DISQUS

Robert, awesome insightful post. This is huge. In one move Facebook trumped Twitter and FriendFeed, AND they positioned themselves to be the king of Word Of Mouth advertising on the Internet.

You inspired me to write a post on How Facebook Trumped Twitter http://tinyurl.com/cuv5j5

This could be a huge sea change event. Beacon was a failed experiment. But they were on the right track. These are the first steps to a much better Beacon.

Don Dodge

Congrats Mathew. I have always enjoyed your blog, and look forward to reading your new stuff.
BTW, I will be in Toronto November 12/13 for the Startup Empire Conference. It would be great t meet you in person.

Cheers,

Don Dodge

Twitter is more like Facebook. It has a social network aspect to it that makes it harder to switch to something else.

The browser analogy doesn't work for me. Maybe more like a Web 2.0 version of AOL Instant Messenger with a social network mashed in. Social networks are hard to switch. AOL IM is still used by millions of people just because of the friends list.

Twitter has a great future if they can get a revenue model going...or get acquired by someone who already has a complementary reveune model.

Robert, Great ideas...and exactly the kind of advice we need to hear. I think I read a post from you last week that said a startup should have revenues and/or great technology. If they don't they could end up in Jason Calacanis's "80% will fail" bucket.

Companies without proven revenue streams will fail pretty fast. They will have a very difficult time raising another round of investment...and can't save their way to cash flow break even. That is a bad spot to be in.

Startups without revenue streams can only survive if they raised a ton of cash earlier...and manage their expenses wisely until teh economy turns around.

I like your suggestions for recession proofing your startup. Great advice.

Don

OK Robert, now I know why there were 40 or 50 FF additions today. Thanks for putting me on the list. You still have the Midas touch.

Every human being has friends...and a social network. In any group or network there is one who is an extrovert and opinion leader, another bunch who contribute to the discussion, and the rest just listen and learn. I call this the 1% rule of social networks.

We see the same thing on this blog. Fred writes a thought piece, 10 or 20 of us comment on it, and thousands read it. Everyone benefits from the interaction. So, when Fred says "everyone posting their thoughts in any number of ways" my translation is that the opportunity is available to everyone to do so for free, but few will. It will follow the normal 1% rule or community pyramid of most other social activities.

I wrote a blog on this subject 2 years ago, and updated it today. See "Social Networks 1% Rule" http://dondodge.typepad.com/the_next_big_thing/...

Don Dodge

Robert, Thanks for sharing this with us. The WWT will inspire kids and future astronomers, and entertain the rest of us. I cant wait to download it.

See you next week at MIX in Las Vegas!

Don Dodge

Paul, Great post! I think there are lots of elements to success. Timing and luck are pretty big factors. I have seen lots of great teams build amazing technology solutions that address huge markets...and still fail.

Timing, being too early or too late is a huge factor. We have all seen or experienced companies that burst onto the scene too early, before the market was ready. Those companies got crushed by "fast followers" who hit the market when it was ready. Likewise, great products that are clearly superior to the market leaders have failed because they were just too late. Brand image took over in the minds of the consumers and a better product didn't matter.

Luck is a key factor in almost any successful company. Folklore revises history and turns that luck into brilliant strategy and foresight. But in reality it was a huge dose of luck. However, the old cliche is true...the harder I work, the luckier I get.

Google had all the elements; great team, great technolgy, a ready market, good timing, and luck. Take out one of the elements and they would not have been as successful. Take out two or three of them and it ends up a failure.

Your point is a good one. Be humble, listen to customers, question your assumptions. Do this with a great team and focused on a big market and your chances of success are much higher.

Steve, Excellent post, very balanced. I agree it is silly to declare Web 2.0 Office suites as dead, but I think eWeek wrote that headline to grab attention, and perhaps as a balance to the many headlines that declare Microsoft is dead everytime Google announces anything.

It is important to remember that Google Apps are not free for business. they cost $50 per user per year. After 4 years they have paid $200...about what they would pay for Microsoft Office (in volume), so I don't see much in the way of cost savings.

Most businesses will stay with Microsoft Office because that is what all their employees, customers, partners, and suppliers use. Compatibility is important. Security and compliance laws tend to favor keeping applications in house too.

Microsoft's approach of "Software plus Services" gives customers the best of both worlds. That makes it a pretty easy and safe choice.

Zoli, This is a complicated and fast evolving story. Thanks for the links to my posts. You are right about my conclusions on how the next round of disruption will turn out.

I understand how one might conclude that I am debating both sides of the issue, but I think Microsoft is a unique case.

I think there are a lot of paralells between Google vs. Microsoft today and Microsoft vs. IBM 25 years ago. Microsoft did indeed learn the ropes, what to watch for, and how to respond, and I think the outcome will be different this time. BTW, IBM is still doing pretty well after being disrupted by Microsoft 25 years ago.

Microsoft has adapted to several market shifts in the past 25 years and has largely avoided 'The Innovators Dilemma" that kills so many market leaders. This is rare but Microsoft has done it, and I expect them to do it again in response to SaaS web based services.

Google is more of a "One Trick Pony" (search) and nothing ellse they have done has gained any revenue traction. They are placing all their bets on cloud based computing.

BTW, cloud based apps are not free. Google charges $50 per user per year. After 4 years customers have paid $200...about what they would pay for Microsoft Office (in volume) and Office tends to ship every 4 years. So where is the savings?

There are a lot of angles and perspectives to this issue. It is not as simple as it might first appear. Overall, I think Microsoft is doing a pretty good job of balancing the conflicting demands.

Zoli, Good point on the "mass distribution", and I do understand it, although I wonder how many people actually use Google Pack. The Mac has about 5% of the desktop market and Linux probably has 1% or 2%. I don't see Google Pack changing that a whole lot.

How many people do you think will request StarOffice (over 200MB) "that needs to be installed and constantly upgraded". Where is the advantage?

I do think online spreadsheets and docs are useful for sharing and collaboration. I also like putting my stock portfolio in an online spreadsheet and having the prices update automatically. Pretty cool.

It is a big market and there is room for everyone. Some will choose Google Docs, some will choose StarOffice, and most will choose Microsoft Office. Business users are likely to stick with Microsoft Office for a long time.

BTW, Microsoft Office supports PDF, ODF, and OpenXML, among other file formats. Compatibility is much less of an issue than it was in the past.

Choice and competition is great. The customer wins, whatever their choice.

Don

Robert you are the man! Interesting that only 3.4% of all those feeds make it to your link blog. Sounds about right to me.

Thanks for being our filter and editor!

Don Dodge

Robert, I read your blog and several others, NOT because you get the story first. I read you because you have an opinion, some insight, or personal experience.

Newspapers and magazines print lots of verified facts, but very little opinion, insight, or personal experience. That is why I like blogs, and still read the trade magazines.

I don't know what Ed Bott is ranting about. Yes, some bloggers ran a headline saying it was Microsoft's LiveStation. They were wrong.

I got the story right, as did Paul at dotnetjunkies. I did check with Skinkers and Microsoft's Cambridge Research Lab to get deeper details than most of the other bloggers.

I even took the time to register for the beta, download the software, and use it before I wrote about it. What a concept!

The Skinkers PR people were out in force to correct the few bloggers who got it wrong. Overall I think most bloggers got it right, or corrected it once they discovered it was wrong.

If anyone is interested in the details see my blog. http://dondodge.typepad.com/the_next_big_thing/...

Details aside...LiveStation is pretty cool. The P2P technology under the covers came from Microsoft's Research Lab. Awesome stuff.

Robert, All the reasons you list would make sense if the founders or executive team were making the decision. In this case the money guys at the H&F private equity firm were making the decision.

John Batelle doesn't have any facts on the situation...just speculation. I wouldn't take it as fact that DoubleClick was offered more by Microsoft and that they turned it down. There is no verification, and personally I doubt it.

Simon Brocklehurst probably got it right...the No Shop clause shut off further higher bids...and Google paid extra cash to get it.

Another possibility is a stock versus cash offer. Even though the stock might be worth the same or more...cash is king...even a smaller amount of cash.

These things are never as simple as they appear, and none of us have the facts.

Robert, Startups will always be more exciting and produce more products that make you go WOW! That has always been the case.

Remember Newsgator and how we were both impressed? Well the new version of Outlook has an RSS reader built in that works just like Newsgator. It is great! An RSS reader is also built into IE 7. In this case Microsoft was a "fast follower". Not fast enough for us geeks, but well ahead of the curve for the average user.

I think the Xbox 360 has made a few people go Wow! The Zune introduced a new way to share music wirelessly. The next version of Zune will be really cool. But in most cases Microsoft isn't all about Wow.

Microsoft's main businesses serve developers and IT people. They aren't looking for Wow!, they want steady improvements in quality, performance, integration, and reliable features.

I think Office Live is going to meet the Google challenge. Microsoft already has blogs, wikis, RSS readers, and will increasingly incorporate web based services seamlessly with client and server based products. This might not be sexy, but it is highly productive.

Microsoft acquired 19 companies last year and 22 the year before. These were mostly small startups with cool technology and strong development teams. JJ Allaire and the Onfolio team is one example.

I would say that Microsoft is doing the right things to avoid being caught in the Innovators Dilemma trap. Being a "fast follower" may not be sexy, but it is smart. Acquiring innovative startups is also smart. And then there is Ray Ozzie, who BTW came from another Microsoft acquisition, Groove Networks. Ray has big plans, and I would never bet against Ray.

Mathew, I think we agree more than we disagree. I am sticking with my RSS reader which is actually integrated into the new version of Microsoft Outlook. Most people will stay with their RSS reader of choice.

It is the newspapers and magazines that want these dedicated readers. They approached Microsoft to build it for them. It makes business sense for the newspapers to do this so they can extend their brand (look and feel) on the web, and advertising probably figures in there too.

So, Microsoft's customer in this case is the New York Times, Forbes, Seattle P-I, etc. and this is what the customer asked for.

Robert, Steve Jobs is caught between a rock and a hard place. On the one hand he has benefited from the DRM iTunes to iPod lock-in. On the other hand, several European countries are raising anti-trust issues and threatening to ban iTunes/iPod sales in their countries unless they open it up. Of course the record labels would cut Apple off if they discontinued the DRM.

BTW, Bill Gates agrees that DRM is broken. I wrote a blog about the DRM issues and ironies today. See http://dondodge.typepad.com/the_next_big_thing/...

Don

I have known Jim Gray for almost 20 years. We worked together in the database group at Digital Equipment Corp, and now we both work at Microsoft. He is a good friend, and one of the three smartest people I have ever worked with. The other two are Ray Ozzie and Paul Butterworth.

Jim is a legendary computer scientist, especially in the database world. As brilliant as he is, he is charming, friendly, and has no ego. An amazing guy.

I hope they find Jim and the boat soon.

Hey Robert, if you are at DEMO check out Zink. It is a zero Ink printer that connects to your camera or camera phone wirelessly or via USB. It fits in your shirt pocket and sells for less than $100. Zink is a spin-out from Polaroid, and works in a somewaht similar fashion...the ink is in the paper substrate, not the printer.

I wrote a blog about Zink today. See http://dondodge.typepad.com/the_next_big_thing/...

Robert, You nailed it! Focusing on vertical search is the way to go. Microsoft must win a few key markets, and do OK in the general search market.

My vertical focus would be on Mobile Search, Local Search, and Classified Ad Search. I think those are HUGE markets with no clear leader.

The consumer web search business is HUGE. Microsoft could make a billion dollars with just 10% to 15% market share. Yes, it is that big. You don't get the bragging rights for being the market share leader, but you can make handsome profits with just a small market share.

Look at Apple. They have about 5% share of the personal computer market and they do just fine. Great brand, good products, loyal customers, and very profitable. What is wrong with that?

I wrote a blog on this today http://dondodge.typepad.com/the_next_big_thing/...

Don Dodge

Hey Robert, Cool gig with John Edwards. Are you coming to New Hampshire? I live in Hampton, New Hampshire and would love to hook up with you if you are coming this way.

Back in college I did an internship with US Senator Ed Muskie, and later worked for Sen. Bill Hathaway. Politics is fun, but technology pays the bills.

Don Dodge

Mathew, Just curious...what do your traffic logs show? Mine showed 70% of referrals came from Google, which mirrors exactly what Skrenta found.

However, I just noticed that his link to WeBsideStory was from March of 2004...almost 3 years ago. A more recent press release from them says that Google accounts for 75% of referrals in the UK...more in line with what we are seeing. Here is the more recent link. http://www.websidestory.com/company/news-events...

In any case, there is a big difference between share of referral traffic versus market share of total searches. Either way Google is #1 so it is just academic.

Don Dodge

People tend to confuse invention with innovation. They use the words interchangeably, but they are very different.

Invention is the creation of a feature or technology that is totally new. Innovation takes a collection of prior invention to the next level by combining them with existing products or technologies, and producing a commercially viable product.

Both invention and innovation are vitally important to our industry. Microsoft does both but rarely gets credit for it.

Don Dodge

A year ago I was skeptical of Riya based on my past experience at AltaVista.

Now I think Riya has a much better chance of success focusing on the fashion market because "likeness" is OK, exact matches are not necessary. Secondly, the Cost Per Click (CPC) business model will be much more effective than consumer based advertising. That addresses the two concerns I had initially.

Sometimes technology people get all wound up about the technology. It is not about the technology...it is about the problem it solves. I wrote a blog on this today. http://dondodge.typepad.com/the_next_big_thing/...