Polygraph Media Blog

Quick Hits - February 10, 2010

It's been too long since I've made some random, unsubstantiated observations.  Lucky you.

• I have used Google Buzz for just a few hours, and I'm already convinced it's a game-changer.  Watch out Twitter... and Facebook, you'd better not get too comfortable.
• I really do think I could make a compelling argument for you that Twitter's best bet is for AOL or Yahoo or Microsoft to buy them.  Not that any of that would be inherently bad, but I just don't see Twitter surviving and thriving as an independent business over the next few years.
• Social media "fatigue" really seems to be an increasing trend among younger people who have used things like Facebook for awhile.  I spoke at an event at Texas A&M recently that really reinforced this point.  It will be interesting to see if this is a limited case or something that marketers will have to deal with in coming years.
• I have given up on working with my neighborhood association.  It involves the worst elements of  government, bureaucracy, volunteering, politics, incompetence, ego, and personal fiefdoms -- and very few benefits.
• Lots of people out there are willing to give advice to early-stage entrepreneurs... but if they haven't created an early-stage startup themselves, be careful how much you internalize.  There is nothing like starting a company from its earliest stages, and it's a very, very unique business experience.
• Writing a book while starting a company is hard.  At some point, I'll share the story of how I got this opportunity, how I made it work, and why I'll never do the two things at the same time again.  It's a rewarding life goal achieved, but everything has its costs.
• Facebook is a particularly tough topic for a book, since the platform and/or the rules change about every 3 weeks on average.
• The Austin Technology Incubator has significantly improved its portfolio in my opinion, and is rebuilding its brand around substantive member companies.  You heard it here first.
• I'm increasingly of the opinion that networking for the sake of networking is a really bad idea for early stage entrepreneurs.  I know this goes against conventional wisdom, but I have a good argument.  Later.
• Location-based services are in their v2 with foursquare, Gowalla, and MyTown.  No offense to the good folks in those companies, but I really think the act of "checking in" is too hard and lacks enough of a consumer value proposition for any of those services to "win".  You'll know you see a winner when 1) there is a real compelling reason for consumers to check in, 2) a lot of it is automated in some way, and 3) there are reasons to do so that will appeal to "Joe Public."  These are very much early-adopter technologies today.
• Speaking of location-based services, can Apple really get away with removing apps that surface location-based ads from the App Store?  I know they make their own rules, but that's unreal.
• I love the potential of Google Android.  My wife has one & it's a pretty neat device.  But it isn't quite there right now.  Let's see how it evolves before handing it the future. ;-)
• We're told that the economy picked up quite a bit in Q4 in the US... yet capital efficient startups are still in vogue.  I'm telling ya, this frugality thing is here to stay for a decade or more.
• Finally, I finally yesterday met the first woman I know who likes the iPad branding.  Ultimately, I think after the shock wears off it will be OK.  But gosh, how obvious is it that Apple's branding team is lacking???

Groundhog Day Update

Howdy everyone.  Sorry for the time it's taken me to update this blog.  A lot of things are moving fast with our business and in the markets where we compete, and I haven't had time to maintain the blog. It has fallen way down in priorities all of a sudden.  Here's a quick rundown of the things that are keeping me happily driving to work at 7am, engaged throughout the day, and starting another half workday or more around 8pm.

Company - Last week, we launched our first deployment of MinutesNotice at QuickDFW.  Quick is a Dallas Fort-Worth Metro Area nightlife portal that supplements a print publication that is given away for free in the metroplex.  We have enabled the QuickDFW ad sales team to offer our "offers platform" to local bars, restaurants, and nightlife destinations.  It's going great so far, and we're very optimistic about how this vertical site will perform.  Expect to see bigger, broader, and more vertical deployments from us in coming months.

Market - Local has certainly heated up significantly in the last 90 days.  Even as late as the end of October, a lot of people asked me "why are you guys going after the local business/local advertising market?"  Well, it's really the wild west out there right now, but there are billions of dollars at stake as local online advertising evolves.  A number of companies have announced big plans, funding, and other initiatives that will help advance the market.  As such, we're hearing from a wide range of folks who have taken a much bigger interest in local opportunities.  It's an exciting time.

Book - Some of you may know that I've been steadily plugging away on Facebook Marketing: An Hour a Day -- a book that will be published by Sybex.  Later, I will share with you the long & strange story of how an entrepreneur like me got caught up writing a book while starting a company -- suffice it to say that it is tough but doable, but perhaps only when your business is still figuring out what it wants to be when it grows up.  Fortunately, book writing tasks just about concluded at the same time our business picked up significantly.  The book is now slated for release in April, and can be pre-ordered from Amazon.com right now.

We did make a change to the book mid-stream.  My original co-author had some time conflicts and could not finish the book.  So I'm really happy to share with you that Mari Smith (Twitter @marismith) is co-authoring the book.  Mari's late addition to the book has been a godsend.  She is a true professional in every sense of the word.  Even more importantly, she really knows social media at a deep, deep level.  Her involvement has turned a great book into a phenomenal book.  So in a sense, the book is a practitioner's guide to Facebook Marketing, but from the dual perspectives of an industry pundit (Mari) and a capital efficient entrepreneur (Me).  I can't wait for you all to read the book & share your thoughts about it.

Wanted: Entrepreneurs to Fix Federal Government

As I scanned my RSS feeds this AM, I tripped across an interesting article on Alan Greenspan's concern about U.S. debt.  Summarizing -- he sees an impending fiscal crisis (duh!) that can only be fixed by finding ways to reduce federal spending.

One proposal that he supports is the creation of a bipartisan commission to tackle issues of deficit reduction.

Here's an idea for you, Mr. Greenspan.  Let's set up a commission of entrepreneurs to find such opportunities.  Limit participation by lawmakers, lobbyists, and attorneys (no offense, people) as much as possible.

Entrepreneurs are probably the most qualified people around who can find inventive ways to do more with less.  Why?

1. We're broke and cost-sensitive.
2. We have to be great at finding inefficiencies and fixing them, otherwise we fail.
3. We have a lower sense of entitlement than other groups.
4. At worst, we'll funnel more resources to ourselves, which has potential economic benefits of its own.
5. We have no problem making people angry.

The more I think of this, the more I think it's actually a pretty good idea!

Doing More with Less

I've talked before about Mish Shedlock's observation that we've entered the Age of Frugality, which has since been echoed by major publications such as Business Week.

Well now, we're seeing this phenomenon in the movie business.  Paramount has committed to a new program to create 20 "micro-budget" movies starting in 2010.  This is regarded as a revolutionary step in that business, driven by evidence that you just don't need huge dollars of investment to create a huge return.

I've argued for awhile that the best & most profitable startups in the current era will similarly do more with less -- the best opportunities for M&A and big returns over the next few years will be for those startups that purposefully *don't* take big investment.  These companies certainly won't be in favor of the service provider and "big VC" communities, but that may not be all that necessary moving forward.

It's interesting to see this now in the movie business... an industry that has been defined for so many years by "the blockbuster."

 

How Consulting Helps our Startup, and vice versa

Had we launched a startup and a consulting business at the same time in 2006 or 2007, we may have taken a lot more criticism than we did.  But even in the middle of 2008 -- before the stock market crashed and many people realized that the salad days were over -- I heard a lot of good things about the model.  The "capital efficient" startup model was just starting to take hold and most people thought that we could effectively balance the needs of both businesses.  I mean, it's better than starving right?

It has worked a little better than I originally expected.  Here are a few points about our experience that we've learned over the last 18 months or so:

• Focus is great and perfect for an ideal situation where you are adequately funded and you know exactly what you're building.  Kudos to folks who have that luxury.
• Focus, however, may work against you if your team members need a dynamic work environment.  Our team works best in bursts of 2-3 weeks at a time.  If we worked on one thing all the time, we would be less productive.  I have seen us work hard on something for say a month at a time, and we tend to slow down towards the end.  We get stuck on things that we can't quite solve.  Variety helps us.
• So we aim to have a few software projects and a few consulting arrangements both at the same time.  It turns our startup into a cross-disciplinary group that takes lessons from one project and applies them to the others.  It's helpful far more often than you'd think -- and as a result, we have both better products and we provide better services to clients on the consulting side.

At some point in the not terribly distant future, we will have to focus our energy more directly.  The two businesses will likely divorce one another as the stakes get higher with world-class customers and possibly investors.  But I don't think I'd start a company any other way if I had to do it all over again.  Focus is great if you can afford it, but the serenditpity you get from doing a few things well pays off tremendously.

Capital Efficiency and where we are in the innovation cycle

Capital efficiency is a hot topic for Web entrepreneurs these days.  I've outlined a lot of the reasons we've gotten here in prior blog posts... it's a combination of a bad economy, a maturing yet healthy & evolving Web business from search to social media, the fallout of Sarbanes-Oxley and the resulting lack of IPO activity, a weak M&A market, and poor venture capital performance over the last decade.

Time marches on and despite the broader macroeconomic climate, entrepreneurs continue to innovate.  I think it's an important distinction to keep in mind at all times -- entrepreneurship and innovation are (relatively speaking) a constant.  The economy, investment activity, and valuations are comparatively not.

After living through a few of these cycles now, I'm beginning to think that our business follows three distinct and separate timelines that together create the environment for entrepreneurs.

Platform Development -- major tech players create/invent new platforms that promise tremendous benefits for businesses and/or customers.  Examples:  Windows (ca. 1994), Web (1996), Google/Search (1999), Facebook (2006), iPhone (2007), Twitter (2008).

Innovation via Applications -- entrepreneurs build products (mostly old ideas) on new platforms because of the advantages the new platforms provide.  This is an experimental phase that begins with a lot of ideas and not a lot of proof, so valuations are relatively low but entrepreneurs and investors are optimistic.

Hype/Mainstreaming -- after a few applications succeed & begin to unlock the value of each new platform, the hype machine kicks into high gear.  Valuations go up because people have discovered ways to make significant money from the new platforms.

For my money, we're in a fairly mature phase in platform development.  People have optimism today about Web entrepreneurship because quite frankly, not a lot happened post-Google.  Now entrepreneurs can target social media or the iPhone as two major platforms currently in their early years.  We've already seen a few success stories with these platforms -- Zynga being one of the most prominent -- but there will be more. 

We're starting to see a wealth of new applications come about to take advantage of social media as consumers and corporations deal with the shift from search to social.  These applications come in a variety of forms -- some are games that you can play with your friends, others codify the time consuming process of monitoring, measuring, and succeeding with social media, others are innovations in existing businesses with the overlay of social and/or mobile context.

As people succeed with new ways of doing business, the hype machine will kick into force.  I am not sure we'll see ridiculous valuations again like we did in the late 1990s, but we will see more companies and products come to market.  The difference between now and the 1990s is that we've seen what a bursting bubble can do -- so everyone is a lot smarter and more rational.  Successful businesses will be built not out of hype, but out of free cash flow.  The ones based largely on hype that emerge late in the game will again be the ones to fail.

So in closing, capital efficiency is all about building a business the old-fashioned way -- one profitable customer at a time and on a shoestring.  If all the hype is indeed about capital efficient businesses, we won't see a big bursting bubble but rather healthy businesses that can live and prosper for a long time.  We're all better for it.