Senate Opens the Door for Web 2.0 Usage

Back in July, we covered the story about Congressional use of Twitter and social tools ad nauseum. Frankly, it was an epic story around here – defining in many ways – and has opened the door for other opportunities to be involved in the political and policy discussion around Washington, D.C.

I plan to have Congressman John Culberson, who was at the center of the House controversy, on the Aaron Brazell Show in weeks to come to discuss the changes and progress being made in the House, it’s important to note that the Senate actually has taken the first step to modernize and unshackle legislators hands.

Andrew Noyes writes Wednesday in Congress Daily about the changes (subscription only):

As part of the change, Rules Chairwoman Dianne Feinstein and ranking member Robert Bennett included some exceptions. A member, committee or office may separately maintain Web sites or post material on third-party platforms as long as they abide by guidelines.

The Rules Committee plans to offer a “non exhaustive list” of approved third-party sites. Those sites must agree to disclose when content is maintained by a Senate office and is banned from adding commercial or political material or links to an office-maintained page.

The rules also go on to outline rules for the third party websites, prohibiting data collection of personally identifiable information about users.

All in all, common sense approaches to web/government crossover and it’s nice to see that the Senate rules never become a political football like the House rules did. The House is trying to mirror these rule changes on their side.

Startup Voodoo: Turning Users into Evangelists

If you can pitch a user and convert them in under an hour, you’ve got a great product. If you listen to your users recruit other users without prompting, you’ve got a kick-ass company.

Last year at Gnomedex, I discovered Lijit for the first time and the concept behind trust-based search clicked in my mind as very valuable and necessary in an increasingly crowded web space. Little did I know that less that a year later, I would begin doing business development for the company that, more than any other, had me sold on first blush.

About two months ago, I sent an email to Jeremy Schoemaker about the Lijit tool. I was unsure what the outcome would be and was pleased to get an email within an hour thanking me for the email and informing me that he had signed up and installed since my initial email. Quick win, and thanks, Jeremy!

A few days later, he wrote a post about the widget and he became the referral for a large number of installs. To this day, he ranks near the top.

A few days ago at Blog World Expo, I sat in the New Media Lounge with Drew Olanoff from Strands and Jessica Smith. I was not pushing Lijit but instead, plunking away on Twitter while Drew and Jessica chatted. At some point, the conversation spun around to Lijit and I listened with a smile as Drew sold Jessica on our tool, without me getting involved.

Drew is a passionate user who has been converted into an evangelist.

There is no greater testimony to any company, not just Lijit, than to have their users do the selling. End of the day, your brand is controlled by your users (as I’ve said repeatedly for years) and though you might feel like you have to protect or have ownership of your brand, it is really the intangible effect of the loyalty of your users.

If your users don’t have faith, confidence and loyalty in your brand, your brand is essentially worthless. If, however, you can turn them into passionate users (Kathy Sierra’s message, actually), you will have evangelists for life and your brand has value.

DC Needs a Fred. Any Takers?

FredWilson cropped.pngProfiled in Sunday’s New York Times, Union Square Ventures‘ Fred Wilson is a legend of contemporary venture capital — a title previously reserved for West Coast luminaries like Moritz and Doerr, and maybe a couple others. At Web 2.0 Expo in New York last week, Wilson was greeted with cheers usually reserved for celebrities. . . or rock musicians.

We don’t need a celebrity here in DC. But it would be great to have a venture capitalist with a fraction of Wilson’s passion, commitment, and drive. It’s not so much that he’s an investing legend. . . what’s amazing is his sheer devotion to his companies, his followers, and everything Web 2.0.

By his own admission, Wilson’s had his share of bad calls. But most of that goes back to The Bubble, when he was at Flatiron Partners. I was at a startup (liveprint.com) pitching Flatiron in 1998. I met Wilson briefly back then, as well as the firm’s the most vocal partner, Jerry Colonna; the partner who ended up leading our investment was Bob Greene.

Flatiron’s highest-profile investment was probably deliver-to-your-door service Kozmo.com. I remember getting a Kozmo.com hat. Kozmo raised $100M, before its legendary implosion. I left liveprint.com after the first Flatiron (~$3M) round, before an additional ~$40M bought all those Aeron chairs, and the chairs were acquired (along with the rest of the company) by Kinko’s in a transaction so complicated that no one knew what they had until a check arrived in the mail.

According the NYT profile, Flatiron wrote off a third of its investments.

But Wilson returned, humbler and smarter. To me, he’s the quintessential early-stage VC. Why? Because he’s so focused on his space, and passionate about his companies. True, he’s been accused of shilling for them . . . but from an entrepreneur’s standpoint, the benefits of having such a high-leverage, high-profile investor on your team is literally worth millions (not to mention what you’ll save on not needing a PR firm.)

Just watch Wilson work. He uses nearly every one of his portfolio company’s products — twitter (6,571 follow him @fredwilson), disqus, tumblr. Add these to his blog (A VC), and he’s one of the most prolific posters on the planet.

DC needs a Fred.

Or maybe a Josh. Josh Kopelman, though less vocal than Wilson, has put his money where his mouth is, on behalf of the venture fund he founded just outside Philadelphia, First Round Capital. In fact, First Round has made no fewer than 57 early-stage investments, nearly triple USV’s portfolio.

Or maybe a Bijan. Or a Brad.

And this isn’t just about attitude. There are clear metrics here. Several mid-Atlantic firms talk about their ‘seed’ programs. But the litmus test is: name the ones routinely doing investments in the $250k – $1M range. For most firms, the funds are just too large for the math to work — invest a $250M fund $500k at a time, and you end up with 500 startups in your portfolio. That’s a helluva lot of board meetings.

Which is why First Round usually doesn’t take a board seat. (Most VC firms have a six-seats-per partner limit.) This is about volume (or more accurately, statistics). Quicken the cycle of investment, trim the due diligence, invest more with the gut . . . and let the odds work in your favor over a larger statistical sample. Though time will tell, based on initial exits, it seems these guys are doing pretty well.

So while it’s good to see them on the East Coast (Silicon Valley has sufficient players that none is noteworthy) — and Baltimore, DC, and Northern Virginia are certainly within their flying radius — it’s just not the same as having our own local VC hero. I mean, how sad is it that a local meetup was organized for DC Fans of Fred? (Full disclosure: I was there, and met some great, like-minded entrepreneurs.)

And perhaps more than anything else, these guys get Web 2.0. Unlike most VC firms, USV is not only not afraid to invest in pre-revenue companies, they will invest before a revenue model is even figured out (twitter, tumblr, disqus). So who out there will claim this mantle? Anyone? Anyone?

Sweet Caroline in Vegas

I’m still in travel mode. Long story, but I’ve been in Las Vegas since last Wednesday and don’t leave until tomorrow. While this has been a fantastic trip, the process of writing serious posts requires some time to process everything from the week. That processing of data doesn’t happen when you get together with Jeremy Wright, Darren Rowse, Muhammed Saleem, Micah Baldwin and many others for karaoke in Las Vegas.

Yeah. Could be ugly.

So, while I have a ton of things to write about, those will have to wait for another day. In the meantime, enjoy my rendition of Red Sox Nation national anthem, Sweet Caroline. The entire bar was into it and though there was someone just off camera who was really “off” making the recording sound meh, in reality it brought down the house. Thanks Micah for having your Nokia N95 ready to go at a moments notice.

Cameos by Jeremy Wright, Darren Rowse, and Shai Coggins.

Thanks for letting me bring Red Sox Nation to Vegas. :)

Network Management – deadlines and rhetoric

Another filing deadline, another blast of press releases about the Comcast “network management” debacle.

To quote the great philosopher Rodney King, “can’t we all just get along?”

No, really. This topic gets people in an uproar, whether it’s the good and well-meaning people at Free Press and Public Knowledge, who brought the complaint, or the folks at Comcast and their NCTA brethren, who have made a valiant effort at reaching out to the Internet community and explaining themselves. They have a great blog. Seriously.

At first, I think there was some justified anger out there. I know there was some major ranting on this blog about what was, in hindsight was a poor P.R. response on the part of Comcast.

See, Network Neutrality was originally this fear that the owners of the big pipes were going to charge Google and others premiums to have their content carried, despite the fact that GOOG and their ilk already pay. This came out of some rather inartful comments by the CEO of what was then AT&T, who ranted about Internet companies making money using “his” infrastructure.

This whole “network management” issue is totally different, but the Network Neutrality debate shifted from the long-haul to the last mile. And Comcast, bless them, didn’t react well. First they said there was nothing going on, then admitted it. Then back in March they announced an agreement to try and work out the technical issues that make Cable so difficult a platform to deliver consistant bandwidth on when P2P applications come into play.

Skip ahead to today. Free Press blasted out a release saying it’s time for Comcast to “come clean” on their practices, when we know what they are doing, and have known for months.

“Last month, the FCC found Comcast guilty of violating users’ online rights,” Free Press said. But let’s be honest here. Guilty? Last time I looked, not only was the FCC not a criminal court, but there is even dispute over whether or not the FCC can regulate broadband.

But a Free Press spokesperson said that guilty, which has a specific meaning in criminal law, was appropriate as a term of art, “given the amount of deception involved.”

Ben Scott, FP’s Policy Director even suggested that Comcast might go “AWOL,” and not file. But a spokesperson for Comcast was quite adamant in assuring me that the “highly technical” filings would be in the commission’s hands “by close of business.” Comcast will also make them available at http://www.comcast.net/networkmanagement after filing them with the commission.

Let’s cool off until we see what everyone’s cards are, shall we?

What's a Social App Developer to do?

To Mike Lazerow, CEO of new-age ad agency BuddyMedia, Facebook is the future. Big brands trying to reach the world’s 500,000,000 social network members are ringing his phone off the hook, because his firm has the skills to create branded apps — what he calls ‘the new ad unit.’ But what might they bode for us ‘pureplay’ app developers?

For most, not good. First of all, BuddyMedia, Context Optional, and a few others are blazing this trail because traditional ads — display and links — don’t work, which is why (as we all know) there’s beaucoup excess inventory and CPMs are in the crapper. Second, consider this: branded apps are all about engaging users, and those 250,000 active users playing Rundezvous (the game BuddyMedia built on behalf of New Balance) are, uh, not on your app.

Third, what they’re doing contributes more to the overall signal-to-noise problem than you might expect. Not so much that they’re adding to the 32,000+ Facebook apps anywhere near what 400,000+ registered developers are piling on each day, but because each branded app media program includes buying engagement — Lazerow averages $1/user to get them to show up. (Oh, you hadn’t planned on spending $100k to seed your app?)

Finally, it stands to reason that these guys will get better at what they do. Since Rundezvous players earn ‘AceBucks’ redeemable for actual (not virtual) running shoes, a whopping 57% of users came back at least nine times. BuddyMedia developed a Facebook version of InStyle magazine’s Hollywood Hair Makeover — an app that lets you swap your face with a celebrity’s, so you can see how you’d look in their hairstyle — which had negligible traffic on InStyle’s website.

Hollywood hair.png

At O’Reilly’s Web 2.0 Expo in New York this week, Lazerow provided Makeover’s latest Facebook stats:

➢ 185,000 installs in 6 weeks

➢ average time on app: almost 7 minutes

➢ 47% of total user base has returned to the app more than 25 times

➢ the average user tried 3 hairstyles

Some pretty decent numbers. And, unlike traditional ad campaigns, this one hints at something that just could be perennial. (Women were even printing out the results and taking them to their hairdressers.) Dang, if there were a second-order viral component to it (more than than just telling your friends), it could kill.

So what’s a social app developer to do?

Well, it still starts with building a great app with true viral attributes, getting it up, testing, tweaking — nothing’s changed there. But if it’s revenue you’re after (duh), time for some new creative thinking. We’re working several angles for our startup, CHALLENJ, a social gaming utility (under construction). Here are two — maybe one fits what you’ve got.

1. Can’t beat ’em, join ’em. If you’ve got a themed game, why not pull a BuddyMedia? Get your own advertiser, and turn it into a branded app. (Try to think of it as a sponsorship . . . rather than selling out.) This, of course, would be easier if you’ve already launched and are putting up some respectable numbers.

2. Market your engine. Less applicable to most maybe, but what we’re working on is something has some underlying functionality that’s not only useful for us, but would be useful to BuddyMedia and their ilk. Without going into detail, it’s analogous to, say, a polling app, or better yet, the functionality of social-debate platform CreateDebate.

Where there’s a will, there’s a way. At the Social Gaming Summit in San Francisco this past June, Acclaim Games‘ Chief Creative Officer Dave Perry cited 29 business models for games.

There is still success to be had — and money to be made — if you’re creative. Time is not on our side, however. With apps that enable non-programmers to build apps now emerging — lolapps recently raised $4.5M to do just that — it’s only going to get noisier out there.

Vegas Casino Rocks the Social Media

Earlier in the week, I caught wind of LuxorLV on Twitter. By now, many companies are jumping on the social media bandwagon, recognizing that there’s something there to use in their marketing efforts. Some companies just “get it” and some companies literally struggle along trying to figure it out.

Knowing I was coming to Vegas, I quickly set up a meeting with Brandie, the beautiful young woman behind LuxorLV. (Note: She is not the stripper displayed in LuxorLV avatars, so please don’t spam her looking to get some action, thanks!) She is literally rocking the tweetstream and getting a very positive reception in the space, something that is hard to do.

She related a story to me of how one twitterer early on intentionally tried to get under her skin, by antagonizingly asking to stay “under the spinx’s ass”.

Many marketing types coming from a traditional background might handle such “negative customer reaction” in a much different way. Brandie’s philosophy is that everyone deserves a response, though she admits that it was tricky to try to figure out quite the best way to respond.

Brandie has a very personal interaction on Twitter, which is a marked difference between other casino/hotels that are also engaging in a much more traditional “push marketing” sort of way. Though she shrugged it off as “everyone trying to figure out the best way to use the medium”, she concedes that she is younger than most and uses text messaging religiously already. “I already text message 10,000 times a day with my friends,” she claims in a somewhat exaggerated way. “It’s how I communicate with my friends”.

Luxor Hotel is owned by the MGM Mirage company who owns, according to Brandie, 60% of the resorts on Las Vegas’ Strip. The company as a whole is very interested in engaging customers in the social space but, as with most companies of size who are in exploration mode, like to test things out on small scales first. Therefore, Luxor often leads the rest of the company by engaging in new marketing techniques. So far, they have not necessarily noticed an improvement in business, but they certainly are garnering good will wherever they go.

Luxor is engaging on more than just Twitter as well. Their Social Media page lists YouTube, MySpace, FriendFeed and Facebook as well. Not listed is their Brightkite presence.

As usual, I love to see the intersection of social media and real life, and Luxor’s efforts are very genuine. Their returns are coming. If you’re coming to Vegas, book with the Luxor and support the social media community.

The Rise and Fall of Friends

We have been transformed. We have been transformed from a culture of Leave it to Beaver, where friends were next door neighbors or maybe work or church associates, into a culture where “friend” is a status symbol peddled by the gazillion social networks. It’s not uncommon to hear someone at a tech conferenct like Blog World Expo, where I am for the next few days, or Web 2.0 Expo, where Ray is bringing us coverage, proclaim, I’ve got 3500 friends on Twitter or I capped out at 5000 friends on Facebook. They won’t let me add more.

Silliness, of course, and I’ve talked about it before.

Putting aside the cliché friends bit, social media has definitely altered the way humanity interacts with each other and it’s not at all a bad thing. Cultural divides are falling, business relationships are being built. Heck, people are even getting married because of Twitter.

I can’t help but think that there is somewhat of an ebb and flow that takes place and we are on a retreating slope. At the very core of our human existence, we want relationships. While the inundation of networking opportunities, associates or “friends” is satisfying in its own right, it challenges the ability for humans to have their most basic relational instinct satisfied.

The other night on The Aaron Brazell Show, I cornered guest Jim Long (a minor demigod on Twitter) about who his favorite people on Twitter were. I knew I sent him a curve ball and expected him to dance out by making a diplomatic statement like, “Everyone is my favorite” or “I don’t have one”. Instead, he noted that as the quantity of friends go up, it becomes increasingly difficult to “see” the people he loved to see.

In essence, he was stating that, though Twitter satisifed a communications need and a desire to be connected, the ability to “relate” was getting more lost.

On another episode of the Aaron Brazell Show, my friend Jessie Newburn talked about the ebb and flow of generations and how the 4-part cycle of generations demonstrated and ebb and flow of how things were done. In Generation X,  loosely disconnected from previous generations and went their own way, but that the Millennial (often incorrectly called Generation Y) generation has a tendency to regroup.

Sort of like social media. The influx of friends, the followers, the contacts, the blogs, the feeds, the networking opportunities, the parties, the conversations…. all relatively empty from a human instinct perspective. For my part, I’ve spent less time engaged in all these things and more time in one on one relationships. I haven’t read my Google Reader in over a month. I get on twitter and Friendfeed in small spurts. I don’t go to DC for as many social events as I used to.

However, my Twitter direct message box is full. My IM is going all day. My phone book is full.

It’s all about being personal?

Lessons Learned — Scaling Social Systems

My charter with Venture Files is to contribute to and promote entrepreneurship and the startup scene around DC in general. Now, as I’ve warned, my posts may reveal my bias towards the Web 2.0 world. (It’s what my startup is about.) But heck — I’m at the Web 2.0 Expo in NYC, so . . .

A session today of great interest was Joshua Schachter’s ‘Lessons Learned in Scaing and Building Social Systems.’ For many of us, Schachter lived the great American Web 2.0 dream:

Step 1. Build an app (del.icio.us) in your spare time, and operate it from your apartment (server ‘farm’ below);

Step 2. Sell it to Yahoo! (rumored to be in the neighborhood of $20M . . . nice neighborhood);

Step 3. Retire (he now devotes his time to playing XBox).

Delicious server.png

I can certainly relate to that!

Schachter’s talk on scaling wasn’t technical — he was referring to scaling the features, the very functionality of his social bookmarking site del.icio.us (now delicious.com).

Interestingly, Schachter built the application to solve a problem he had — he had a Word file with thousands of lines of links for all the web pages he bookmarked. Thus, the application’s initial value was utility. And that’s what Schachter would provide the world — a useful site for keeping track of favorite sites . . . and making your friends aware of them.

And for a couple of years, that’s what it did. But when the number of users got substantial, features surrounding the network effect eclipsed the site’s original value. Achieving a critical mass of users (file this under ‘high-class problem’) suddenly transformed the site’s functionality from a utility to a social application, giving Schachter a whole new set of issues to deal with — customer service, spam, kiddie porn. (“You see it all, when you get to scale.”)

Ultimately (for all of us), the focus of scaling shifts to revenue. Being ad-driven, for del.icio.us, that meant getting to more and more users and pageviews. Subtleties start to really matter, such as encouraging sharing among del.icio.us users (he saw, for example, that a disproportionate number were checking the ‘keep private’ box; it dropped dramatically when the label was changed to ‘do not share’ — as in, ‘what, you don’t want to share your toys, Johnny?’). Bingo.

“The problem, however, is that these features impact one another. Optimizing revenue often comes at the expense of user satisfaction — think of ad-splattered sites, or Evites that force you to visit the site, rather than providing details of the invitation in the email.”

Here are a few other nuggets:

Make your product self-marketing Provide as much functionality as you possibly can before asking people to register.

Want harmony on your site? Avoid conversations Schachter really disliked the flame wars that comments generate, so unlike digg, delicious.com to this day has none.

Listen to your users We’ve heard it a hundred times, but the best founders (Flickr, 37 Signals, WineLibraryTV) all really do it — Schachter read and answered every customer email up until a year ago, when the volume got so great, five people at a Yahoo! customer-support center had to be dedicated to it.

Learn your ‘drivers of infection’ The two most dramatic traffic-builders for del.icio.us were the Firefox plug-in and the RSS feed.

Great lessons for all of us.

Tech Policy is the new Economic Policy.

So, has anyone else been watching Wall Street do the 2000 style dot-com dance while the TechCrunch-watching, TechMeme-obsessed crowd throws parties like it’s 1999? I feel for the guys at Lehman and AIG, some of them my age, now out on the street. In fact, I feel even more sorry for them than I did for the guys caught in the dot-com bust.

Those guys in 2000 had skills but no one to pay them. These guys in 2008 have no skill except moving non-existent money around. Now don’t get me wrong. I feel awful watching people clear out their offices. I’ve had to do it when I’ve been laid off. It’s no fun. You pack up the place where you spend a third of your life (8 hours a day, right?) into boxes. You turn in keys. Sometimes a guard has to walk you out. Company policy, you know.

Lehmen’s situation is so bad they’re not even doing that, they’re too busy trying to cash in their scrip at the company cafeteria to get a few meals before the food runs out. And it’s horrifying because some of these people have spent their careers at places like Lehman and Merrill Lynch, moving up through the ranks by selling and being able to sell more and more, faster and faster. They worked long, long hours. But they got huge bonuses. They got rich. I’m not so concerned about the ones who got the massive bonuses (unless they blew it all on cars and stereo gear), but I am worried about the guy at Lehman’s London office who signed a lease and now has no job. That could be me.

And that was many of the people I know in the tech industry, who are warily watching a new host of companies get huge and valuable. Google is always the example, with their buses and meals. Facebook is another one. Even smaller companies like Twitter and Qik are getting new digs and cash infusions. And the fear among many is that we’re in another dot-com bubble.

We’re not, but we could be if we’re not smart. Manufacturing jobs are disappearing overseas while the financial sector…just disappears. But Silicon Valley is doing O.K. for now.

For now. There are some monumentally stupid things that need to happen if we want to keep the tech sector, which has become our economic lifeboat, floating:

  1. The 111th Congress must pass an Immigration bill that has fewer H1-B visas. That’s right. Fewer temporary visas for high-tech workers. Strike that provision. Replace it with a fast-track process to give those workers green cards, and fast-track them to citizenship.
  2. You’ve heard this before, but our immigration policies around universities are insane and must stop. When I was an undergraduate, I was on the rowing team at the University of Wisconsin (this year’s national champions, fyi). I had a teammate who was a Chinese national. He had gone to high school in the U.S. and came to Wisconsin for college. Each year, we went to Texas for a winter training trip during our (long) winter break. Before that, people generally went home for Christmas, and went back home for another week and a half after the trip. But this kid had to stay in Wisconsin. Because if he left, it would take months to get permission to get back in. Unconscionable. My teammate couldn’t go home for 9 months. It’s harder to get a student visa than ever, when we should have more of them. Harvard and Yale and Caltech and Stanford and Wisconsin and Michigan are competing with the Indian Institutes of Technology, Oxford, Cambridge, the Sorbonne and like 50 universities in China that are churning out engineers and coders and inventors and entrepreneurs like mad. Want to come to the U.S. and study something cool? Great! Got a degree? Stay for another! Got that one? Here’s a green card! Get a job! Start a company!
  3. Google and Microsoft and H-P and the entire U.S. tech sector needs to give up their dirty little secret — their Chinese and Indian R&D labs. Bring some of those people back here. I know how much money you spend on lobbying, and it’s not enough when it comes to immigration. Throw your weight around and get it done. It’s OK to have people overseas, but you should keep your base here. Keep the mindshare here.
  4. The U.S. must have more broadband access nationwide, both fiber and wireless. Sorry Comcast, but caps won’t cut it. You need to do more. And the Government? We need a true National Broadband Strategy. Whether financed by private capital or not. The railroads powered the boom of the 1800s, the Interstate made the 20th century’s success possible. And I’m sorry to bring back this metaphor, but Broadband is the Information Super Highway. And we need it to get built, NOW. We need it built with the enthusiasm of the transcontinental railroad, the transatlantic telegraph cables, and the Interstate Highway System. Eisenhower got the idea from Hitler’s autobahns, but who has been watching Korea’s broadband network? Japan’s bullet trains? Our infrastructure must be reinvigorated with technology, like broadband, and real transit. Let people and information get around. Fast. We need more speed.

What am I saying? Lehman and Bear Stearns collapsed because there was nothing underneath. There was no product. Just empty credit and “irrational exuberance.”

Despite our fears, our Web 2.0 economy is producing something. The struggle to “monetize” will fade as platforms allow products to be built. Products. Look at the iTunes App Store. Those products are selling. How many are American-coded? Stop thinking about monetizing and advertising and start thinking about creating something of value and selling it.

The factories need workers, and the products need a way to get to the customers.

No more hollow shells. No more Webvans. No more Lehmans. They were selling each other air.

To survive, we need to attack the information age like the industrial age. 2008 is 1958 is 1888. The opportunity for innovation can keep our economy going if we develop products.

I know some will say that I’m insane, the paradigms have shifted, and we can’t exist in a vacuum. The world is flat, blah blah. If indeed the world (and the country) is flat, that flat ground is perfect for digging foundations and building new factories for new products in a new economy.