Sunday, October 18, 2009

Myth: Entrepreneurship Will Make You Rich

One of the unfortunate side effects of all the publicity and hype surrounding startups is the idea that entrepreneurship is a guaranteed path to fame and riches. It isn’t. Building a startup is incredibly hard, stressful, chaotic and –- more often than not –- results in failure. That doesn’t mean it’s not a worthwhile thing to do, just that it’s not a good way to make money.

A more rational career path for money-making is one that rewards effort, in the form of promotions, increased security, salary and status. Startups, unfortunately, punish effort that doesn’t yield results. In fact, the biggest source of waste in a startup is building something nobody wants. While in an academic R&D lab, creation for creation’s sake will often get you praise, in a startup, it will often put you out of business.

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Thursday, October 15, 2009

YouTube Integrates Promoted Videos With AdWords, Launches Them Abroad

As the most popular video site on the planet, YouTube has a lot of content to present to users at any given time (the site says that 20 hours of footage are uploaded every minute). That poses a challenge to premium content owners and other content creators looking to attract attention, which is why YouTube also offers a premium ‘Promoted Videos’ feature that lets you pay to expose your video to other users. And today, it’s making it easier to launch a Promoted Video campaign: users will now be able to manage their Promoted Videos directly from the AdWords platform.

The news comes soon after a number of other significant improvements to the Promoted Videos program, which has seen a 500% increase in clicks since the beginning of the year. In August, YouTube began integrating ads for Promoted Video directly into the site’s ‘Watch’ page (before that they would appear in search results, but not where users actually viewed content). And earlier this month the site began allowing the sponsored videos to appear in AdSense units across the web, where they compete in standard ad auctions. All of this is part of YouTube’s push to monetize the site, and to make it more appealing to its growing list of premium content providers.

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Monday, October 12, 2009

Half as many clickers in 2009 vs 2007

The Evolution Of Click Fraud: Massive Chinese Operation DormRing1 Uncovered

Anchor Intelligence identified a click fraud ring being run out of China which involved 200,000 different IP addresses and racked up more than $3 million worth of fraudulent clicks across 2,000 advertisers in a two-week period. That money was never paid out and the ring has now dissipated (or moved onto another scam), but who knows how long the ring was in operation before Anchor noticed. The operation was called DormRing1 because it was centered in dorms at technical universities in China such as the Shanghai Technology Institute.

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Web Ads Hidden Under Cloak of Invisibility

Kraft Foods, Greyhound Lines and Capital One Financial have bought some strange ads on the Internet lately. What's so strange about them is that they're invisible.

The companies might not have known about their invisible display ads—the kind that are supposed to appear alongside content on Web pages—if not for Ben Edelman, an assistant professor at Harvard Business School who studies Internet advertising.

Mr. Edelman says his research shows that all three marketers, and many others, have fallen victim to Web sites that use such ads as a way to sell more ad space than they have.

The Web sites can get away with it, he says, because online advertisers don't always audit their campaigns for proof their ads are appearing. It isn't clear how common these ads are or how much they cost marketers.

Verifying that ads appear is an issue that has long plagued traditional media, particularly commercials on local TV stations. But a single online ad campaign can appear on thousands of Web sites, making verification even harder.

Advertisers often buy display ads based on the number of times they are loaded onto a page, rather than the number of clicks they get. Over the past, year, an increasing number of scams have sought to take advantage of that pricing system as advertisers have started buying more of their online ads via middlemen called ad networks, instead of directly from the Web sites themselves. These networks sell ad space at cheap rates across thousands of sites, and they don't always weed out illegitimate players.

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Thursday, October 8, 2009

Everything You Wanted To Know About Startup Building But Were Afraid To Ask

Let’s say you have an idea for a startup. How do you begin the process of finding cofounders and employees, creating a corporation, handing investors, growing the company, etc.? There are lots of details about building a startyp that are usually a mystery to the newly initiated founder. Usually you have to learn this stuff on the job, making mistakes along the way.

But not anymore. Last night I saw a 45 minute presentation by Mint CEO Aaron Patzer at a startup competition event called Juice Pitcher on the Microsoft campus. The event, which is put on by TheFunded and, put a handful of new startups on stage to show their stuff and compete for a top prize. Between pitches, Patzer took the stage and told the story of Mint, in detail. His company just sold for $170 million to Intuit.

Patzer takes the audience (and now you) from the beginning of Mint, and gives some incredibly useful device. He talks about the early days of Mint, where he lived on $30,000/yr and hired engineers at just a little more salary by offering them significant equity. He also says that, as a rule of thumb, every engineer in a pre-revenue startup adds $500,000 in valuation. Every business guy lowers the valuation by $250,000, he half jokingly quipped. In its earliest days, Mint was burning $150,000/year, he says, for 2 founders and 1 engineer/contractor.

Patzer also spoke about financial modeling, keeping costs low throughout the life cycle of the company, and Mint’s revenue model. He also gives suggested goals and milestones for each successive funding round. One interesting fact – today Mint, which is free, generates $30/year/user from various offers and value added services.

There are lots of additional details, including, for example, various hidden costs in financings (mostly legal).

If you are a startup founder, you’ll want to bookmark this and refer back to it. It’s absolute gold.

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Wednesday, October 7, 2009

Uncovering Connections on Twitter Could Become Big Business

f there's a hard-to-reach person you want to meet, one of the best ways to do so is through their friends. That's true in the offline world and the increasingly social nature of the internet may make discovery of the social circles of key influencers a powerful business practice online.

A new class of tools intended to surface influencers and the people they are influenced by are focusing on a hub of rapid, connected conversation that's wide open for analysis - Twitter. Could analysis of individual behavior on Twitter become a valuable tool for business development and marketing? A growing number of startup companies are making a case that it could.

Last week Twitter announced that it will soon allow users to create lists of friends that they can share with others. It's an attempt to make user discovery easier and it's cute, but it looks pretty rudimentary at a time when some companies are building enterprise-scale software for real-time discovery and analysis of circles of Twitter users, their expertise, influence and sentiment on topics.

On the margins of the developing Twitter-as-business tool ecosystem are startups building light-weight influencer discovery and analysis tools. Two of the most interesting yet have launched in the last 24 hours, in fact.

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Mobile Advertising Is Shaping Up To Be All Search

WIth the rise of Web phones like the iPhone, Android, Blackberry, and Palm (Verizon’s CEO says that 40% of its new phone sales are such smartphones), mobile advertising promises to be a huge growth area. The Kelsey Group, a market research firm, projects that the mobile advertising market will balloon from $160 million in 2008 to $3.1 billion in 2013.

Of course, that is just an educated guess which will turn out wrong. But there is no doubt that mobile advertising will be much bigger in four years, perhaps even ten to 20 times bigger than it is today. Where will all of that mobile ad money go to? Here I think the Kelsey group is more on target. It projects that mobile search will go from 24 percent of the total mobile ad market last year to 73 percent of the much larger pie in 2013, according to a recent research note put out by Citi analyst Mark Mahaney, which is where I’m getting all of these numbers.

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Monday, October 5, 2009

On the Internet, Everyone's a Critic But They're Not Very Critical

Average Review Is 4.3 Out of Five Stars; Jerkface Fights Back and Gets Bounced

Mr. Luster is part of a movement on the Web that's taking aim at 4.3, a figure reported as the average by companies like Bazaarvoice Inc., which provides review software used by nearly 600 sites. Inc. says its average is similar.
Many companies have noticed serious grade inflation. Google Inc.'s YouTube says the videos on its site average 4.6 stars, because viewers use five-star ratings to "give props" to video makers., which aggregates reviews from 3,000 sites, has tracked millions of reviews and has spotted particular exuberance for products such as printer paper (average: 4.4 stars), boots (4.4) and dog food (4.7).

Culture may play a role in the positivism: Ratings in the U.K. average an even higher 4.4, reports Bazaarvoice. But the largest contributor may be human nature. Marketing research firm Keller Fay Group surveys 100 consumers each week to ask them about what products they mentioned to friends in conversation. "There is an urban myth that people are far more likely to express negatives than positives," says Ed Keller, the company's chief executive. But on average, he finds that 65% of the word-of-mouth reviews are positive and only 8% are negative.

The vast majority of reviewers on Amazon "are a bunch of brown-nosing cheerleaders," says Mr. Schenker, who reviews under pseudonyms including Jerkface. "In an online store selling millions of items, there's bound to be many, many awful ones," he says.

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U.S. Internet Ad Revenues Decline 5.3% In First Half 2009

The IAB and PricewaterhouseCoopers released U.S. Internet advertising stats today for the first half of 2009. The tally – $10.9 billion total, a 5.3% decline from the same period in 2008. This is in line with the 3.4 decline in worldwide ad revenues among four largest Web companies during the same period.

Search continues to take nearly half of all Internet advertising, with 47% of the total ($5.1 billion). Display ads, classified listings, lead generation and email took 34%, 10%, 7% and 1%, respectively. Search took just 44% of total advertising revenue in the first half of 2008.

Digital video jumped from 3% to 4% of the total in the first half of 2009, to $477 million.

2008 was the peak year so far for Internet advertising in the U.S., with $23.4 billion in total revenues. That’s up from just $6 billion in 2002.

Retail advertisers represented the largest category of spending, at 20%. Telecom (16%), Leisure Travel (6%), Financial Services (12%), Automotive (11%), Computing (10%), Consumer Packaged Goods/Food Products (6%), Entertainment (4%) and Media (4%) made up most of the rest.

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