friends - requires only two taps of the thumb. Nothing more. Which makes sense - simple user experience here not only works perfectly but is in fact consistent with the initial effort required for a user to have a successful interaction with the service. Of course, there is much more richness to the application - but the initial, baseline experience is in line with the benefit of the services' goal.

Which doesn't mean that simplicity in itself is the answer to the design of users experience. Contrast Hunch. Stated goal: customized recommendations that get smarter the more you use it. To get those recommendations requires some effort by the user - there are a number of user touch points - questions, search, likes/dislikes. As I see it, Hunch does not shy away from presenting to the user a bunch of inputs and experiences. Indeed, the services' value proposition (better recommendations) is of such high, personal value that it implicitly and explicitly requires a deep experience for the user to get that value. Again, an experience consistent with the stated mission.

Finally - Dailybooth. Really only two things to do over there - take a picture, or comment on a picture. But that's precisely the value proposition: document and share your life with others. The experience and functionality are consistent with the value a user gets.

So while I am able to check in to Foursquare while at breakfast and see who else is there, all in 5 seconds with only my thumb, I am going to spend 10 minutes back at my desk figuring out what pair of headphones to buy. And later on spend a few minutes catching up with Jon's life, in pictures and words.

To me, the key innovations of these three services, to use just a few examples, are simply in how they present user experiences (and the design that comes along with that) that are completely consistent with the value their users receive from experiencing the services that way.

Venture Innovation, or why the First Round Capital Entrepreneur's Exchange fund is good

There is an amazing wealth of innovation around early stage venture financing, most of which developed in just the past few years.

There are new models of creating companies out of innovation: Seed Camp, Y Combinator, Tech Stars are just three, all with different foci and core strengths.

Then there are new sources of financing - groups or people that literally didn't exist as early stage financiers just a few years ago: O'Reilly AlphaTech Ventures, True Ventures, Jeff Clavier, First Round, Ron Conway & Co., Roger Ehrenberg, Chris Sacca, Dave McClure, TAG/Saul and Robin Klein etc. I call these "quasi institutions" because while in some cases they are or have traditional ventures partnerships, they act very entrepreneurially - they move fast, they move often, they are heavily collaborative, they focus on the seed, they are very active, they have alot of fun. In many cases they are run by operational entrepreneurs themselves. Their existence alone is innovative.

Then there are new economic models - Founders Collective being the most prominent now, ("None of us have ever been bankers. We like products and building stuff. We show up on time and don't email during meetings").

On top of this framework First Round announced last week that they have set up an "exchange fund" for founders of companies they have invested in. Josh Kopelman writes that the fund will:

"allow First Round Capital entrepreneurs to contribute a small piece of the stock they own in their company -- and share in the upside of all the other companies."

I don't know any details of this "exchange fund" and absent those it's hard to know how it will work, but in any event I think this has the potential to be truly disruptive and innovative for at least five reasons:

(1) Removes some entrepreneurial stress. Again, Kopelman: "When I was an entrepreneur, I remember the feeling of having all my eggs in one basket -- and it is our hope that this fund will remove some of that stress." The idea being that removing some of this stress can lead to the companies these entrepreneurs run executing better and more efficiently.

(2) Promotes more effective sharing and collaboration amongst the First Round companies. I think FR is better than most at providing opportunities for their companies to collaborate, yet this now creates a framework for these activities. Of course you are going to work harder and help your neighborly First Round company - there are shared economic benefits. Every entrepreneur in the portfolio now acts as a part time EIR.

(3) Strengthens the First Round brand and reputation. Yes, they are a solid team. With a great set of companies. And track record. Now when they invest in your company you have an opportunity to share in the greater network. Competitive differentiation.

(4) Incentivizes (sic) the First Round team to continue to be great investors. For now not only their reputations and money are on the line, but they themselves need to work harder to ensure their portfolio is filled with great companies. If not, the value of the exchange fund is diluted. This it the most interesting to me - part of their business is now tied directly to their entrepreneurs' collective success. Josh writes that the fund is for the benefit of their companies - it is, of course - but FR just put into place a structure that I think will make the FR team work harder, and better. Brand equity is hard to build, and even easier to lose. They've now got a pool of founders' equity that they can enhance, or devalue. Talk about putting yourself on the line.

(5) Venture funds by structure are money managers. They get paid to manage a pool of money and then get a piece of the upside on the returns of that money. Very simple, well known. As a result, there is no inherent value in a fund qua fund - it's a collection of assets the value of which is driven by the partner's track records and reputation. But with the exchange fund, First Round as an institution above and beyond the asset management has value. The decision a founder makes to take money from First Round may be driven in part by this exchange fund, and how well it may do.

There are undoubtedly issues with this exchange fund. But, it's a great example of a virtuous circle - each component of the program strengthens and enhances each other. Founders may want to take money from First Round because of the program; the companies in the portfolio have incentives to collaborate more efficiently; the First Round team has to work harder to ensure the collection of companies is quality; the whole brand is enhanced.

In short, innovative.

You Can't Make Word of Mouth Viral

"Virality is something that has to be engineered from the beginning…and it’s harder to create virality than it is to create a good product. That's why we often see good products with poor virality, and poor products with good virality. The reason that over $150 Billion is spent on US advertising each year is because virality is so hard. If virality was easy, there would be no advertising industry."

Josh Kopelman

This is self-evident, of course. But raises another issue, a common misconception, that bugs me.

Positive "word of mouth" - the passing of information person to person - is an important (maybe the most important) component to growing a service. However its not the same thing as service being viral. Virality at its purest and most scalable form means a service that through it's very usage advertises and spreads itself.

Word of mouth is casual, yet the active sharing of brand - positive or negative experience with a good or service. Virality is causal, yet the passive compound effect of interconnections being maxed out.

They are totally different things.

The Pay Pal service is viral. So is Venmo. As is bitly. A user's usage of those products - without anything more - markets the products themselves. This has nothing to do with word of mouth, which is not viral, and is also not directly trackable from the usage itself.

Viral is interesting because of the compounding network effects that result from the usage. With the right use case usage can explode, literally, and it can be measured.

In the past few years a newer, and potentially more interesting, type of virality is emerging - virality via API. Because the idea of virality is about interconnecting nodes, where a product or service is built using the API of another - the API providers service spreads, automatically. TweetDeck utilizes the Twitter API; TweetDeck's growth and usage thus increases Twitter's usage, without any explicit action by the user. The nodes interconnect. API sprawl enables virality (as Greg Battle once told me)

But this ain't word of mouth. Word of mouth doesn't scale. Virality does.

The Golden Road (to Online Distribution)

The technology industry has a seeming lack of institutional memory - the constant cycle of invention and reinvention while barely looking to the past. It's so optimistic in nature.

But we sometimes need to look to the past to sharpen our pattern recognition. We started betaworks by specifically looking at the past, and using that look back to come up not only with a specific and focused view of online media but also a corporate structure to enable us to optimize our participation in future innovation.

Don't yet know how fully right or wrong we are, but we believe we are in the very beginnings of the fourth major road (or phase) of online media distribution and innovation (where the words "online" "media" and "distribution" are each broadly defined). Each of these roads bleed into one another, to the point where its hard to tell when one is transforming into another, but generally each phase seems to last 10 years before the next emerges at scale:

1. The first phase was the ISP phase - where content and distribution were optimized (monopolized?) thru the ISP onramps. ISPs provided access and attempted to provide services and content.

2. The second phase was characterized by portals (AOL and the like) - the idea and philosophy that all your services and content are located under one roof ("come here for everything").

3. The third road IS search (characterized by the idea “you don't need to remember anything, you just need to know where to find it”). This is why the Google UI is so much more radical than given credit for, it represents a media philosophy that was materially different from everything that came before it.

4. And the fourth road - which is barely just beginning now - is real time social distribution. The idea that “if something is important it will find me” - a constant flow of content and ideas with applications and services supporting the distribution of content ("content" again broadly defined) from person to person initially and then with intelligence, filters and who knows what else. This represents the final breakdown of the traditional media content producer/distributor/consumer buckets, which now blend into one another. Indeed, there are no more consumers, there are only “users”. As a result, this transformation is utterly disruptive to the whole media value chain. Think Twitter and Facebook obviously, but also think Boxee, pubsubhubbub, Etsy, Kickstarter, 20x200, PostSecret, Dogster, and many more.

This is where distribution - the linchpin of content - gets flattened, pushed to the edges.

I don't think information (content) wants to be free. I think it just wants to be distributed friction-free. Which is why this fourth road - social distribution - has so much potential. It opens up distribution in ways that never existed before.

I Want To Be A Platform

We all want to create or invest in platform businesses - those that enable other businesses or participants to add features, content, build other things into/onto the platform, extract associated but not directly related content therefrom, thereby creating infinite scale and value. And valuation.

But it doesn't work so easily. I submit that the best platform businesses evolve, they are not created sui generis. Further, they evolve from applications - applications as representative of specific pain points and use cases.

Applications can and do become platforms. It's extremely hard for platforms to begin as platforms and at the same time find the specific problem they are solving, in a way that encourages usage and enhances the users' experiences and leads to growth.

So another core betaworks philosophy: it is infinitely harder for a platform to spawn value added applications than it is for an application to evolve into being a platform.

We've seen this many many times before, for example:

AOL - began as chat/email application, then evolved into "portal" platform.

Yahoo - initial pain being solved was navigation - application was a directory, also later evolved into portal platform.

Twitter - application= messaging, now becoming a communications and media (news, links, more) platform.

Google - search application into media platform.

More specifics: we built switchabit as a content routing platform, a way to move any piece of content from its base format (mp3. jpg, blog post) and location to another service. Nice, decent usage, but too many and varied use cases (flickr to twitter, tumblr to blogger etc etc) which I believe got in the way of mass adoption. It did, however utilize a URL shortening service (bitly), which solved a very focused pain. Thus that application was born separate from the platform. Similarly, Twitterfeed does one thing - as a content routing application - moving one piece of content to one or two other places. Result: 350k publishers and about 600k feeds running through the service. Maybe it will now move to platform like attributes. Maybe not but it has proven it can solve a specific pain and scale.

In practice, then, for us when we build a service, or invest, we look closely at the use case to determine what kind of application it might become. We don't expect any evolution, though as dreamers we hope that there will be one. Show us an application, not a platform.

Don't Get High On Your Own Supply

"Lesson number two: don't get high on your own supply" -- Elvira Hancock

At betaworks we try to (over) simplify some key principles (no business development, for example) to operate our businesses, and look for inspiration for those ideas in disparate pockets.

One of our key learnings is that while it's really fun to live inside the startup bubble whereby your application is filling a huge problem and therefore is going to change the world, it's even more important to remember what happened to Tony Montana in Scarface when he didn't listen to the sage advice of his mentor Frank Lopez (Robert Loggia) and wife Elvira (Michelle Pfeiffer) - don't get high on your supply, i.e., don't believe your own bullshit; don't live in your own bubble; if you are going to use your own product do it as a user not as a supplier.

Innovation is happening at such a fast pace that if you can't step outside your own world you will not see it clearly. Stepping outside your own world can mean don't believe what other people say or write about your service - good or bad - it is the use case that matters, not the chatter. Experience your product as a user would - not as an insider. Don't believe that if you disappeared tomorrow anyone would care. Question the key assumptions you think are vital to your perceived success.

Most importantly, also don't forget Lopez's first rule, the corollary to the first:

Never underestimate... the other guy's greed

Your competition might be hungrier than you are, particularly if you are high on your own supply.

No Business Developement (or, Hackable Business Development)

We have a saying at betaworks - "no business development allowed."

Of course, it's tongue in check and we don't really mean it (well, maybe we do), but it represents the application of one of our core business scaling principles. Namely, find a way to scale usage of a service or application that doesn't rely on formal business deals. Those deals - "business development" as it were - take too many cycles relative to unknown value to be truly effective at the early stages. Too long to find the partner, get to know them, structure and paper a relationship, and then implement.

Instead, we focus on ways to work with other services, companies or applications at the data level. Where complementary data sets - utilized via API - can enhance or supplement or supercharge your service, and can be implemented quickly and without any company-company intervention or interaction (no human contact allowed). Jon Steinberg has an awesome piece called Hackable Business Development which is in some ways profound in its simplicity but represents something vitally important:

If you’re interested in a platform or service from an intellectual, career, or partnership prospective, you simply must build on it.

"You simply must build upon it." Just fucking do it.

Things to Do

Kortina implored me to do resolutions, like him, instead I will just write down what I want to do more of next year:

1. Help spread the joy of Tipjoy. Of course I am hopelessly biased and financially motivated, but I think that what Abby and Ivan have created has the potential to be the right solution to alot of problems, in an open, distributed way, at the right time. Don't be evil indeed.

2. What with betaworks motoring and a couple of growing kids, our travels will likely involve the beach and then the beach. But I will be thinking about my three favorite places in the world - Dublin, Juan-les-Pins, and Ko Samui - and at least planning on visits to each in the next years.

3. Less multi-tasking, more focus and concentration. Got way too much going on in 2008 - need to organize and focus, pay more detailed attention. It's all about the details. Omnifocus to the rescue.

4. Eat at more small local NYC (and other cities') places, such as Dil-E-Punjab , and especially finally take advantage of Alex Lines' outerborough eating club. Small (and local) is the new big (and international).

5. Similarly, I created a list of 10 people I want to spend more time with in 2009. I'm gonna try to see all of these at least quarterly. Some of these peeps I've never met, but know through various social channels, so need to move those relationships into meals at small local NYC (or other cities) places.

6. Hope hope hope (and help help help it become a reality) that at the end of the year Topspin Media and Hypemachine are the two leading companies in the music world, because what they are doing is right, and more importantly their respective proprietors are righteous.

7. Continue posting a song a day over at tumblr.

Wwoof (ebay for farming) and others

Latest things I am tracking:

WWOOF - world wide opportunities on organic farms - ebay for farming - "WWOOF is an exchange - In return for volunteer help, WWOOF hosts offer food, accommodation and opportunities to learn about organic lifestyles."

Devo - keyboard command launcher (thanks Kortina)

Twitter Influencer - twinfluence

World names profiler - just try it

Random

CDARS - "When you place a large deposit with a network member, that institution uses CDARS to place your funds into certificates of deposit issued by banks in the network. This occurs in increments of less than $100,000 to ensure that both principal and interest are eligible for full FDIC insurance."

Where is your username registered? See Usernamecheck

Pastie - “it's the only pasting app that doesn't suck”

Wordia (love this one) - redefining the dictionary -" a democratic ‘visual dictionary’. A place where anyone with a video, webcam or mobile phone can define the words that matter to them in their life"

Songbike

More

Lazyweb links:

http://www.fuspy.com/ (via kortina)

Dave Cancel's invisible web

Twitter Counter

Daytum - what is it? I like anything that greets one with a "Hello"

Recomm.me "a simple Twitter bot with memory"

Stevienickshasnever

the prison burpee

Latest batch

What is the song of the summer? (via mediaeater)

songmeanings.net and lyricwiki - total repeat usage on these

Very Loud - b/c it needs to be louder, sometimes

Backtype - comment search, see, google can't find everything

github "social code hosting"

gutbots

A few more things

Whuffie

drop.io - "simple private sharing"

twistori "wish" (I want this as a screen saver)

WTF is Twitter

Play Crafter "a place where you can easily play, make and share games"

slydial

More Things I Like Lately

14 tracks - great design and concept - online music sales grouped around concepts of 14

TiltViewer

Twitter search for "WTF is up with" (via mediaeater)

Twitter acquiring Summize

Poketo

Zemanta

Trendrr

conversational search