Here’s a brief thought that’s come up in conversation quite a bit this week, about where consumer attention is:
In venture capital, the one of the biggest categories is consumer, because consumer-facing products and services at scale present the greatest possible market. This is, in part, what drives valuations for early-stage hot consumer deals up — the upside always has huge potential. On the web, consumer products and services could grow and scale based on the network effects of the open web itself.
But, today, we live in a different world — a mobile world. All consumer attention is on mobile, but on mobile, growth and scale are confined to a few “growth pipes” which present their own issues. For instance, gaming is an expensive category to compete in, photo and location apps are usually chased by investors after the fact, messaging apps create network effects but those options have largely been set and regionalized, and then there’s the hottest category out there today –> mobile on-demand services.
I’ve written about mobile on-demand services often here. We all get the picture. In a world where mobile scale is near impossible, better to aggregate consumer demand on the phone, but fulfill that demand through offline logistical prowess. Hence, we have Uber, Instacart, and many others. But, consumer web products could scale with much less friction. In the world of mobile on-demand services, there is significant friction — expanding geographically, hiring and training reliable labor, and so much more. As the coefficient of friction rises, so does the risk. This dissuades some investors from jumping into the space, but it also highlights the importance (or advantage) of having investors with real operational experience in geographical expansion, logistics, delivery models, and more.
There is an inherent friction to this new consumer mobile opportunity. With mobile growth elusive, entrepreneurs have shifted to transactional businesses, and with each transaction comes friction. This is both a challenge and opportunity — a challenge to those founders and investors who are concerned about friction (which is a real concern in venture investments) and an opportunity for those who can identify the categories (and the people behind them) who can overcome any coefficient of friction.
A few brief nuggets of interest re: today’s outlier outcome, which is Amazon’s nearly $1bn all cash acquisition of Twitch:
Seven Years Post-YC: Justin.tv (the original) company went through Y Combinator in 2007 and then made a hard pivot. You know, a 7-year over night success. (This is also the largest acquisition of a YC company to date.)
Concentrated, Risky Bets @ Series A: Alsop Louie invested close to $8m to help Justin and his team handle video server and storage costs, and because there was electricity in the house that they were building it. He had to visit the company’s office to find that out, he told me over lunch last year. It was a concentrated, highly risky bet — exactly what a proper Series A should look like.
Gaming = Media = Attention: The act of playing games, and the act of watching games, are media. Building Minecraft servers are the new legos. This is just the beginning of this wave.
Low-Key Founders: I’ve come in contact with various Twitch founders here and there, and they were all very quiet in their own way. Limited social media presence, quite reserved in the settings I saw them. Maybe their minds were on something else ;-)
Amazon’s Motives: Amazon paid an all cash sum amounting to a seriously non-trivial percentage of their total cash on hand (especially relative to what Google may have wanted to pay). In this light, we could view Twitch as a gaming portal, a streaming base for other media, and/or even a social network. They probably also had all sorts of inside data on how Twitch was scaling their cloud services. Let the theories fly around! Either way, we have to believe there is something deep in this for Amazon, perhaps across all three areas, which made this deal vital.
I am 37. To date, I have been very fortunate not to personally encounter too much tragedy in my life, family, friends. Lately, on Facebook and a bit on Twitter, I have seen people publicly share bits of their bad news. It is hard to read. On a tweet, I’ll open the replies to see how people respond to their IRL friends or Internet friends; on Facebook, I’ll occasionally open up the comment threads to see what people are saying. The phrase I see the most is: “So sorry for your loss.”
I am compelled to write this post because in two instances, I saw this phrase so many times, it stuck with me. Everyone says the same thing, more or less. What can one really say in such a sad situation? Yet, I felt as if something is missing. I know there are some sites and apps out there that anticipated this social media need, but I haven’t seen any in the wild at work. I recall 1000memories was acquired by Ancestry.com, which makes sense.
So, the question I pose is – are we left to just tweets and short comments on Facebook that mostly say “so sorry for your loss”? Is that all the grieving want? Does it make them feel good? Is there anything more we can really say or do? Facebook is just 10 years old and I don’t see it going away anytime soon. There’s tons of debate and rules around what happens to a user’s data when they pass away, but what about an online memorial? Will people be able to attend an Irish Wake of an old friend via virtual reality?
“So sorry for your loss” seems too easy, too short, often devoid of meaning. There must be something better out there, or to be built, something that can be collaborative and last forever. I’d love to hear your opinion about this, to the extent you can share or feel like sharing.
Of all the places in the world where Uber really gets under the skin of others, London takes the cake. Why it does so warrants more examination. In London, cabbies are required to master the old city’s streets, all the nooks and crannies, if you will. It can take years (and lots of pounds and sterling) to obtain this knowledge.
In fact, that’s what London cabbies call it: “The Knowledge.”
Now, that knowledge is under attack. Cabbies were tested so as to have maps and turn-by-turn navigation capabilities in their brains. Each cabbie, in turn, had to do the hard work of writing this information to each of their “disks.” While the streets are static, the navigation is dynamic. Then, companies like Google (and others) started bringing maps online, followed by directory services (search) and turn-by-turn directions (navigation). But, up to a point, the convergence of those technologies only disrupted the old external GPS providers like Garmin, TomTom, and so forth.
Mobile, of course, changes everything. Mobile now places “The Knowledge” in everyone’s hands, and by proxy, in everyone’s brains. You can see why London cabbies are worried. I heard one on the radio this past weekend. He doesn’t like Uber. He feels that it’s unfair that his knowledge is now obsolete, or at least commoditized. He feels part of being a cab driver is maintaining a character of person that is higher, though I’m sure cuddly behavior exhibited by cabbies varies on a case-by-case basis. In a matter of 15 years, Google mapped the world, and Apple put those maps in the hands of everyone, complete with static street knowledge and powered by the most dynamic, real-time system consumers have ever enjoyed.
The result is what we see on the news and on the streets of London. Up to a point, human knowledge created a moat for some to earn a steady living. But along the way, machines maps combined with cloud computing on handheld devices created a mechanism to democratize and distribute (in real time) the knowledge that had been trapped inside the heads of a few select London cabbies.
It’s not just cabbies in London who hold “The Knowledge.” Many people in other jobs believe they worked hard to accumulate “The Knowledge” in their own fields, but many of them, too, will experience something akin to what these London cabbies are feeling. Think of mobile developers who have been grinding out cycles of Obj-C only now to have to learn Swift to write apps again. Think of those who report and analyze the tech and startup landscape for a living now having to compete with forums and blogs maintained by those who are in practicing their craft in the arena. Think of the venture capitalists who were trained in their craft for decades and over funds to manage large sums of money, only now to see upstarts leveraging platforms like AngelList and resources like Mattermark to invest smaller amounts earlier into startups.
What was once difficult (and costly) to obtain is now more likely to be commoditized, provided for free, and distributed at the touch of a fingertip or even before we know we need it. It happened to these cabbies in less than a decade. Keyhole (which became Google Maps) was founded in 2001 and acquired in 2004. And, it will happen to many others in different fields. This specific case was only really fueled by machine learning, cloud computing, and mobile networks. What happens when vehicles drive themselves? What about the block chain applied to supply chain management? What about the economic effects of 3-D printing on today’s manufacturing industry? Questions like these are never-ending, and, unfortunately, the answers are going to piss off a whole lot of people.
I know what you’re thinking — “C’mon! More sky-high valuations?” My short answer: “Yep.” The rate of appreciation of hyper-growth, late-stage private valuations is hard to keep up with. Already in the past few weeks, private companies like Airbnb, Dropbox, and Uber have broken through the $10Bn club. Wow. What shall we expect next? Well, if you’re a market bull, then set your sights on Pinterest, which — depending on how you calculate these things — could be currently undervalued, and by quite a bit. Many people believe that the combination of DAUs, strong engagement, and locking in nearly 90% female users (who often control control purchasing decisions) makes for a powerful company.
Insider Round. The first bit of evidence we have that Pinterest is currently undervalued (depending on your POV) is the most recent $5Bn investment led by SV Angel. This was not a normal deal for this fund, which leads me to believe it was partly motivated by helping the company get cash quickly, helping cash out some earlier employees (perhaps – recall that Pinterest’s cap table is quite messy from all the early battering the company received). In such a deal, a firm like SV can enjoy the carry on making the deal happen, but if this was a real priced investment by the next Wellington, the price would likely have been higher. The metrics are just insane.
Global Referral Traffic. On slide #44 of the 2014 Mary Meeker presentation, it notes that Facebook refers about 20% of global web traffic ($170Bn market cap) while Twitter is about 1% ($18Bn market cap). Pinterest is about 7% and growing quite nicely. But, that’s just the web…
What About Mobile? The WSJ reported a few months ago that over 90% of Pinterest’s traffic comes through mobile — either by users hitting mobile browsers or through their native app? In an era where mobile distribution is choked except for a apps in very specific categories, Pinterest will easily have enough of an installed web user base to bring them into the mobile and tablet world. Thinking ahead — I’ve wondered if Pinterest could somehow negotiate mobile OS integration (like Facebook and Twitter have), but outsourcing photo storage and retrieval (like Dropbox) may be too strategic for the OS to budge on.
Global Distribution. Many consumer and social sites to date took a while to internationalize because of language considerations. Pinterest doesn’t have that exact scaling problem, as photographs are a language understood by all. Like other photo-based services which have exploded recently, this consideration cannot be discounted. It speeds up the time it would take to grow and that speed gets factored into a higher price if and when the next financing occurs.
Vertical Validation. Houzz, a sort of vertical Pinterest focused on people who want to catalog and design their home interiors (and more) was recently valued at over $2Bn. In terms of commerce and closing the loop on lead-gen and transactions, Houzz is an example of what Pinterest “could” do at scale. The “could” is a consideration, however — and a serious one at that.
So, let’s discuss the “could” part — clearly we all believe Pinterest has the ability to do something big, but will they? If people continue to swarm to Pinterest and then find items they buy elsewhere, at a certain point, Pinterest will need to be a part of that transaction — less of an affiliate and more of a broker. The good thing for Pinterest is that people keep coming back, over and over again, to do the same thing. The tricky part is that Pinterest is now a big ship, adding more employees, and carrying the weight of expectations that have been thrust upon them. Will Pinterest build channels to close this loop in time? Will others products that take a vertical approach (like Houzz) start building interest-based communities around images and capture that commerce before Pinterest can? Many unknowns, to be sure, and the company is not enjoying a rate of free cash flows like Uber or Dropbox or Airbnb — but, the metrics are out of this world, and in a world where private capital seeks name brands and growth, parking more money inside Pinterest at even at $10Bn valuation right now may not be an entirely crazy idea.
A blog post about Tweetstorms. How cute! Tweetstorms are definitely a thing. @pmarca has popularized them, and now it’s fascinating to see how many people on any given day will mimic the technique. A step further, many folks on Twitter or on the tech blogs are peeved by it and have called for it to stop and/or for Twitter to adjust the product so these missives don’t clog other peoples’ networks.
My stance is: There are no rules on Twitter, and tweetstorms are just fine by me. I can always unfollow anyone. That’s my two cents.
But today, I was curious as to why so many other people are adopting the nomenclature. Sure, there’s some mimicry going on, and I’m all for people expressing their thoughts in public — and if the Twitter interface and audience encourages more people to do that, then that’s fine by me. Beyond mimicry, though, I’ve got a hunch that something lurks deeper in the mind of the person creating said tweets, just as they’re about to type “1/….” — it is the concern, or even fear, that they will not be heard.
Going unheard can be an unsettling feeling. “Is there anybody out there?” “Ground Control to Major Tom.” I don’t have data to back up this claim, but I have noticed (anecdotally) that many people who share links in my feed don’t see too much interaction on those tweets. We don’t really know how many click through if links are present. Yes, we could all use trackable links (and many do), but I think there’s a reason Twitter hasn’t exposed these stats for the user — the results might be depressing to the content creator.
I will admit, I see some tweetstorms from others that are quite good, and I realize that I likely wouldn’t have read a blog post if the creator had laid out his/her thoughts in the “old school” method. For those who use Twitter, attention is so focused on the stream, that expecting someone to click through (usually, out of context) is a big ask relative to all the other content flowing in the stream that’s brand new and shinier.
Hence, tweetstorms. Those with thoughts who engage in this tactic may be calling their followers’ bluffs to unfollow them, but maybe they’d like to have their thoughts heard and don’t mind the few people who elect to unsubscribe. (Yes, I know you can “mute” people on Twitter, but I don’t think this will stop tweetstorms from entering your feed, regardless of author.)
Perhaps this is another subtle cut to the web. For me, I publish a niche blog on the web and rely on email and social networks to have that content reach its intended audience. Most often, people don’t click on my links, which isn’t a big deal to me — but maybe I’d think differently if I felt as if I wasn’t being heard. And, if more and more people start blogging this way (which would be great for Twitter, I believe), people will have visit blogs less and less. This seems to be the space Medium is trying to jam into, and they already have decent traffic harvesting signals and matching content via Twitter. Given the environment, those who publish from the web for their livelihood or business should be on warning that traffic is increasingly under control of the big social and interest networks online, and getting people to click out of those may actually get even tougher — and even then, Google and Facebook can easily tweak their algorithms to cause great changes for other publishers.
This fear of not being unheard may start with individuals on Twitter and work its way all the way up to some of the most venerable media brands. Therefore, we should expect more and more tweetstorms, where we can just unsubscribe from the author (if we so choose) and we should expect that the bar to clicking on a link and actually reading someone’s thoughts will go even higher. And, just like the old days, the best content will be king.
This will be a shorter, more informal post over the holiday weekend. I’ve been slammed with work and travel and finally used a three-day weekend to dig myself out of a backlog of work and home items. As I may have written about earlier here, every summer I try to revamp this site with some new features or pages. We are about to get underway for the 2014 revamping — the biggest additions will be around the investment activity (in Haystack) and a way for people who visit the site regularly to engage in Q&A. I will also finally be investing in better email newsletters (and moving off of WordPress’s emails). If you have any additional requests or ideas, now is the time to send me a note.
One idea a friend gave to me has been rattling around my brain. I’ll admit, at the beginning of the beer (we talked over beers), I didn’t like the idea, but by the end of beer #2, I did. My friend, who also used to be a columnist for TechCrunch, suggested that I go back into my archive and, at random, pull old posts and record a short 3-5 minute audio podcast of the “backstory” behind the post. Then, I would take the embed code from SoundCloud and add it to the post, so the result would be like an original script with a bit of extra background from the writer. Most people aren’t going to care, which is fine, but as I’ve had folks here reading this blog now for over three years, I thought I’d ask and see if even a few of you would find this interesting. A lot has changed over three years, and it’s so easy to record and upload quality sound now, it struck me as a great idea. But, that’s just me. Please let me know what *you* think.
A few weeks ago, I was flying back from Vegas on a Sunday and (shockingly) didn’t have the energy to do anything more than watch TV on the Virgin America flight. I stumbled across one channel that just played a bunch of GoPro content on loop — and I watched it the entire flight, all 90 minutes. I don’t have Cable TV at home and rarely watch shows, so this was unusual for me. I couldn’t stop watching. There were some clips that covered extreme sports that aren’t in my core interest areas, but the rest of the content was captivating.
I was reminded of all this again as I read the news today about GoPro going public soon. It’s a darling story from many angles. It will be a multibillion dollar outcome and done so without venture capital. It’s also morphing into a content company, built on top of the technology they put into their HD cameras. I think everyone gets that, or will eventually.
For me, the cool part about the company and technology is that its enabling individuals to capture more videos and from vantage points unseen before. Then, all of that raw footage needs to be spliced and stitched together by a storyteller, set to music, in the right order. The results can be moving. The video above is just one example — a primatologist who has devoted his life to rescuing and rehabilitating injured or lost/orphaned orangutans. There are so many more. One of my favorites is a story about a couple who fell in love in South Africa while trying to rescue injured Cape Vultures. Stories so moving, only possible now because we all get to see the world from a different point of view.
After this flight, I subscribed to the GoPro YouTube Channel (707 videos) and often watch it via AirPlay when I’m home and trying to unwind for a bit. It’s often better than anything I remember from TV or on Netflix (though Bourdain’s show is awesome). Anyway, if you have a favorite GoPro link from YouTube, please do share it here. I want to make sure I see it.
Rumors floating around (again) that Facebook is considering a new twist on a Snapchat-like app that they develop. Sound familiar? That’s because they tried the same thing around the holidays in December 2012, after which Snapchat secured Series A funding from Benchmark and was off to the races. Today, the app may not be in the news every day, but the metrics are on a tear. I read on BusinessInsider earlier this week that folks are sharing over 450M pictures per day on Snapchat. OK, stop — read that line again. 450M per day. (Caveat – there is some debate around how one actually counts pictures sent or shared inside Snapchat – I’m not going to get into that, but I think we can agree it’s a ton and enough to make Zuck think twice.) Additionally, the BI article pointed out that Snapchat was adding 10M *new* active users…every month…and growing. That is insane. Snapchat is benefiting from a network effect ignited by its users’ phone contact lists, a sort of distributed network of people and devices that can grow without the help of the Web, without real identity, and without a set of unbundled apps.
I would never bet against Zuck; the guy is an incredible visionary and CEO. But, my initial thought when I saw this rumor again was deja vu — that this will never work because the lure of Snapchat is that it is the pure anthesis of Facebook. An app branded or blessed by Facebook likely won’t engender the trust needed to scratch this particular itch, not to mention the “empty room” problem new adopters may face with a 1:1 or 1:many messaging app (not the same effect with Paper).
Then, in the car ride home today at the end of a trip, I kept thinking about it, and a thought occurred to me — even though Facebook may try this move again, this time could be different because they now own Whatsapp, one of — if not the — largest mobile app properties. What if part of Facebook’s plan is to build a Snapchat-like clone and distribute it through their own native app but also Whatsapp (just as LINE and other messaging clients cross-promote content and apps)? This theory could be interesting because (1) Facebook is deep-linking users in and out of some of their other apps (such as Facebook to Messenger) and (2) a good chunk of the Whatsapp audience resides in different parts of the world where Snapchat may not have yet penetrated because of either geographical limitations and/or phone incompatibility. There are billions of people who have phones that only run Whatsapp, who don’t yet use Facebook or Snapchat, and who may — as they get better and better phones — may want something like Snapchat…and if they do, Zuck & Co may be right there to serve that new customer.
At first, I was confused about the news of Quora joining YC and YC investing in Quora, but now I get it…I think…it seems like a smart deal for both sides. I don’t use Quora nearly as much as I used to (for a variety of reasons), and I’ve written about why that is here on my blog, so I won’t revisit that here — I do wish Quora would make some changes that would encourage me to use the site more again, and maybe they will one day — who knows. Regardless of my own use, briefly, here’s how I think this is a good arrangement for both sides given today’s circumstances, with the caveat that I do not know how either organization operates, so this is just pure speculation:
From YC’s perspective…:
they get equity in Quora, which could have big, long-term upside;
they get the association with Quora, the bump all of the attention and PR brings, and some little added attention;
they get to experiment with new deals and structures as a relatively small, nimble fund, as this break conventions and it’s entirely possible YC continues to invest outside the incubator and even at different stages;
(I’d guess that) a small part of YC’s pitch to founders is an extra-cushy landing in the event of M&A, so now Quora (with $100m+ cash in bank) adds to Dropbox, Airbnb, etc. as potential acquirers within the YC family; and
Quora is filled with many talented people, and maybe they can collaborate with current/former YC students in some ways.
From Quora’s perspective…:
they get back into the tech news and Twitter chattering classes, if even for a flash;
they’re a bit isolated (physically, in Mountain View, and in the tech/startup ecosystem, which isn’t a bad thing) and with this arrangement, they will now get back into the flow for at least the short-term, maybe even longer-term in terms of new network connections.
it’s likely fair to say that Quora has lost its way with product from its early Beta days four years ago, so maybe (hopefully) this new environmental exposure will create an opportunity for them to face product and company decisions without the veil of protection they’ve enjoyed.
With over $100m+ cash in the bank, a little YC dilution won’t leave any marks on the Quora cap table while affording them to opportunity to use their cash leverage to scoop up teams who make it through YC interviews but don’t make it through YC Demo Day, or who don’t reach follow-on funding.